Is Manchester United’s Lack of Success Finally Impacting Their Finances?

Is Manchester United’s Lack of Success Finally Impacting Their Finances?


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.”

About the Author: Garret Beatty

100 Comments

  1. Can Ed Wood ward go and manage a relegated team and in the process make them huge money . Please, the only reason United is making money is due to undying fans of the club.

  2. no its Woodward and the glazers who only care abut money going into their own fat bank accounts. we need a proper football CEO like Van Der Sar for example

  3. They should have traded Pogba for Isco and Bale. And if one of those two did not wanted to go to Man Utd then go for James Rodriguez instead. They should have also traded Lukaku with Icardi because he wanted to leave Inter so badly. Then after that you could have bought Milinković-Savić from Lazio or Doucouré from Watford. It's not that difficult Man Utd!

  4. Boycott Manchester United! All official merchandise, ticket sales, and club sponsors if you're really serious. This, if done effectively, should get the glazers to sell or at the very least to start investing in the club

  5. Finally your first trending video. Shame it has to be on such a poor team like Man Utd. The video is great. You forget that their owners took 1b dollars. Old Trafford is more than tatty it is rather run down by the lack of investment by their owners. I think the days of Man Utd being a club for good managers /coaches is over.

  6. United have spent roughly the same amount paying off managers they were firing over the last couple of years as Liverpool did on buying Mohamed Salah wow

  7. Can't wait till all their sponsorship deals expire and nobody wants to renew with them because they don't want to be associated with failure

  8. The sooner scum realise they’re a mid table club. Like they were for 60 years of their existence they’ll be alot happier

  9. you can't siphon off 1 billion from a cub and expect continued success, the fans should boycott stop going to the games until there are new owners, it's the only way. The owners should sell and make themselves even richer.

  10. paying world class wages to second division quality players, and you can't blame any of the managers they have had.

  11. IMO Spurs are just as bad they spent 100s of millions and all they’ve got to show in the same period is an Audi Cup win, CL final and league cup final which is less trophies than what United have won.

  12. Stop blaming Ed Woodward and glazers they’ve spent a billion since fergi left. What other club apart from city have done that.

  13. Most kids grow up to like whoever the best team is at the time, most of my friends are Man Utd or Arsenal fans, a few chelsea fans and I'm a liverpool fan. Man utd have been out of the picture for long enough now that they're not gaining the new young fans. They also don't have any players for kids to look up to, just look at that clip of the young Utd fan saying "all of them are rubbish"

  14. i remember the days when sky sports where blatantly pro Manchester United like blatantly.
    and that filtered to the press which filtered to the officials what even filtered to the neutral.
    the turn of events what after that was a few billionaires owners and ferguson leaving. From the nxt five years they need at least 3 of them champions league. the nxt ten years we will see them mid table as what Liverpool went to when they fell from dominating in the 80s.

  15. They haven’t had a bad start to a season like this season since the 1980s before Ferguson took over as manager

  16. The answer is NO. If you knew anything about United you know there income is doing nothing but rising 😂😂 you don't know what your talking about. The lack of success is down to been run poorly

  17. Mc's turnover of £500m is totally fake. A club with a tiny fanbase cannot have such a huge turnover unless cheating the system somewhere along the way. Their accountants have been cooking the books to bypass the FFP for years. Even Stevie Wonder can see that.

  18. Live and learn … don’t let greedy American wankers who couldn’t give a fucj about the game be banned. Football is about passion, and should only be about passion. Makes me sick that these owners look at football as paychecks

  19. Not buying a thing until they start proving they want to win and actually win. I think I wont watch matches as well.

  20. Team depending on the U18 and we were still wasting time to sign a couple of players….Instead they sold Lukaku Herrera and more without replacing them. How could this team get forward?

  21. The commercial success of any club comes as a direct result of the success on the pitch. If it wasn't for Ferguson's dominance of the premier league and his champions league wins, United would have nowhere near the commercial success they have today. Ferguson's reign is the only reason why they still have any bargaining or player attracting power at all.

  22. If United don't get control of their loan payments soon, I can see a Leeds/Rangers scenario happening very quickly – woe betide if they get into a relegation fight.

  23. We are big disappointment for fred purchased so much of cost.He had worst playing every game. he drove from man utd this is my humble request. and i am angry him big

  24. Have to disagree and reject the ‘tied and tatty’ comment about Old Trafford….it’s over 100 years old, has tonnes of history, is bloody massive and is still far superior to any new, generic, flat pack looking stadium we always see now.

  25. Of course it would have an impact, the clueless, glory supporting kids of today support the latest team to win the league.
    That's why there were more Chelsea jerseys being sold when abramovic took over and they bought the league title.
    Past few years there has been more man city shirts with them spending £1.5b to buy the title..
    Kids don't care about a has been club that's sat in the middle of the table 😂 😂

  26. just sack Ed Woodward. Problem fixed. They won't do it, but that fixes everything. Hell they should learn a bit from PSG and Manchester City, they have fucking former players as their sporting directors.

  27. The probelm with club MU is because the chairman, i think the chairman MU seems like liverpool chairman in era owen, torres and suares. And thats time liverpool dont have money to pay player salaries and no sponshor in thats time ( i dont remember the chairman name).

  28. 100%!!!…. Manchester is FLOODED with City supporters now. 10-20 years ago you wouldn’t be seen dead wearing a City kit, not unless you were die hard fans. I see the kids in the shops now and they look at The Utd kit and laugh…so many kids wearing City colours. So for sure they’re losing coins.

  29. This video is so eye opening. Thank you so much, I learned a few things i ddnt know abt my club 😬.. We really are in trouble

  30. I’ve bought the athletic but to be honest you are better. If they had any sense and if you were up for it they’d buy you out

  31. Utd were decent under Fergie but that period or time was not the norm. They were shit before Fergie and now they’re back to being shit again now that he’s gone. Utd is finished.

  32. As far as I know ManU did not have to pay Jose 19M in lump sum amount but they have to pay it in monthly or weekly until Jose managed to be employed by other club like ManU in the past who was willing to play double bus parking counter attacking football.

  33. The FA have to step in and close down ManU, in this day and age when it is all about people's feelings, we can't allow so many ManU fans to go through all the mental anguish as they watch their club be relegated down the leagues until they inevitably go bust and go into liquidation.

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