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.”