Friday, Manchester United’s executive vice-chairman/lightning rod/chief figure of fun (delete as appropriate) was ‘grilled’ by investors when he reported on the club’s financial results for the third quarter. Much like the ‘grilling’ in the second quarter there was little surprise that investor questions focus little on Manchester United’s on the pitch challenges.
“In many respects this sport above all others has articulated certain changes in English society over the past century,” writes James Walvin in The People’s Game, a seminal work on the history and rise of football in England. From the “ritualistic free-for-all” of medieval times, to a codified game for the common people – football’s development has long matched the long arc of economic and social change. Yet, long gone too are the working class and community roots of yesteryear; today’s game is a globalised proposition, distilled with little irony into an insipid brand that proffers an “identity that acknowledges everyone who plays a part” in the Premier League’s overly-commercialised machinery. Read More
It’s a slow news day when the headlines are less about Louis van Gaal’s failure as Manchester United manager, than Ed Woodward’s success as a financial architect. Yet, as United slipped from second to third in the Deloitte Football Money League 2016, the annual financial ranking of Europe’s leading clubs, there will be little concern in the Old Trafford Boardroom. After all – there is huge revenue yet to come, even if Van Gaal’s tepid side is just fifth in the Premier League. Read More
It is, in every sense, an extraordinary deal. Some 13 years after Manchester United first hooked up with Nike, executive vice chairman Ed Woodward has brokered a shirt manufacturing contract with adidas that is worth at least £750 million to the club by 2025. Possibly substantially more. It is a deal that underlines United’s enduring global appeal despite the damage inflicted both by David Moyes and the Glazer family’s ownership. Now, supporters trust, Woodward will flex United’s commercial muscle once again – to deliver big name signatures that lead the club’s revival under Louis van Gall.
The adidas numbers are, indeed, staggering – a deal that represents a three-fold increase on the contract United holds with Oregan-based Nike, and one that will add around 40 per cent to the club’s bottom line from June 2015. Or, in other words, a material impact on United’s finances at a time when a lack of Champions League football has left a £40 million black hole.
The American company claimed last week that spending some £75 million each season does not represent “good value” for Nike’s shareholders. adidas’ rejoinder was stark – CEO Herbert Hainer boasting that the German company expects “total sales to reach £1.5 billion” over the decade-long contact. One that supports Woodward’s decision to play a game of brinkmanship with a clutch of global kit manufacturers as Nike’s contract ran down.
Indeed, in the global battle for sportswear supremacy United is a pawn set to profit handsomely. In fact so large is the new contract that revenue from adidas in 2015/16 will exceed the £64 million United received from the Premier League broadcast pool last season, making the kit deal the single most important source of ongoing income.
And when put in the context of both United’s historical kit deals, and the global market, Woodward and his commercial team has broken new ground. The total value of Nike’s then record-breaking £302.9 million contract, signed in 2002, has been more than doubled. Meanwhile, United’s new deal outstrips those of rivals Real Madrid, Barcelona and Liverpool by more than £40 million per season.
Or to put the numbers into context, the £75 million that United will receive from adidas is only just shy of the turnover Sunderland and Aston Villa posted in 2012/13. United’s three principal sponsors alone – Adidas, Chevrolet and Aon – will generate income in excess of 14 rival Premier League clubs. Such is the impact that it is no stretch to argue that Woodward’s commercial strategy has reinvented how many clubs now view monetisation.
Just hours after United announced adidas as a record sponsor, the club paraded Japanese noodle firm Nissin as a regional partner, adding to the multi-year sponsorship deal with Korean Pharmaceutical company Cho-A Pharm, reported in June.
In April it was a partnership with curry firm Ottogi and one with Asian confectionery company EuroFood. And in 2013 “Personal Care and Laundry Partner” Unilever was brought on board, along with tyre manufacturers Apollo and Federal Corporation. The club has held longer relationships with Kagome, Bulova, Bwin, Casillero del Diablo, Singha, Aeroflot, Aperol Spritz, Epson, Yanmar, Kansai, and a string of regional telecoms companies.
Each is a smaller, but cumulatively lucrative, junior partner to the £53 million-a-season contract signed with principal shirt sponsor Chevrolet last year that has helped to drive United’s commercial income way beyond £150 million per year.
The new income will help to fill some of the void left by the lack of Champions League this season, which leaves the club short of matches, prize money and likely short-changed by special covenants on some of its commercial arrangements.
Yet, supporters have long-held the view that money – to bastardised Sir Matt Busby – is far better spent on the pitch than sitting in the bank; and certainly nowhere near the Glazer family’s pockets. It is a view held in tandem with a suspicion that Woodward is far better at signing sponsors than he is navigating the European transfer market.
