Manchester United Stadium

United We Stand

Forbes magazine has valued the Red Devils Manchester United at an Enterprise Value of over $3 billion dollars ($3.3 billion to be precise or Rs 18,150 crore). That’s quite a neat sum! The first sporting club to have done so and that too by a wide margin: The next one in line – Dallas Cowboys – is a distant second by a margin of over a billion dollars.

Even the latest Deloitte report places Manchester United third in its Money League (behind Real Madrid & Barcelona), with a revenue of 320 million pounds (roughly $500 million) during the 2011-12 season – holding steady versus last season. The above achievements have been reached in a season / year in which Manchester United lost out to the Premier League title by a whisker, and got knocked out of the UEFA Champions League & FA Cup early. Predictably, broadcast revenue did fall by 11%. Therefore, it would be instructive to look at what is right.

Football is a major source of entertainment. Folks play it, flock to the stadium in droves to watch games, bet on matches, create anthems & songs for their teams, buy shirts & merchandise, play video games based on it, watch it on TV, make films – to name a few. So in the end a football club is in the business of creating good content for its fans week in week out. That exactly is the ethos of Manchester United – to entertain; and it takes that responsibility very seriously.

The approach is one of managing a professional organization, rather than just a sporting club. The club curtails wasteful use of money in the transfer market through the use of analytics & research and instead redirects that towards wages, which seem to bear a better correlation to victories (as per data in Soccernomics by Simon Kuper & Stefan Szymanski). It has also managed to increase player longevity, cultivate talent in their academy, blend youth and experience (buying players who may be considered too old by others eg: Van Persie who came to ManU at the age of 29) and maintain consistent management under Sir Alex.

On the business front too, it has taken several new steps. On 22nd of January Manchester United, according to a Marketwatch.com report, announced the acquisition of BskyB’s 1/3rd minority stake in Manchester United Television making the television station a wholly owned subsidiary. This enables MUTV to own 100% of the content production and distribution capabilities of this business. This means greater control over the entire value chain.

Further in a bid to de-risk stadium collections, Manchester United has improved its commercial operations. The revenue in this category has not only risen 14%, but has also become the largest contributor to the club’s total. Some examples of increased commercial activity are the DHL training kit deal, regional partnerships in new media & mobile, a 3-year sponsorship with China Construction Bank to produce Manchester United branded credit cards, a 3-year deal with Chinese soft drinks maker Wahaha as the first Official Soft Drinks Partner in China, and a 3.5-year sponsorship deal with Indonesian tyre maker Multistrada. (info source: Deloitte report + internet search)

In a world where fans have other means of entertainment & occupation through increasing connectivity, it is imperative that one stays relevant across as many touch-points as possible. Whether that means creating signature cafes and bars, selling t-shirts & memorabilia, or engaging enthusiasts in ground activities & gaming contests – the choice is that of the sporting club. So is the choice it makes in approaching its business: Dispelling old notions of shunning hard-nosed business or embracing new paradigms of data, research & business, while not compromising on core ethos.

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