Manchester United’s commercial power could be plateauing.
Figures revealed this week in the club’s second quarter report suggest United, who have been more effective at selling their brand to sponsors than any other football club in the world in recent years, may have finally reached peak noodle partner.
United’s commercial income came in virtually unchanged compared to a year ago. The £66.8m generated by retail, sponsorship and content represented a 1.1 per cent rise that is the second-lowest quarterly rate of growth recorded since the club listed on the New York Stock Exchange in 2012.
A source of derision for many, United’s ability to pull in an “official mattress and pillow partner” or an “official Indonesian isotonic drinks partner” has fuelled the club’s rise to their current status as football’s richest team.
United have surged past their Premier League rivals — not to mention Real Madrid, Barcelona and Bayern Munich — in monetary terms despite a failure to challenge for the Premier League title for four seasons during which time they’ve only qualified for the Champions League once.
That’s largely been down to the club’s unparalleled commercial clout. In the five years between 2011 and 2016, United’s commercial income rocketed from £103m to £272m, a 164 per cent leap that vastly outpaced the club’s overall revenue increase of 56 per cent to £515m.
Unprecedentedly large deals with kit manufacturer Adidas and shirt sponsor Chevrolet formed the pillars of the business. When announced in 2014, United’s decade long, £75m-a-year Adidas contract was more than double the equivalent deal at any other Premier League club while their Chevrolet shirt sponsorship is also the division’s biggest.
Supplemented with a seemingly endless supply of regional, global and financial partners, United’s commercial income last season was the biggest in world football and larger than the entire turnover of clubs such as Juventus, Borussia Dortmund and Tottenham according to the latest Deloitte Football Money League.
Post-Fergie performance issues
There are questions over whether the club can sustain such dominance in an era of under performance on the field they have yet to demonstrate signs of emerging from under new manager Jose Mourinho.
A clause in the Adidas deal will be triggered, reducing its value to around £55m-a-year if Mourinho cannot guide the team into next season’s Champions League and it may be harder to keep selling inventory at the same pace.
“I think it’s fair to say that they’ve reached a peak unless they can start winning again,” David Haigh, chief executive of international brand valuation and strategy consultancy Brand Finance, told City A.M.
“They’re at a zenith. It’s hard to see it [the club’s commercial income] growing astronomically further and you could even see it eroding.
“Because Ed Woodward is a clever guy, he’s locked in a lot of these deals a long way into the future when United were on a high. The Adidas and Chevrolet deals were long term deals but I don’t suppose they would be queuing up to give United money the way they were two or three years ago.
“They have sold a lot behind the fact they’re one of the most popular brands in Asia. But after years and years of failing to win major trophies, their brand equity in Asia is going to be declining. It’s pretty much inevitable.”
United, for their part, are not warning investors of any urgent issues and are currently forecasting full-year revenues to hit an all-time high between £530m and £540m.
When quizzed about the slowdown in commercial income on an investor call this week, Woodward conceded it was becoming harder to drive increases in the space but remained bullish on its pulling power.
“I wouldn’t say it’s a mature business, I still view it as a growth business,” he said. “But it’s harder to drive those double-digit annual increases that we’ve seen in the past.”
Rivals gaining ground?
Yet that might not be such a concern for other Premier League clubs who could be catching up commercially — next season Chelsea will double the value of their kit deal after switching from a £30m-a-year agreement with Adidas to £60m-a-year with Nike.
“I’ve described Ed Woodward as the Ronaldo of the commercial side of football, and it’s true,” said Haigh.
“But he has laid out a blueprint for other clubs to follow. A lot of the top clubs are now switched on financially and have got in great commercial guys who are extracting large amounts of dosh. And so that obviously means the pool of available resources might be slightly lower too.”
Even the international markets that have been reliably generous may soon become less so, warns Haigh, as United face competition from other top European clubs and, increasingly, local leagues.
“The other adverse tailwinds for United is over a long period other tournaments are actually becoming more popular in relation to the Premier League,” he says.
“India has a Premier League, there’s the Chinese Super League, MLS in America. There is a growing recognition that other leagues are worth watching and interesting too and they might start nibbling away at the Premier League.”
Digital and data - the key to future growth?
The path to re-igniting rapid rate commercial growth may be found in its mobile and content division and it’s new MUTV app which will offer live and archived content to users in more than 160 countries around the world.
“Like a lot of other clubs, they’re trying to wrap their head around the challenge of getting to know their fans better and monetising that,” said Michael Broughton, partner at investment and advisory fund Sports Investment Partners.
“Things like apps are a great way of getting firsthand data from fans and consumers which they’re less likely to get from Facebook. From an app they’ll be able to get firsthand data on who their fans are and how often they interact with the club. The more you now know about them, the better you are at packaging things up to potential sponsors.
“Getting more first hand data is another tool in the armoury for them to back to the market to find more commercial partners and say ‘look how much we know about all of our fans’.”