This charge has only partly been rectified by the acquisitions of Juan Mata, Ander Herrera and Luke Shaw over the past six months. After all, long remain the memories of summer 2013 that brought mirth to rivals, embarrassment to United, and Marouane Fellaini to a level beyond his limited ability.
This summer, with van Gaal arriving at Carrington on Wednesday after a successful World Cup with Netherlands, is billed as one of renewal. Herrera and Shaw will add silk and steel to United’s midfield and defensive resources, but popular opinion still has it that United is some way short of rivals both home and abroad.
It is an observation that leaves van Gaal seeking, perhaps, another four more high quality reinforcements, while more than half-a-dozen players will be removed from the club if suitable buyers can be found. Certainly none of United’s expenditure this summer – if Woodward can pull off the deals – is likely to be at the bottom end of the market, reversing years of relative parsimony under the Glazer regime. In spectacular fashion at that.
The Dutchman is believed to be after an experienced central defender – with Rio Ferdinand and Nemanja Vidić having left Old Trafford in May – a box-to-box midfielder, and a sprightly winger. Anderson and Bébé will certainly go, while few of Nani, Shinji Kagawa, Darren Fletcher, Javier Hernández, Ashley Young, Tom Cleverley, Wilfried Zaha, Chris Smalling or Fellaini are secure at Old Trafford.
Nor would many be truly missed. With no European football van Gaal need not work with the full 37-man first team squad he inherits, albeit one that includes half-a-dozen youngsters such as Will and Michael Keane, Jesse Lingard, James Wilson and Nick Powell.
Yet, the new man has just a month until United’s first Premier League match against Swansea City on 16 August; just six weeks until the transfer window closes on 2 September. Enough time, one suspects, for Woodward to close yet another sponsor in a far-off land. Or, perhaps, to add the final touches to a squad that simply must finish in the Premier League’s top four if van Gaal is to retain his job – and the Old Trafford bean counters are to remain content.
Anything less is unthinkable. Then again, few thought United would extract more than £750 million from a kit supplier. Woodward, it seems, is now central to both goals.
It is a period of gloom for David Moyes’ Manchester United side on the pitch; and not much better than that for the Glazer family’s MANU stock in the capital markets. Trading at a dollar over the $14 IPO price on the New York Stock Exchange, United now boast a market capitalisation of just £1.5 billion; far shy of the family’s suspected asking price, and a long way short of the value the Americans might have hoped following the August 2012 flotation.
Indeed, watching United’s stock has become almost as fascinating as the football this season – not hard given the paucity of quality displayed by Moyes’ side for much of the past seven months. While the share price gradually rose after an initial sale of around 10 per cent of the club, the months following Sir Alex Ferguson’s retirement have proven to be far rockier for the Glazer family and their banking partners.
Or in other words: the market has shown little faith that United will remain as profitable in the coming year as it has in the past. And if anything should truly concern the manager when it comes to job security, it is a negative market reaction, and not solely poor results on the pitch.
Share ownership can be a long game in addition to the short, of course, which is why so many headlines in recent weeks have erred wide of the mark. The CEO’s imperative to meet next quarter’s targets is tempered by those buy-side analyst forecasts on just how much a company, or in this case a football club, is likely to grow in the medium term. The sentiment has remained neutral to only moderately bearish over the past six months despite increasingly disastrous results for Moyes’ side.
But growth does matter. That growth in United’s case is relevant on-the-pitch and principally in the auditors’ office. United’s stock neither carries dividends, nor the prospect of any decision making power, given the Glazers’ decision to retain some 97.5 per cent of all voting rights in a controversial two-tier share issue. It leaves investors with one upside alone: capital gain based on an intangible belief in solid future financial performance. That belief, it seems, has eroded since Moyes walked into Old Trafford last summer.
What the general downward trend in United’s share price – around 20 per cent off May’s peak of $19 – says most of all is that under-performance on the pitch could have a material impact off it, even if that is likely to be in a timeframe that measures in months, if not years. Believe not the misleading headlines; at least not just yet.
But watching the stock ticker bounce down, and only occasionally up, has a draw of its own for those whose minds whir with speculation about when the American family might up sticks and sell. They always sell when it comes to leveraged purchase.
Peaks of feverish activity – possibly coinciding with share-price supporting bulk purchases by the Glazers’ underwriters – come amid a more gradual abatement in value over these past months. Indeed, United’s value has fallen not just to the £1.5 billion market cap, but the club’s £280 million net debt means that an enterprise value is barely double that for which the Glazers paid a handsome premium back in 2005.
