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Business News/ Industry / Manchester United: Second coming or beginning of the end?
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Manchester United: Second coming or beginning of the end?

Draw against Chelsea has raised hopes that the club can once again reach the heights scaled under Alex Ferguson

Robin van Persie (left) in action against Chelsea on Sunday. Photo: Phil Noble/ReutersPremium
Robin van Persie (left) in action against Chelsea on Sunday. Photo: Phil Noble/Reuters

Two consecutive Sundays—26 October and 2 November—could well be acknowledged a few years from now as seminal dates in the post-Alex Ferguson history of Manchester United. After an injury-time equalizer by striker Robin Van Persie earned it a creditable draw at Old Trafford against Premier League leaders Chelsea, the world’s most followed football club will now shift its focus to a captivating derby match at the home of neighbours and league champions Manchester City.

After spending close to £150 million on buying new players, the club has its first opportunity to illustrate before its global following of 659 million that it is still as much a force in the English Premier League as it was during Ferguson’s reign, which brought 13 Premier League and two UEFA Champions League trophies to Old Trafford.

With consumer confidence and brand equity having slipped to an all-time low following the seventh-place finish in the league last season, eager United followers are hoping that the club would demonstrate that it has regained considerable ground under new manager Louis Van Gaal. The Dutchman, who has a sparkling CV with title wins in Spain and Germany with Barcelona and Bayern Munich respectively, took over the reins of the club in July. Soon after, the club embarked on a spending spree during the summer transfer window through which it secured the purchases of talented players such as midfielder Angel Di Maria and striker Radamel Falcao (on a season-long loan).

The two matches are of particular significance for the club’s estimated 325 million followers in the Asia Pacific (as per a study published in 2012 by market research group Kantar Media prior to the club’s initial public offering on the New York Stock Exchange). It would not be lost on the club’s management that the lions’ share of its estimated 34 million followers in India and 108 million in China took to the English Premier League only over the last decade-and-a-half when the club was enjoying its golden run under Ferguson.

A substantial percentage of the league’s following in the two most populous countries of the world are in the 15-30 age-group and they started following the club because of its impressive collection of silverware under Ferguson and not because of any extraneous social or emotional influences.

Jamie Reigle, the Asia Pacific managing director of Manchester United, told Mint that from an Asian point of view it was important for the club to be fighting for honours with all top clubs during the 2014-15 season. “Not being able to win the league this year or even the next one will not erode the club’s following in Asia. However, our followers in Asia buy into the fact that we are committed to having a competitive team capable of challenging for trophies every year. The recent investments demonstrate the club’s willingness to put in significant resources to build a competitive team," said Reigle.

In 2012, the club had doubled its global following as compared with 2007. In many Asian countries, including India, the corresponding period witnessed a three-fold increase. In 2007, the following in India was only 10 million. “The club’s significant following in Asia continues to grow as more people gain access to technology and media that enables them to connect with the club," said Reigle.

“In India, China, Indonesia, Thailand and other emerging markets, access to mobile devices, social media, TV, etc. is a bigger driver of new fan adoption than winning titles. Five years ago, many of these potential followers had limited ability to engage with the Manchester United brand. Today, the club is connected with these followers on a daily basis."

Early days

Reigle feels that the strategy in the region of keeping existing followers and building new ones by providing them with constant access to the club through various multimedia platforms will pay long-term dividends. “In India, the club has a good story so far though we are still in early days," said Reigle. “Of the club’s total 60 million global likes/connections on Facebook, 3.5 million are from India," he added

Reigle, however, states that a lot more needs to be done to provide access to the club to its Indian followers. The first priority, according to him, is to find an Indian broadcast partner for Manchester United TV (MUTV), the club’s in-house television channel with programming that includes deferred telecast of its matches, interviews with the manager and players.

