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Manchester United: Number 1 on and off the field
As the 2012/2013 Premier League season draws to a close, it looks very much like Manchester United is going to regain the right to call itself the best team in the land. Surely not even the club that loves to make things hard for itself can throw away a 13 point lead with only 5/6 matches remaining? The club’s success is not, however, limited to the field of play with financial data related this week showing that the club is by far and away the Premier League’s number one when it comes to generating revenue.
For the financial year ended June 2012, the club’s revenues were £320.3m ($507.5m), £59m ($94.6m) higher than those of the nearest rival club, Chelsea and over six times as high as the lowest earner, Wigan Athletic. Much of the club’s growth in recent years is attributable to increased commercial revenues, which is now the club’s most significant revenue stream, accounting for over 36% of the club’s total turnover. Much of this revenue is generated from sponsors and the club’s current official partner roster includes world-leading brands such as AON (principal sponsor), Chevrolet (official automotive partner), DHL (official logistics partner) and Nike (official kit manufacturer), as well as local brands such as Kagome (official partner of Manchester United for Japan), Thomas Cook (official travel partner) and Turk Telekom (official integrated telecommunications partner for Turkey).
Matchday and broadcasting revenues also remain important but are highly dependent on the club’s on-field performance and this represents the greatest threat to the club as a business. It is with regards to broadcast income that on-field performance has the greatest bearing on the club’s ability to grow revenues. Under the terms of the Premier League’s television agreement with BSKyB and BT, broadcast income is shared equally between the league’s participating clubs, but bonuses are prize money are available and are linked inextricably to performance and progression in the UEFA Champions League has a noticeable impact, with the club’s broadcast revenues falling by 11.3% in 2011/2012, a season in which the club was eliminated from the competition at the earliest possible stage.
Manchester United continues to be weighed down by debt accrued as a result of the Glazer family’s takeover of the club in 2005. Net debt stands at £366m ($587m) and cost the club £50m ($80.2m) in interest last year and this remains a concern for the foreseeable future.
Manchester United is nevertheless leveraging its on-field success to achieve its financial aims and has done so very effectively. The club’s focus on, and extensive fan base in, under-developed markets provides it with a strong platform for future growth, but if the club is to continue to grow revenues and improve profit margins, it must continue to win silverware on the field. The signs are that this will continue to happen and that Manchester United will be, or at least close to, the Premier League’s number 1 for some years to come.
For a more in-depth analysis of Manchester United as a business, check out the MarketLine Case Study now