Or to put it another way, United’s price-to-earnings ratio – the measure of the share price relative to the annual net income – is now just a touch over 12.5; down significantly from the multiple of 40 the Glazers paid during the £790 million acquisition eight years ago. Projecting forward, the P/E ratio shows current investor demand for the company; and wavering sentiment of anticipated earnings growth in the future.
Or to put this argument another way still, the family’s aggressive business model based on selling the club’s name to any company willing to pay for it, under-investing in the team, and fleecing supporters for the privilege of visiting Old Trafford, has created far less new value than the family’s spin machine might have supporters believe.
Still, United will report another record quarter when Q2 results are announced next Wednesday before the opening bell in New York. Ed Woodward is likely to face questions about how United’s anticipated failure to qualify for Europe squares with the growth story sold to investors 18 months ago. Revenue projection is broadly based on an assumption that Moyes’ team finishes no worse than third in the Premier League and reaches the Champions League quarter-finals.
The Scot’s outfit will miss at least one of those targets by some distance. Given United’s form there is no guarantee the Reds will beat Olympiakos over two legs in the coming weeks.
The financial blow of dropping out of the Champions League – estimated by analyst Andy Green to be anywhere between £30 and £45 million – may be compounded by the premium United will have to pay to attract high-quality talent next summer. After all, as has Liverpool found to its cost, Champions League football remains the barometer for all top class players, while Manchester City admitted to paying hugely inflated fees simply to qualify for the tournament in the first place.
With Rio Ferdinand, Nemanja Vidić, and Patrice Evra likely to be joined at the Old Trafford exit by Shinji Kagawa, Anderson and Nani, Moyes is going to need a substantial acquisition fund to strengthen a squad that has suffered this season. That is to say nothing of whether Wayne Rooney and Robin van Persie fancy playing in Europa League qualifying matches come late July.
Investors, whatever side of the pond, realise this is no time to erode profitability.
True, there are financial positives likely to mitigate the cost of no European football next season. Cheverlot’s new contract, a bumper television deal and a new kit deal will boost earnings, and as Ed Woodward has so proudly claimed, falling from Europe’s elite for a season or two is unlikely to harm United’s sponsor acquisition strategy.
Nor, it seems, will a hit on United’s share price drive the Glazers from Old Trafford. Not just yet at least; not until the family believes peak value for its ‘asset’ has been obtained. Given the stock price fluctuation since Sir Alex’ retirement last May, one might speculate that the time has already come and gone.
It has taken, by any reasonable assessment, just shy of £700 million in interest, repayments and fees, three refinancing rounds, and countless intrigue, but Manchester United’s huge corporate debt is finally under a modicum control. There have been times, many of them, when the day seemed unlikely.
Not that United is debt free – far from it, in fact, with more than £360 million still on the club’s books. But with annual debt interest now down to £20 million per year, the club is heamorrhaging the equivalent of just the one international-class signing per season, rather than four.
It poses an interesting scenario. With United’s corporate imperative no longer financial survival, there is the theoretical possibility that the Glazer family could finally unleash United’s revenue generating potential, investing in the club both on and off the pitch. After all, United’s cash-generation has never been stronger, while there is plenty of equity still to be released should the family issue more shares, as is believed likely.
History, of course, says supporters should throw that logic to the wind. After all, the family has a record of placing its own financial requirements first; United’s a distant question. The club’s August 2011 IPO in New York is a case in point, with the family backtracking on an initial promise to retain the proceeds within the club.
Yet, the question of investment is now on executive vice chairman Ed Woodward’s desk. The 40-year-old is juggling debt, the club’s rampant commercial drive, and the inexorable rise of wage inflation, as the Reds ponder moves in the January transfer window.
Still, United’s Q1 figures issued this week demonstrate strong revenue growth – up 29.1 per cent to £98 million for the first quarter of the financial year. Commercial income rose 62.6 per cent on the back of a dozen new sponsorship deals, while record Premier League broadcast rights income, and the summer season-ticket influx contributed to a surge in turnover. United reported operating cash flow of £32.3 million in Q1 and cash profits before transfers up 36 per cent to £22.2 million.
The Premier League’s £3 billion deal for domestic rights, which represents a 70 per cent increase on the previous contract, has significantly bolstered United’s coffers. And this is a bubble not yet ready to burst: BT Sport’s victory in outbidding Sky for Champions League rights is likely to ensure English clubs earn an extra £10-£15 million each annually from 2015. BT will pay £900 million for Champions and Europa League matches over three years.
