When formulating their sales proposal for prospective investors, Manchester United incorporated a projection that was optimistic in nature.
A claim that raised a few suspicions was tucked among the boasts of having more than one billion global followers and being the most successful English football team of all time.
Representatives from Sheikh Jassim bin Hamad Al Thani’s unsuccessful bid for a 100 percent purchase and Sir Jim Ratcliffe, who is nearing a 25 percent investment through his petrochemicals firm INEOS, were informed that the club anticipates generating $1 billion ($1.2 billion) in annual revenue by the end of the 2027 fiscal year.
This figure does not account for any potential revenue generated from the development of Old Trafford, which would be supplemented by increased revenue from broadcasts, advertisements, and matchday activities.
Even the most sanguine individual at United would undoubtedly concede that the projected target is nearly unattainable.
The club disclosed its exceptional earnings of £648.8 million for the fiscal year concluding June 30, 2023, in October. This was an increase from the £491.1m in 2021 and £583.2m in 2022. The organization’s most recent financial statements estimated revenues ranging from £650 million to £680 million for the fiscal year concluding in June 2024.
Therefore, United must raise more than an additional £350 million over the next four years in order to attain £1 billion. It will require some effort.
The club’s former executive vice-chairman, Ed Woodward, once stated that United’s commercial capabilities are not significantly impacted by their playing performance. However, an individual with knowledge of Manchester United compared the situation at Old Trafford to the act of amputating the head from a snake: while the head symbolizes commercial success and football, the body can only writhe for a limited duration in its absence.
Have we arrived at that juncture with United? What is the maximum amount of writhing that the body can endure before all future success possibilities are exhausted?
United have secured a £900 million contract extension with Adidas, the club’s kit supplier, for the upcoming decade. Additionally, Qualcomm, an American technology company, has consented to sponsor the club’s front-of-shirts beginning in 2024-25, with the club aiming for a £60 million annual agreement.
Although United’s financial results suggest Woodward’s assessment was not entirely incorrect, one wonders how much greater the figures would have been had they maintained the level of on-field success they achieved during Sir Alex Ferguson’s tenure as manager (1992-93), which included 13 Premier League titles, two Champions Leagues, and six victories each in the FA Cup and League Cup.
“It is extremely, extremely ambitious,” says Dr. Rob Wilson, a Sheffield Hallam University expert in football financing. “Achieving £750 million from £650 million will not be too difficult, but reaching £1 billion from £750 million is an entirely different story, especially considering the current lackluster performance in sports.
“Over the next four years, the relative growth rate must be greater than it has been for the previous five to ten years.” They have nearly doubled their revenue in the past decade and now anticipate an additional 40% increase over the following four years. Hats off if they succeeded. However, it is exceedingly challenging due to the athletic performance.”
In fact, United have not won the Premier League since Ferguson’s final season in 2012-13, and his succession has only led them to the Europa League, one FA Cup, and two League Cups.
Inconceivable as it seems that United can reclaim their former dominance in England’s top division and contend for Champions League titles within the next four years, how can they possibly win the £1 billion jackpot?
Increasing focus on the worldwide support base
In their sales presentation to potential investors, United touted the creation of new digitally-enabled propositions and the expansion of their merchandise business as additional revenue streams derived from their global fan base.
Wilson states, “Most clubs concentrate on matchday expenditures on the day of the game itself, so that would be the 74,000 fans entering Old Trafford.” “They are frequently the ones generating revenue, be it through the sale of replica shirts or programs.” Every club, but especially English teams, fails to acknowledge the significance of non-match attendees.
“The last time we calculated it, Manchester United’s digital footprint in the Middle East was greater than the combined sum of every other Premier League club.” This occurred amidst a lackluster athletic performance and the ownership of Manchester City by the Abu Dhabi Group.
United detailed in financial filings with the Securities and Exchange Commission of the United States for the year ending June 30, 2022, the composition of their 1.1 billion “fans and followers.” They reported that 731.7m originate from the APAC (Asia-Pacific) region, 296.1m from EMEA (Europe, Middle East, and Africa), and 74m from the Americas. According to the club, there are 635 million followers and 467 million supporters.
Wilson states, “If you could engage one billion of your fans for an entire year and convince them to spend £1, that would bring you to £1 billion.”
Neil Joyce, co-founder and chief executive officer of CLV Group, a data and insights firm specializing in sports, media, and entertainment, has conducted comprehensive research on the lifetime value of a fan and strategies for organizations to capitalize on overlooked revenue prospects.
As of June 30th, CLV Group provided an account of how United failed to capitalize on £86 million in prospective revenue for the fiscal year. £18 million was ascribed to content streaming, £33 million was allocated to virtual matchday revenue, and £35 million was allocated to digital memberships, which encompass supporter tokens.
