In May 2018 Ed Woodward, Manchester United’s vice-chairman said that “Playing performance
doesn't really have a meaningful impact on what we can do on the commercial side of the
business." In the Stretford End, hardcore United fans
were unimpressed with the comment at the time and no doubt Woodward is squirming after the
club’s moderate start to the 2019/20 season. United have just announced their accounts
for the year ended 30 June 2019, and like events on the pitch, they are a mixed bag
of results. Football clubs generate income from three
main sources, matchday, commercial and broadcasting. Matchday income was £111 million, but while
impressive by Premier League standards perhaps, it has shown little growth since Sir Alex
Ferguson retired in 2013.
Matchday income is a function of the number of matches played, multiplied by the average
attendance multiplied by the income per fan per match. In 2018/19 United kept season ticket
prices frozen again and sold out every match, so there is little opportunity to increase
this income stream unless Old Trafford, now looking tired and tatty compared to newer
grounds, has its capacity increased. Commercial income is where United have historically
been strongest, mainly through their policy of selling rights to commercial partners in
different countries. This total too was relatively static in 2018/19 and perhaps suggests that
a lack of silverware is taking its toll, as sponsors prefer to associate their products
with success.
Whilst United celebrated the kit deals with adidas and Chevrolet a few years ago, it is
effectively locked into these long-term arrangements and other clubs are starting to catch up.
Broadcasting income was therefore the only driver of revenue growth in 2018/19, but the
numbers hide a story.
Although broadcast income increased by £37 million, this was all due to a new Champions
League TV deal starting. United were in the Europa League in 2016/17 and earned £38 million
for winning it, but £83 million for making the quarter final in the Champions League.
Finishing 6th compared to 2nd in the Premier League meant that broadcasting prize money
there fell by £7 million. United’s lead over the over Big Six clubs
has eroded in recent years. In 2017, they earned £217 million more than Liverpool,
the following season this fell to £135 million. If Liverpool have another successful season
in the Champions League, that gap could be close to being eliminated in 2019/20 by both
them and – of course - Manchester City, with Tottenham also using their new stadium
to close the gap.
Hidden away in the footnotes of United’s press release is a statement saying that the
club expect 2020 revenues to be in the £560-580 million range.
The main costs are player related, in wages and amortisation. United’s wage bill, despite
paying fewer win and trophy bonuses than the previous season, increased to £332 million.
This is partly due to a full season employing Alexis Sanchez, along with new contracts for
some other players and Champions League participation bonuses being triggered.
Since Ferguson retired in 2013 the wage bill has increased by 83%, putting the average
weekly wage at approximately £160,000 a week. United can afford to pay these high wages
on the back of their revenue streams, with wages accounting for £53 of every £100 of
income generated. This is well below UEFA’s ‘red line’ of 70% wages to income.
United have traditionally had one of the lowest, if not the lowest wage to income ratio of
the ‘Big Six’, but this financial advantage has receded.
Transfer fee amortisation is the cost of player transfers spread over the contract life. When
United signed Fred from Shakhtar Donetsk last season for £52 million on a five-year contract,
this resulted in an annual amortisation charge of £10.4 million a year. The total amortisation
charge for the whole squad was £129 million, treble the amount of when Sir Alex was last
in charge.
This suggests that Manchester United have clearly spent large sums recruiting players
from other clubs and paying them handsomely, but the quality of the recruitment must be
called into question. The two English clubs who participated in
the Champions League final last season together had a lower amortisation charge than Manchester
United, and remember that Rashford, Lingard and McTominay all are academy recruits with
no amortisation cost.
It cost Manchester United £19.6 million to sack Jose Mourinho and his entourage during
the season after they were only sixth in the table in December 2018. This took the total
cost of getting rid of managers to £40 million since 2013.
United boosted their profits with player sales that made the club £26 million as Marouane
Fellaini, Daley Blind and young goalkeeper Sam Johnstone left Old Trafford.
Profits are calculated as income less costs. Manchester United had profits from their total
trading of £50 million in 2018/19, an increase compared to the previous season but still
lower than in 2013.
These profits are however before the club pays interest on its borrowings. United have
outstanding loans of over half a billion pounds and the interest on these cost £450,000 a
week. When the Glazers first bought the clubs for £790 million in 2005, lenders were very
wary about giving the club money and charged interest rates up to 16.25%. Interest rates
have fallen in recent years as the club managed to convince the markets that they were generating
enough cash elsewhere to meet its payments. The total interest cost since 2005 has now
reached £809 million, exceeding the sum originally borrowed.
Prior to 2016 the Glazers and other shareholders did not take any money from the club in the
form of dividends on their shares, but since then Manchester United have paid out £22
million a year in this form. Good news for the Glazers and hedge fund managers who own
the shares, but this reduces the amount available to invest on the pitch.
Manchester United spent £135 million on players in the year to 30 June 2019, which includes
Fred, Diago Dalot, Dan James and Aaron Wan-Bissaka, the latter two came in just before the end
of United’s year end. This means that United have made total player purchases exceeding
£1 billion since Sir Alex’s retirement.
Since then, the club confirmed that they’ve spent £99 million on new players, including
Harry Maguire. Sales since 30 June 2019 are listed at £67 million, presumably in relation
to Romelu Lukaku. This figure seems much lower than the amount quoted in the media but may
be net of agent fees on the deal. United managed to reduce the amount they owe
to other clubs on transfers to £188 million at 30 June 2019, although this figure is another
which has risen rapidly since Ferguson’s retirement.
Many modern transfers are paid in instalments but owing such large sums to other clubs does
eventually restrict a club’s ability to buy new recruits.
So, where does this leave Manchester United. There is no doubt that the Glazers and Ed
Woodward are unpopular with a large proportion of fans. The lack of trophies in recent years
is now perhaps catching up with the club as it no longer, shows the incredible growth
in sponsorship deal values that took place once upon a time. So perhaps Ed Woodward is
wrong and playing performance does really have a meaningful impact on the commercial
side of the business, and that might now worry the owners and investors as it has the fans
in recent times. “Kieran Maguire is the author of The Price
Of Football: The Finance & Economics of The Beautiful Game, published by Agenda and released
in November 2019.”