“Sport is the ‘must-have’ content, its value has grown dramatically,” said Woodward, speaking to investors on Thursday.
“We are excited by the continuing rise in the value of sports content, evidenced, amongst other things, by the recently announced BT deal for the UK rights to broadcast the Champions League and Europa League matches. This deal represents a meaningful increase over the current arrangement.”
Players continue to be the principle winners of the rights inflation though, with United’s staff costs rising by 31 per cent to £52.9 million in Q1. UEFA’s financial fair play rules are yet to bring deflationary pressure on salaries it seems, although Woodward argued that “a fall in the acceleration around player wage growth” is now being felt in the Premier League. Just not at Old Trafford.
Yet, it is debt not wages that has most afflicted United since the Glazer takeover. Obligations still run to £361 million, although debt service costs have fallen on yet another round of refinancing. United owes around £200 million in bank debt, at a rate fixed between three and four per cent interest, with the rest in bonds at almost nine per cent.
By the time United is free from arrears, if ever, the club will have wasted more than £1 billion on the Americans’ debt.
Still, with more than £80 million in cash sitting in the club’s bank account at the end of the quarter, supporters may ponder not only transfer market muscle finally being flexed, but investment in a stadium that has remained largely unchanged since the family took control in 2005, notwithstanding commitments made prior the family’s arrival in Manchester.
Indeed, the argument for new spending on the pitch is strong given the club’s rocky start to the new season under manager David Moyes. The Scot presumably still hankers for a new left-back and high-quality central midfielder.
Whether Woodward has the will or means to secure new acquisitions is a question that will only be answered at the end of January. Certainly, supporters expect a far more professional approach to the market, whether substantial cash is spent, or not.
Meanwhile, the Manchester United Supporters Trust (MUST) is actively pressing the club to invest in new infrastructure. Woodward’s arrival has re-opened lines of communication between principal supporters’ groups and the club, with MUST and the Independent Manchester United Supporters Association (IMUSA) previously ostracised by Sir Alex Ferguson and David Gill.
While MUST chief executive Duncan Drasdo’s recent meeting with Woodward remains off-the-record, the group is believed to have pressed for the introduction of German-style rail seats, potentially – and controversially – part-funded by supporter investment in new shares.
“We’re interested in exploring ways to progress introducing a section of these seats,” Drasdo told the Independent this week.
“We can see potential for fans who wish to, to invest in shares in the club, with the funds ring-fenced for specific purposes such as rail seats or stadium expansion. It would be an excellent demonstration of the value which can be derived from fans investing in and sharing ownership in their club.”
“The cooperation and the participation of fans in the ownership of the club brings an improvement to the atmosphere as well a financial benefits to the club.”
In MUST’s call there is some wry humour. While Old Trafford’s bean counters posted record financials, just eight miles to the north east, FC United of Manchester broke ground on a new stadium at Moston this month. Set to open August 2014, the community-funded 5,000 capacity venue will be FC’s first permanent home, nine years after the club was formed in the wake of the Glazers’ arrival.
Moston Community Stadium will cost £5.5 million to construct, with £2.5 raised by supporters, and the rest granted by Sport England, the Football Foundation, Manchester City Council and Manchester College. It is the kind of kind of community effort actively shunned by big brother to the south.
The irony in big United turning a financial corner, after eight years and £680 million wasted, is surely not lost on those in Moston. Whether security now pushes United to invest in team and stadium is open to question. After all this time, few supporters will bank on it.
“Watch Live,” screams the banner on Manchester United’s official website, the club declaring that “pre-season has arrived” alongside a warning that MUTV online is the “only place in the world” to watch the Reds’ final warm up fixture against AIK in Stockholm next week. Indeed, it is the first time that the club has aired a pre-season friendly on pay-per-online-view platform marking a potentially lucrative new channel.
And the cost for the privilege of catching United’s upcoming friendly against AIK in Stockholm? £5.95 for the online stream.
Except that MUTV online certainly won’t be the “only” place to watch United’s game at the Friends Arena next Tuesday – not in the age of live streaming from a myriad of unofficial sources. It leaves the club’s bean counters betting that the professionally delivered stream will beat a hefty amount of arbitrage when the teams run out at the 60,000 seat new-build stadium.
At that price club is presumably not banking on the experiment to fund David Moyes’ albeit limited transfer activity this summer, although if each of United’s claimed 699 million “followers” do subscribe the Reds stand to make £3.9 billion in revenues. Should that happen, even the more cynical among the club’s support might expect a midfield acquisition this summer.
