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When Ryan Reynolds buys a football team, big bucks await
ONE of Hollywood's leading actors, Ryan Reynolds, is on the cusp of acquiring the lowly Welsh football club Wrexham AFC.
It looks like the purest expression yet of why the sport has been attracting a flock of US investors: The seemingly insatiable demand for content.
The star of Deadpool is partnering Rob McElhenney, the creator and star of the FX comedy It's Always Sunny in Philadelphia, to buy Wrexham, a team currently languishing in 14th place in the National League, the fifth tier of English football.
European football has enjoyed an influx of investment from the US in recent years. Six teams in England's 20-strong Premier League are at least part-owned by American investors, who have also put big money into clubs in France and Italy.
The logic is largely a bet on the booming value of broadcast rights. Since 1992, the English Premier League's (EPL) broadcast income has jumped more than 60-times to £3 billion (S$5.34 billion) a season.
Wrexham is a long way from that jamboree, of course, as teams outside the top division earn little to no broadcast income. But there are other opportunities.
In a webcast presentation last Sunday to the Wrexham Supporters Trust, the fan-controlled non-profit that has owned the club since 2011, Reynolds and McElhenney outlined plans for what was described as a Netflix-style documentary that tracks the team's fortunes.
Such a deal would follow other EPL teams that have gotten the streaming platform treatment, such as Manchester City, Tottenham Hotspur, Sunderland and Leeds United.
For those clubs, the documentaries were just one strand of the business - and a small one at that.
The Hollywood approach to Wrexham seems different, because it looks like the prospective show is key to why they want the club in the first place.
From a business perspective, buying Wrexham as a vehicle for a Netflix show makes sense. Since the club is now supporter-owned, the two actors will not pay anything to acquire it up front.
Instead, they have pledged to invest £2 million in the club's infrastructure, playing squad and facilities.
And it's not unreasonable to expect Netflix, Amazon Prime or whoever might acquire the broadcast rights, to spend several hundred thousand pounds per hour on a show, according to Ampere Analysis analyst Richard Broughton.
If we assume that the actors are able to charge, say, £300,000 an hour for an eight-part series, that could boost Wrexham's annual revenue by £2.4 million.
As owners of the team, Reynolds and McElhenney would not have to pay an additional cut to anyone else, as the producers of the other football documentaries had to do.
So they could reasonably look at profit representing 25 per cent of that income, or some £600,000.
This would handily move the club from the red into the black, as Wrexham otherwise expects to make a loss of £300,000 on revenue of £2.1 million this year.
The owners' star power could boost the numbers even higher. For Netflix and its rivals, sporting documentaries cost less to acquire than top-level sports programming (EPL games cost £9 million a pop) and have a longer shelf life.
Fans are likely to only watch a match live, while documentaries attract return viewing. The main hurdle to an ongoing series is whether it's compelling television.
This poses a risk to fans: Good TV requires troughs as well as peaks, meaning losses as well as wins. So if the owners' goal is must-watch TV, rather than on-field success, then their priorities may not align with those of Wrexham supporters.
The fans seem to think that is a risk worth taking. They already voted more than 75 per cent in favour of continuing the discussions with the actors, and are in the process of deciding whether to approve the final takeover bid.
At times, professional sports tend to veer into the realm of soap opera. It may be a smart move to monetise that. BLOOMBERG