A United supporter, according to Joyce, will spend less than £1 on the club on average throughout their tenure of support. Jones, on the other hand, estimates that enthusiasts of the Dallas Cowboys, a widely followed NFL franchise, will allocate an approximate sum of $60 (£49).
Joyce explains, “The Dallas Cowboys do an outstanding job of generating revenue on matchdays, with average ticket prices hovering around $300.” “Similar expenditures can be observed between season-ticket holders of the Dallas Cowboys and Manchester United.” However, Manchester United’s fanbase’s pure magnitude and scope dilutes that number.
“Historically, when I am in the business of selling commercial deals, sponsors have placed significant emphasis on metrics such as reach and engagement.” The figure of 1.1 billion will hold significant appeal for a sponsor due to their emphasis on the quantity of visual impressions.
Wilson further states, “Fan engagement and their ability to activate it is the golden ticket.” “If they are successful, they will begin to approach £1 billion.”
According to Joyce’s research, the mean age of a football enthusiast in the United States is estimated to be between 16 and 34 years, whereas in the United Kingdom, it exceeds 40 years. United must penetrate this youthful American market in order to generate £1 billion in revenue, according to him, because it offers the chance to sell digital content, including a streaming service accessible through the club’s app.
Joyce states, “You have witnessed the success of the Formula 1 documentary series Drive To Survive, which focuses more on the teams and their personalities than on the race results.” “I believe that some solid benchmarks exist for what is possible.”
Achievement on the pitch
Achieving success is ultimately what will accelerate the trajectory towards £1 billion in revenue.
In recent years, United has developed a routine of failing to qualify for the round of sixteen in the Champions League and finishing outside the top two in the Premier League. This cannot be sustained.
The counterargument, which also served as the impetus for the European Super League’s failure, is that the Premier League’s competitive landscape is unique. For instance, Barcelona, Real Madrid, Paris Saint-Germain, and Bayern Munich are not subject to the domestic rivalry that characterizes the English Premier League. However, United will have little sympathy if that prevents them from surpassing the £1 billion mark.
For over a decade, United have exhibited a dismal track record in generating transfer fees through the sale of players; only the notable profits from the sales of Dan James (£10 million), Chris Smalling (£8.1 million), and Dean Henderson (£20 million) have been profitable.
Further, further, further
Additional revenue could be generated through the sale of naming rights and other sponsorships, such as a contract for the space on the sleeves of the players’ match uniforms. An alternative approach, one that would be met with universal disapproval, would involve augmenting the price of both general admission tickets and hospitality tickets at Old Trafford.
After eleven years of freezing adult season tickets, United increased them by five percent prior to the current campaign.
Wilson states, “From a matchday standpoint, they will only generate an additional £40 million to £50 million through improved corporate areas and increased ticket sales.” “I believe that their commercial revenue will continue to increase due to technological advancements, the global market, and the emergence of new companies in various industries.”
“The most significant one in recent years has been cryptocurrency, but others that can be monetized will emerge in the coming years as well.” However, it is unlikely that commercial expansion will reach the magnitude that has been observed due to the sporting aspect.
TV offers
The Premier League’s domestic rights are up for bid, whereas UEFA, the regulatory body of European football, reached an agreement with Paramount Global, the owner of the CBS network, in 2022 for the U.S. media rights for its three club tournaments. The value of the bundle as a whole is $1.5 billion, or $250 million per season for the duration of six years. This agreement, which will be implemented beginning with the upcoming season, represents a substantial augmentation from the $100 million per season that Paramount and Univision previously contributed.
Additionally, United may benefit from the reorganization of the Champions League’s qualifying schedule, as England may be awarded an additional qualifying spot from the current quartet. By increasing the number of participating clubs from the current 32 to 36, UEFA anticipates a revenue increase of approximately 33 percent for its club competitions. At present, the Champions League generates €3.6 billion (£3.1 billion; $3.8 billion) in revenue across all three seasons spanning from 2021 to 2024. UEFA estimates funds of €4.6bn-4.8bn beginning in 2024.
It is evident from those numbers alone why United considers Champions League qualification vital to achieving their optimistic objective. Real Madrid earned a total of €133.7 million from the 2022 Champions League final, which was comprised of prize money, their 10-year record in Europe, and television revenue.
Although the Premier League club may be tempted to take a bite of that, United’s on-field form indicates that a fourth-straight victory in Europe’s elite club competition is improbable. Moreover, with three losses in their first four matches of the season, they may not even advance from the group stage.
One would anticipate that Manchester United would be the first Premier League club to post revenues of £1 billion in a single fiscal year.
However, they are placing their trust in substantially advancing in terms of footballing achievement while simultaneously optimizing revenue generation from their worldwide supporter base.
Their financial statements will be subject to comprehensive scrutiny for the fiscal year concluding on June 30, 2027.