In reality, with the match also being shown on MUTV, the club’s “one off, non-repeating cost” that is “not available as part of any existing MUTV Online subscription” is likely to be taken up solely by the overseas market. It is an audience that will not include fans in Thailand, Malaysia, Saudi Arabia, Bahrain, Kuwait or Turkey due to broadcasting restrictions, but may tempt others with the novelty.
MUTV remains a niche product even in England, with a range of content focused not on live first team action, but interviews, chat and reserves fixtures.
Still, the trial is a noteworthy attempt to find new media revenue streams outside of the centrally negotiated Premier and Champions League broadcast rights. Or a flagrant attempt to rip-off fans already spending large amounts supporting United at home and abroad, depending on the perspective.
Yet, with the Premier League recently defeating First Row Sports in a UK court case, United’s pay-per-view deal is one small step in the direction of official live online content. To date MUTV Online offers subscribers brief match and news highlights, while The Times has won the right to stream 30 second Premier League clips behind its paywall in the coming season.
The Premier League’s victory means that major UK Internet Service Providers will be forced to block access to the Swedish-based stream-sharing website during the coming season, although there remains a myriad of alternative online, albeit illegal, competitors.
Back at Old Trafford United’s Stockholm ruse is latest in a variety of approaches to squeezing revenue out of both fans and sponsors. The summer tour is likely to net the club eight figures in new income, with more than 250,000 fans flocking to see a mix of first team and youth players in Moyes’ tour party. The appearance fee for Monday’s fixture against Kitchee in Hong Kong is thought to have approached $1 million alone.
Meanwhile, fans will pay between 500 SEK (£50) and 795 (£80) to see United visit the Friends Arena next week where Wayne Rooney is expected to make a first appearance of the pre-season programme. The striker’s entourage has sought a transfer this summer, with supporters’ reaction to the player’s appearance in Stockholm and back at Old Trafford for Rio Ferdinand’s testimonial potentially bringing the saga to a head.
Elsewhere, the club continues to sign up sponsors on a sectoral basis from mobile telecoms, to tomato juice and even paint. It is a strategy based on claiming ‘exclusive’ partnerships from region-to-region. This summer, for example, the club secured a new partnership with Russia airline Aeroflot, switching from long-term sponsor Turkish Airlines.
And record commercial income is set to drive United’s gross revenue figures past £350 million when the end of fiscal year-end results are announced in the coming weeks. A partial pre-payment from United’s £357 million 2014 – 2021 principle shirt sponsor Chevrolet, a new multi-million naming rights deal on Carrington from current title sponsor AON and other regional contracts have contributed to the steep rise in revenue.
United’s turnover remains some way behind global leader Real Madrid – the Spanish giants earned more than €514 million according to the last reported accounts. However, some analysts believe that United will come close to challenging that figure in the next three years, although net debt remains above £300 million.
Still, in the short-term United’s commercial department will keep a watching brief on next week’s viewing figures. After all, the Football Association secured more than 300,000 paying viewers for England’s match against Ukraine in 2009 at between £4.99 and £11.99 per customer.
United is unlikely to draw a comparable audience for a friendly even with a global fan-base; around 80,000-100,ooo supporters subscribe to MUTV in the UK, with an undisclosed number of overseas viewers through syndication partners across Asia.
But should the club beat that modest number then Old Trafford’s chiefs will have something to cheer this summer. After all, the suits’ performance in the transfer market has been decidedly haphazard.
There has been a certain sense of inevitability about Manchester City’s rise over the past four years. After all, while football has its own financial peculiarities, a market is a market is a market. Money talks in football just as in any other industry, and City’s money is singing from the rooftops this season. On the brink of a first domestic title in 44 years, City can thank Abu Dhabi’s sovereign wealth for the club’s recent success.
It was odd though that Sir Alex Ferguson should choose the week in which City effectively secured a first title since 1968 to complain about the Blues’ spending. Here, a manager who has spent quite literally hundreds of millions in the market over the years, can hardly have cause to complain.
Moreover, the Scot’s complaint would have far more legitimacy – any legitimacy some might add – had the 70-year-old not spent the past seven years supporting a Glazer regime that has sucked more than £500 million out of Manchester United in debt related costs.
No wonder there has been renewed talk by supporters of the Glazers’ affect on United’s competitiveness in the week since City disposed of Ferguson’s side. The sight of Sir Alex’ team meekly surrendering the Premier League title at Eastlands, without managing a single shot on target, while Ferguson left some of his most effective players on the sidelines, was genuinely bewildering.
In truth United played scared; Ferguson running for the sanctuary of a scoreless draw that never appeared. United’s manager, much like the fans, is fearful not only of City’s superiority on the pitch, but seemingly the looming change in hegemony – as Roberto Mancini put it so eloquently this week – in Manchester and England.
