Thursday, November 10, 2011

United In Success

Manchester United: The £110million a year 'religion' with 330 million fans and sponsors from Turkey to Chile
Daily Mirror
10 November 2011

THE glitzy address shows just how far Manchester United has come in the past seven years... as a money-making champion.

For while Sir Alex Ferguson has guaranteed glory on the football pitch, the suits behind the scenes have helped turn silverware into pure gold.

Little highlights this transformation better than the club’s London offices, housed in an anonymous Mayfair building, a stone’s throw from the Ritz hotel and with international hedge fund wheeler dealers as neighbours.

Old Trafford remains the centre of football operations, but this suite of offices is where the Red Devils cash in on the likes of Wayne Rooney and Nani’s superstar status.

An investigation into how the club has transformed itself into a £1.2billion franchise shows why the much-maligned Glazer family, who bought the club in 2005 and saddled it with huge debts, have hung on.

Only Google, Apple, the BBC, Dyson and Facebook are better known brands, marketing experts revealed recently, making it a bigger draw to advertisers than Coca Cola and Microsoft.

The numbers involved are staggering. The club’s estimated worldwide following is 333 million with 92 million in Asia, which is why the team often heads to the Far East for money spinning close-season tours.

The club’s turnover has crashed through the £100million barrier and experts estimate the value of the United brand alone as £412million, up from £197million in 2005.

It now has more than 20 “official partners” from US sportswear giant Nike and German car manufacturer Audi to Turkish Airlines and Chilean wine brand Casillero del Diablo.

But United’s business success is summed up by the shirt sponsorship. US financial giant AON has paid an estimated £20million a year for four seasons, 9,900% up on the £200,000 Sharp electronics paid back in 1992.

Just last month, a two-year £2million tie-up was announced with Du, a mobile phone firm in the United Arab Emirates, where an estimated 500,000 fans live.

It all began in earnest when the secretive Glazers moved in, convinced that United could be bigger than huge US sports brands such as the New York Yankees baseball team.

Since then, revenue has more than doubled, helping annual profits rise to £110million in the 12 months to the end of June this year.

Manchester United Ltd has a whole floor off Piccadilly, London, with a 70-strong sales and marketing team who are adept at striking lucrative sponsorship deals.

Commercial director Richard Arnold said recently: “We’ve only just started. There is a lot more to come. United has huge future potential.”

Firms are willing to pay big money to get in bed with United. Parcel giant DHL is spending a reported £40million in a four-year deal to sponsor the team’s training kit – for good reason.

When Wilkinson Sword launched a Manchester United-branded razor in Japan it sold 1.6 million units in just six weeks.

Tim Crow, of Synergy Sponsorship, which helped broker the deal, said: “United appeal to a huge number of people around the world. They have a bigger following then anybody else.

“Where we have used Manchester United, it has been extremely successful.”

Mr Crow said another key difference about the club is the quality of its power brokers, highlighted by a deal it clinched with another sponsor, Betfair.

He said: “We negotiated with another top-six club and their behaviour was absolutely terrible. They were completely disorganised.

“With United, you are dealing with a religion. You’ve got all that history in the club, that is what makes it worth what it is and that is what United understand.”

Dave Chattaway of Brand Finance, which calculates the value of brands, said: “Like them or hate them, it’s hard to dispute the business success story of the Glazer reign at Old Trafford.

“One of the key factors is the fact they have Sir Alex Ferguson. The Glazers have given him the resources for him to deliver consistent on-pitch success, which feeds the off-pitch expertise.”

The next stage in the Glazers’ plan is a rumoured stock market flotation that could value the club at £1.8billion. Reports have suggested they are willing to sell 25% of the club via a listing on the Singapore stock exchange, rather than in London.

Critics claim the Glazers will use income from the sale to cut their personal debts, rather then plough it back into the club.

Figures for Red Football Joint Venture, the Glazer company that controls United, show a loss of £108.9million in the year to the end of June.

At the same count, the club itself still had net debts of £358million and paid out £43.5million in interest alone last year, much to the disgust of fans.

Andy Green, a fund manager who writes a United blog called Andersred, keeps a close watch on the club’s finances.

He said: “The brand is being tarted around continuously. It’s ridiculous when you see an official wine partner, an official office supply partner. There has to be a limit to the number of brands you can hitch on to the United bandwagon.

“How far do you take it? Will there be an official washing powder? It just gets silly.”

Hostility to the Glazers’ ownership has waned, but Mr Green said fans are still angry at the debts dumped on the club and are anxious about what the future holds.

He said: “Yes, there is less hostility, but it doesn’t change the fact that, so far, it has cost more than £400million in interest, debt repayments and bank fees.

“That is enough for every fan to go free to every game, all season, for four years. It is a staggering amount of money.

“You need to ask why the club has had enormous success off the pitch in the past five years. Because it has won stuff on the pitch. Has it won stuff on the pitch because of the Glazers? Of course it hasn’t.”

Such criticism and concerns from fans are unlikely to deter the Americans. When you own one of the world’s biggest brands, it’s almost a licence to print money

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