LONDON (AP) - Manchester United’s owners will be relying on the strength of the club’s brand to soften the impact of a sudden downturn on the field this season.
Few clubs have the money-making abilities of United, which has been setting revenue records even as the team endured poor performance under the brief managerial reign of David Moyes, whose departure was announced by the club Tuesday less than a season into a six-year contract.
For all United’s success in accumulating dollars, euros and yen, handling the managerial succession after 26 years under Alex Ferguson has proved more challenging.
The Florida-based Glazer family, which bought the team nine years ago, has not shown publicly an emotional attachment to the 136-year-old club. The leveraged purchase left the club with hundreds of millions of dollars of debt.
“United probably peaked on the pitch in 2009, and since then we’ve been in a gradual decline, slowed only by the genius of Sir Alex Ferguson,” said Duncan Drasdo, chief executive of the Manchester United Supporters’ Trust. “Despite some key successes in that time, if anything, the other elite European clubs have moved further ahead, while the domestic challenge has also become much stronger.”
Since 2005, more than $1.1 billion has been spent servicing the club’s debt, which currently is about $600 million. Drasdo argues the club has “limited funds available for investment in the playing squad.” United has been generating record revenue, though, each quarter, with revenue set to exceed $700 million in the 2013-14 financial year.
United fans have cast envious eyes at Abu Dhabi-owned Manchester City and Qatar-backed French champion Paris Saint-Germain. Both clubs have been investing their owners’ oil wealth during recent transfer windows.
Since 2012, when a 10 percent share of United was sold in an initial public offering, the rise and fall of the club’s shares on the New York Stock Exchange has been watched along with the team’s on-field results. Wall Street investors initially welcomed the dismissal of Moyes, with shares soaring by seven percent at one point after Tuesday’s announcement and reaching their highest level since Ferguson’s retirement.
Those gains were wiped out Wednesday, with shares dropping by almost five percent to $17.85, sending the club’s value below $3 billion again to $2.9 billion.
“Following on as the successor to Sir Alex Ferguson was always going to prove a Herculean task … with arguably deeper disappointment at stake should the trophy cabinet remain bare for a second season,” said Andrew Wilkinson, chief market analyst at Connecticut-based Interactive Brokers.
United will be hoping the 659 million followers it claims to have worldwide are more loyal to the club than some investors.
Such a large fan base has helped United attract an enviable array of sponsors across the world with innovative country-specific deals masterminded some at the club’s corporate headquarters in London. From curries in South Korea to potato chips in Malaysia to credit cards across the Middle East, companies have been willing to pay millions of pounds to use United’s branding.
“They have been very innovative in the way they have carved up the rights,” said Steve Martin, chief executive of agency M&C; Saatchi Sport & Entertainment. “They have broken the mold and everyone else is trying to copy them by opening up international markets.”
However, those companies were attracted by a club that has won 13 Premier League titles since 1993, not one that failed to finish among the Premier League’s top four and secure a Champions League berth next season. Missing out on the Champions League will cost United more than $50 million in media revenue and gate receipts.
“Sponsors have bought into a brand and a club based on success, being at the top of the tree, which brings big exposure,” Martin said. “They will hope it’s not diluted. Any sponsor now would be slightly apprehensive. … The issue is not so much having to change manager. The issue will be if they don’t play in the Champions League every year. That’s where the sponsors get their value.”