Yet, Ferguson is unable to move on from the now tiresomely clichéd excuse that there is no value in the market. Only the foolish now buy into that line given the dozens of examples of ‘value’, let alone bone fide quality, which United has missed over the past six years.
“It’s been an insane transfer market for a long time and I think clubs like City create that,” said Ferguson.
“They can buy all the players and put a marker on all the players and that makes it difficult for clubs then to be reasonable. There’s no chance of that calming down and I don’t see how the financial fair play can work. No-one can match City’s financial power – no-one.
“It’s not just about the top line transfer fees, it’s about the amount of money clubs can offer in wages. Players are being offered stupid money, the type of sums that are hard to turn down. We can make a player a very good offer, but unless he wants to come to United for football reasons he is not going to say no to stupid money from somewhere else.
“We have to accept that, so we do it a different way. We’ll try to look at young players with the potential to develop in the club, which we’re good at, so we’ll stay with that.”
While City’s wealth will buy the club trophies, closer to home Ferguson has continued to deny that the Glazer family’s tight-fisted budget has made any impact on United’s competitiveness. This despite the family allowing Ferguson to spend less than half of the net amount per season invested in the six years prior to the 2005 Glazer takeover.
What’s more, the Glazers regime has impacted United’s budget not against a backdrop of Ferguson’s protest, but with his vocal support. United’s squad quality has eroded, while Ferguson’s ability to recover from transfer market misses.
Yet, the excuses come thick from those proffering an alternate line. United’s loss to Wigan Athletic last month, and the disastrous late capitulation against Everton, is little more than a ‘temporary changing of the guard’; a short-term ‘loss of form’ at the worst possibly time. Blame the players, blame the referee, blame injuries. Blame anybody bar manager and his paymasters.
The wider context of United’s cataclysmic European campaigns is relevant though, especially when taken together with the Reds’ performances against Manchester’s other team. When viewed in the prism of matches against City this season, or those with Europe’s second-tier clubs, United’s regression is stark. This is true despite the 86 Premier League points garnered in a relatively poor quality league.
Defeat to City has a way of clarifying the collective consciousness though. And while there is nothing United, Ferguson, or the supporters can do about another club’s financial model, the cumulative effect of £7.5 million net spent per season under the Glazer regime, while rival clubs pump investment into the team, could do little but reduce the club’s competitiveness.
It is a truism that not only City, but Tottenham Hotspur, Liverpool, Sunderland, Aston Villa and even Stoke City have each spent more, net, than United since 2005.
And in the week that Cristiano Ronaldo secured the La Liga title, United supporters were given a taste of what has been lost – and not replaced – during the Glazers’ tenure. The Real Madrid forward has scored 45 goals in 37 La Liga games this season. Interesting, then, that Ferguson should believe Ronaldo still represents ‘value’ at £80, £160 or even £800 million.
“You can only assess value on success,” added Ferguson, who sold Ronaldo to Madrid in summer 2009.
“Like Real Madrid with Ronaldo. They’ll be saying ‘we’d have paid £160m for him with all he’s done’. At more than a goal a game he’s been a fantastic buy for them. At the time we thought £80m was not bad. Now I’m saying to myself it should have been a lot more. He’s been such a fantastic buy for them, maybe we should have asked for £800m.”
United didn’t genuinely replace Ronaldo, although there was once much talk of the ‘Ronaldo money’ being available for Ferguson to spend. Yet, mindful of working under the PLC regime that required layers of sign-off on every deal, Ferguson now enjoys working with a single paymaster, whatever the budget. His aggressive support for the American family may never fully be explained.
Increasingly, Ferguson has insisted, with no concern for historically accuracy, that United does not spend large sums on players, while promoting ‘youth’ as a method of bucking a market that offers no value. It’s hogwash of course, as those who completed the analysis presented in Soccernomics and Pay as you Play will attest. Money spent on transfers and wages counts for much: between 72 per cent and 89 per cent of success, in fact.
Record transfer signings, of one form or another, Roy Keane, Paul Ince, Gary Pallister, Rio Ferdinand, juan Veron, Dimitar Berbatov and Wayne Rooney might disagree too. Fergie has always spent money – some good, some bad. According to some he offers the best ‘value’ of any manager around. Who could disagree?
Which brings us back, not only to the Glazers parsimony over the past six years, but Abu Dhabi’s dizzying ability to outspend all others. ‘Tick tock’ mocked City’s supporters over recent years, suggesting that success was only a matter of time. Indeed, bar Queens Park Rangers pulling off a miraculous result at Eastlands in a week, United’s hegemony will have been broken.
