What affect will the COVID-19 pandemic have on sports teams, and most importantly, Manchester United?
That’s a question many are asking but few have credible answers for.
An intriguing piece in the Financial Times looks at how the extended season and coronavirus crisis fallout is likely to hurt revenues across football, not just at Manchester United.
The report accepts that United is the highest earning club in the Premier League, the world’s most valuable domestic football competition, but they’ve still been left exposed.
And as editor of a leading Manchester United blog, I think it’s important we are aware of this in the midst of £150m plus transfer rumours. It adds some perspective and makes you rethink source credibility.
“Any football club that doesn’t play football cannot survive,” a source told FT. United fans have banged that drum for some time, especially when the Glazers prioritise using the club as a commercial cash cow over on-pitch success.
This month United lost nearly a third of its value before recovering some of those losses. FT claims it is down 22% since the start of 2020, with a market capitalisation of about $2.bn — listed on the New York stock exchange.
The biggest problem with no games being played is the damage it will do to broadcast and match-day revenue, which according to FT, made up more than half of United’s $627m annual revenues last season.
Playing remaining Premier League matches (that means 11 for United) would honour the league’s £9.2bn multi-year broadcasting contract — worth between £100m and £150m to competing clubs — so that explains why United want the remaining games played, even if Liverpool are two games away from winning their first league title in 30-years.
Although we criticise the Glazers and Ed Woodward for their greed, United has remained successful off the pitch for the most part, even during pretty bleak times. United struggling to finish in the top four, no Champions League. How will they keep sponsors happy long-term?
Woodward is quoted in the FT piece as saying, “playing performance doesn’t really have a meaningful impact on what we do on the commercial side of the business.”
That sounds absurdly naive now, but nobody imagined games not being played.
Ultimately, it sounds like United could be victim of the success of their excellent sponsorship model, depending on how long this pandemic lasts, but there will be business analysts watching how the club operates over the coming months.
We have long warned — via Patreon (£) — that coronavirus could reshape football in Europe. Another source told FT: “We need a healthy football industry after this. We can’t have loads of clubs starting to fail.”
The Glazers acquired Manchester United in a £790m leveraged buyout in 2005, making the club among the most heavily indebted in the league, and fans have long argued against having the American leaches as owners.
Moreover, the report suggests United have only got £100m in the bank, which suggests we could see a transfer policy that allows us only to act if players leave, and United are crap at shipping players. Many of whom are on wages they wouldn’t get elsewhere.
It’s worth noting that 25% of the season failing to complete will cost us somewhere between £30-40m. Then a couple of sponsorships fall through as well as failure to qualify for the Champions League…
The club’s 10-year £750m sponsorship with Adidas includes a penalty clause that kicks in after two consecutive years of no Champions League football. Failure to reach the tournament this season would lead to £22.5m being shaved from the contract next season.
To add more discomfit for the suits at United, the club has looked for a new principle shirt sponsor because Chevrolet are unlikely to renew it’s 7-year $559m deal that expires in 2022.
United will then have to raise funds and that will either push the share price really low (triggering a takeover) or result in MORE debt being taken on board? The former would lead to a fan revolt.
It’s a doom-ridden article on United, which I usually try to avoid, but we are in uncertain times and nobody knows when life will be normal again.
Maybe we should take more about this rather than an apparent spending spree in the summer?
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