How can Manchester United explain financial gains without re-investment?

Manchester United 3

Manchester United announced record-breaking profits on Wednesday in the aftermath of a summer characterized by a lack of spending.

The club posted their annual revenue has increased by 13.4 per cent to £363.2 million, their sponsorship revenue for the year increased by 44.1 per cent, as the club remains by far the most globalized British sports brand in the world.

The club secured their 20th league title win the last term and despite the retirement of Sir Alex Ferguson after 26 years in charge at Old Trafford, their shareholders’ earnings per share increased by a whopping 266.7 per cent.

Meanwhile, 40 per cent of the brand’s total revenue was commercial revenue, which also grew by 29.7 per cent for the year (to June 2013) to a record-breaking £152.5 million.

This came following the club’s announcement of no less than seven global sponsorship partnerships including a world record shirt deal with car manufacturer Chevrolet, four regional sponsorship partners and nine services and telecom agreements.

The club also reached 34 million followers on Facebook and launched an officially Twitter account as part of the social media campaign. For the coming year to June 2014, the club expects their revenue to rise by another 15.6 per cent to a minimum of £420 million.

What does this mean for the fans of the club? Well, in theory it means the club continues to grow as one the most popular football club on the planet, attracts an increased fan base and exports the club’s image and prestige further on a global scale.

The television deals secured, along with the new sponsorship partners will provide a huge platform for the club to increase its hold over the international community and, for example, season ticket holders at Old Trafford may well find a greater diversity of national and ethnic backgrounds amongst the supporters each week.

In theory, it should also mean there is more money to spend on the pitch – not on the grass – the squad and new manager David Moyes would (again, in theory) have more cash to play with to bring in the very best players from around the world.

But, hang on a second, the club knew they were in a strong and increasingly stronger financial position prior to the end of last season and yet they brought in just one major signing in £28 million Marouane Fellaini from Everton.

The club, the chief executive and the manager came under fire from supporters following the ‘botched’ job they did in the transfer market this summer – the failures to bring in the likes of Leighton Baines, Cesc Fabregas, Ander Herrera and Fabio Coentrao amongst others.

With those kind of record-breaking profits, one would have imagined the club’s owners would have sanctioned the kind of deals we saw Real Madrid making – the likes of Gareth Bale and Isco – seeing as Madrid and United the two of most profitable clubs in the world at present.

Questions must be asked – whether they are asked of the Glazer family, Ed Woodward or even David Moyes – as to why the (quite clearly) available funds they had to spent that extra bit on Baines or whoever else they were after weren’t made available to those charged with spending it.

I’d be intrigued to know what kind of players Moyes had on his shortlist in June and July and I’d be even more intrigued to know what kind of budgets Ed Woodward was discussing with him. When a club makes £363.2 million in a single year and reinvests just 7.9 per cent of that on new players it makes you wonder where the 92.1 per cent of the profits are going?

Incidentally, the club spent £71 million in 2012-1013 financing the debt of the Glazer family’s 2005 takeover which takes the total cost to Manchester United £680 million including interest and fees. According to Andy Green via The Guardian, the £525 million the Glazier’s borrowed to finance the takeover was ‘loaded on to the club to repay’ and yet, eight years later, United still have £389 million left to pay off.

If the club spend £71 million a year on financing their owners’ debt, they’d still be paying it off five years from now.

Meanwhile, the club’s globalization could reach saturation point and if the boss doesn’t have the funds made available to furnish his squad with the players capable of competing with the likes of Manchester City and Chelsea, never mind Paris Saint-Germain, Monaco, Real Madrid and Barcelona in Europe, the brand that is Manchester United might not be quite as valuable as the Glazers have been used to over the past eight years.

Ultimately, these questions are for the owners, not the manager and they ought to be asked by the fans – the ones who have supported the club (financially and otherwise) for thirty to fifty years as they will unlikely be asked by the new fans acquired through the sale of United’s image to car companies, tire manufacturers or whoever else the badge ‘represents’ now.

That badge used to represent the people of Manchester, the fans, the manager, the players, the history and the sport but, slowly slowly, that image is being diluted by corporate ‘partnerships’ and corroded perhaps by a diminished interest in and or capacity to spending the fruits of that labour on the pitch.

Manchester United used to break records in the transfer market – Rio Ferdinand, Juan Sebastian Veron, Andy Cole, Bryan Robson – now their only involvement in those record fees is acquiring the profit and losing the player and breaking records in their profit margins.

image: © birdies-perch

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