Worse, those supporters hoping for a response by United in the market will be disappointed at early indicators of Ferguson’s likely transfer strategy this summer. While City may spend “insane” money, United will invest in youth. It may be some time before City’s superiority is matched.
Spending under the Glazer regime
United’s net spend 2005 – 2012 (in relevant financial year):
- 20005/06 – £1m
- 2006/07 – £4.1m
- 2007/08 – £26.55m
- 2008/09 – £33.75m
- 2009/10 – (-)£64.5m
- 2010/11 – £13.55m
- 2010/12 – £38.15m
Net spend under Glazer regime 2005 – 2012 = £52.6m
Net spend per season under Glazer regime = £7.51m
Net spend 1998 – 2005 (in relevant financial year):
- 1998/99 – £25.95m
- 1999/00 – £16.05m
- 2000/01 – (-)£8.3m
- 2001/02 – £29.3m
- 2002/03 – £27.05m
- 2003/04 – £13.35m
- 2004/05 – £21.35m
Net spend under PLC regime 1998-2005 = £124.93m
Net spend per season under PLC = £17.85m
“There is room in Manchester for two clubs,” said James William Gibson upon effectively taking over Manchester United on 19 December 1931. Manchester City was then the region’s premier club, and United, by contrast, was on its knees after years of financial mismanagement and falling crowds. In debt to the tune of thousands, the club went cap in hand to Gibson, a successful local businessman. Salfordian by birth, Gibson became United’s second financial saviour of the early 20th century, bailing out the club and laying the foundations for success to come.
Today, there are parallels between heavily indebted modern United and the club of the 1930s, although the Reds of 1931 would not have lasted the winter but for Gibson’s significant financial aid. United’s peril deepened as the great depression took hold, and crowds fell to below 10,000 at Old Trafford, with the team sliding between First and Second Divisions.
Gibson, the eldest of three children, was brought up by his paternal grandmother after his parents died young. But the orphan owned an astute eye for business, starting his started his first company manufacturing military uniforms after 15 years working for his uncle. With the Manchester textile industry booming, Gibson’s Collyhurst factory expanded into uniforms for transport and other workers after the First World War. It proved to be a successful venture – one that would prove central to United’s rich history.
At the club’s request, Gibson ploughed £2,000 into United through the winter of 1931/32, ensuring the players’ wages were paid. Later he would spend another £40,000 to keep the club afloat through the economic downturn, funded the rebuilding of Old Trafford after the Second World War, and then had to vision to start the youth academy – Manchester United Junior Athletic – that produced the Busby Babes. More than a benefactor though, Gibson became United’s chairman, appointing Matt Busby manager after the war.
The saviour’s legacy, superbly documented in far great detail elsewhere, was recognised by Trafford Borough Council in 2001 with a bright red plaque at the railway bridge on Sir Matt Busby Way. Thousands walk past the lasting memory to an a hugely important part of the club’s history each match day.
And on Monday morning, eighty years to the day after Gibson’s gesture of solidarity with the club, the Manchester United Supporters Trust (MUST) recognised his legacy once again. Together with Gibson’s relatives, MUST and the Mayor of Trafford laid flowers at the James Gibson Plaque. Unsurprisingly no Glazer family members chose to mark the occasion. Why would they, for Gibson’s story is antithetic to United’s current owners.
Indeed, without Gibson there would be no modern Manchester United; no 76,000 capacity Old Trafford, no multi-million pound players, no global ‘brand’, and certainly no 19th domestic title last May. With the club on the precipice of extinction in 1931, the Salfordian created the environment in which United could survive and then eventually thrive in the years to come.
Moreover, unlike the club’s current owners Gibson did it not for profit, but through genuine selflessness and at huge personal financial risk. What greater contrast to the Glazer family could there be. After all the family has invested not a penny in the modern United, while sucking out millions in personal loans, management fees and debt repayment.
Gibson’s philanthropy is also a reminder of a football world now lost, when local businessmen ran clubs not to generate untold millions in profit, but as a service to the local community. This is not simply nostalgia either. In a similar vein to the mutuals that still exist in Spain and elsewhere, local businessmen once owned for the greater good.
This, after all, is how organised football eventually thrived in England. United, formed as Newton Heath LYR FC in 1878, was a workers union until financial difficulty required the club’s first bailout, by John Henry Davies, in 1902. Clubs all over the country were formed as unions, or Church and school teams, before being taken into largely private, but local hands. At United, it was not until Martin Edwards inherited the club from his father in the 1980s that the club’s owners sought to extract significant profits. In any case, FA rules precluded directors from taking a salary until 1981.
So raise a glass in toast – one that is 80 years in the making – to James William Gibson. United’s saviour.
From the Manchester Guardian, Tuesday 22 December 1931
It is now six years since the Glazer family waltzed into Manchester United, encumbering the club with hundreds of millions in debt and incurring the wrath of a legion fans. In the intervening period the family has priced thousands of supporters out of the club, while many more have walked away in disgust. Yet, with the Premier League almost in the bag and a third Champions League final in four years to come, the protests of 18 months ago have died down and fans – at least those still attending Old Trafford – seem content with success on the pitch.
Ffan talk of finances has seemingly been refocused in recent months. After all, Premier League titles from 2007-9, and another heading towards Old Trafford in 2011, together with the 2008 Champions League, is a level of success equal to any other era in the club’s history.
Yet, six years after the Glazers’ extracted control of United their impact is felt more than ever. With £500 million worth of bonds piled on the club and a Payment in Kind (PIK) loan refinanced somewhere in the depths of Delaware, damage has undoubtedly been done to a 133-year-old institution. Not least the £300 million that has been lost to the club in interest and other fees during the Americans’ reign. With the Glazer family seemingly now entrenched at the club, United will continue to haemorrhage money up to and likely beyond the 2017 date on which the bonds mature.
The strained finances have necessitated massive ticket price rises, which on aggregate have increased 55 per cent since 2005. Meanwhile, United’s well-staffed London-based commercial department has sought exploit global sponsorship markets to the fullest extent in response. The club, as always over the past six years, is running just to keep still.
This much has been widely debated of course, with fans now conversant in the language of business that had rarely been witnessed at Old Trafford prior to the 2005 leveraged buyout. Indeed, the ‘green and gold’ protests were provoked by the January 2010 bond prospectus, which laid bare for the first time the extent of United’s debt burden. Short of exchange-rate fluctuations, little has changed in the total debt owed by the club in the intervening 18 months.
Yet, the anger felt by United’s supporters has quelled since its height last season. In part success on the pitch, with short-termism always likely to override long-term concerns, has distracted fans’ focus on money. Moreover, the failure of the so-called Red Knights to mount a realistic bid left many protesters feeling disillusioned, with the palpable inability of organised supporters’ clubs to maintain a protest movement a factor.
In this sense the club has won a public relations war. The dual mantra that the ‘Ronaldo money remains in the bank’ and ‘there’s no value in the market’ is now repeatedly aped by supporters. David Gill’s disingenuous appearance in front of a Parliamentary select committee merely one in a rash of repeatedly contradictory statements issued by the club that has seemingly been swallowed by those willing to listen.
It is the symbol of a fragmented support where many traditional supporters have been priced out of Old Trafford and replaced by the affluent, casual and transient. Perhaps the most distressing element of a sorry epoch in United’s history. The road from here to financial probity and a mutually respectful relationship between club and fans is almost certainly lost forever.
This summer promises more of the same, with another heavy marketing campaign expected while season ticket renewals are a stake. Inflation-rate price rises were predictably met with anger from supporters groups, although in truth the failure of MUST or IMUSA to arrange a widespread boycott during the past six years has negated their power to influence. It is unspoken, but both club and fan groups recognise that enough supporters will renew to prop up the regime.
In all of this the family has not been forced into heavy transfer spending, even in the wake of Wayne Rooney’s October revolution. With the Glazers’ position now set for the foreseeable future, it seems unlikely that the club’s strategy spending strategy will alter either. After all, Gill’s oft-repeated promise that ‘the Ronaldo money’ is still available for Sir Alex Ferguson to spend has not yet been fulfilled.
By contrast the policy to buy young, buy often and buy cheap, is seemingly still in place. It is yet to materially affect United’s chances, although the clubs has now slipped significantly behind rivals at home and abroad in terms of wages paid. While Ferguson, the ace in the family’s sleeve, remains in good health the Scot will surely continue to extract just enough from his charges to remain successful.
Competition is set to increase though. Cross town rivals Manchester City plans another summer of huge spending. City’s failure to sign Rooney last January still rankles in the boardroom. Meanwhile, Roman Abramovich’s lust for football has returned and Liverpool is once again resurgent under Kenny Dalglish’s management. Even Arsène Wenger has spoken of bringing experience into his spineless squad.
Arguably rivals’ failings this season will not be repeated. Six years on from the Glazers’ takeover we cannot be sure that the club has the financial muscle or boardroom will to meet yet another challenge.