The club has struck commercial partnerships in India. Apollo Tyres is currently the official tyre partner of the club in India and the UK. The global brand of the club provides visibility and in exchange big-ticket players such as Van Persie and captain Wayne Rooney feature in the brand’s commercials on Indian television, thereby enhancing the club’s profile in the country where cricket is the main sport. United has also partnered with Airtel previously in an endeavour to spot emerging Indian football talent.

Its commercial partnership in India is a drop in the ocean for the club. United has in the region of 40 commercial partners across the world, many of them Asian companies. Some of them are regional partners like Apollo and others— such as Japanese noodle manufacturer Nissin, diesel engine maker Yanmar Co. Ltd and Thai brewery Singha—are the club’s global partners.

However tried and tested the commercial pulling power of the club is, sports broadcasters in India are going to consider airing MUTV programming only if they see interest from a healthy pipeline of potential sponsors. And sponsors will align themselves only with a team which attracts top stars and is a title contender. As for social media likes and mobile value-added subscription downloads, they are going to go through the roof only if a Manchester United team featuring top-quality stars stands shoulder to shoulder with new heavyweights Manchester City and Chelsea.

It is this commercial reality that was encapsulated in the club’s pre-IPO prospectus in July 2012. The “Risk Factors" section of the document states: “A downturn in the performance of our first team could adversely affect our ability to attract and retain coaches and players. In addition, our popularity in certain countries or regions may depend, at least in part, on fielding certain players from those countries or regions."

The numbers

In its financial account for 2012-13, the club stated that its “revenue streams are driven by the performance and popularity of our first team". The document mentioned that “significant sources" of the club’s revenue came from the team’s historically strong performances in the English Premier League, the FA Cup, the League Cup, and the Champions League. “Our income varies significantly depending on our first team’s participation and performance in these competitions," added the club, which was valued recently by Forbes at £1.85 billion.

Reigle added perspective to the tricky issue of financial ramifications surrounding non-qualification for the Champions League. “We have an annual revenue of $500 million, and what we get from the Champions League is typically 10% of our annual revenue. The competition gives the club a minimum of six matches and a maximum of 12. Half of them are home games at Old Trafford, attended by 75,000 passionate fans. Champions League participation is more of symbolic value to the club, guaranteeing a magnificent atmosphere in the stadium and attracting global stars to play for the club. However, in spite of the club missing out on European football this season, we saw that many top global stars came to Old Trafford to play under Van Gaal," said Riegle.

Balance sheet-wise, there is little cause for concern as the club posted record revenue even last season, when it fared the worst since the inception of the Premier League. It reported record annual revenue of £433.2 million and a £23.9 million profit for 2013-14. Revenue at the club for the previous season, when it won its 13th Premier League title in the last year of Ferguson’s reign, was £363 million.

The club’s two mammoth global deals will ensure that the commercial revenue keeps coming in at a fair pace. The seven-year reportedly $560 million shirt sponsorship deal with Chevrolet started this season. From the next season, the club starts its partnership with Adidas worth £750 million pounds over 10 years—believed to be the largest kit deal in sporting history.

There have been unconfirmed reports that these deals have performance clauses written into them. For instance, it is speculated that the Adidas deal will lose 30% of its value should the club fail to qualify for the Champions League for two successive seasons during the validity of the contract.

However much the club’s management perceives it to be a blue-chip company, nothing can change the fact that the core asset of the club is its football team. Sport is played by humans entirely on the pitch and devoid of any mechanical intervention. Therefore, glorious uncertainties are part and parcel of it.

One does not know how well Van Gaal knows his Shakespeare. But, he would very well have quoted from Julius Caesar in his pre-match pep talk to his team against Chelsea in a game where United was as resilient during the Ferguson years to stage a last-ditch comeback.

He would also be repeating these lines against Manchester City on 2 November: “There is a tide in the affairs of men./ Which, taken at the flood, leads on to fortune;/ Omitted, all the voyage of their life/ Is bound in shallows and miseries."

Well-wishers of Manchester United would be hoping that Rooney, Van Persie, Falcao and Di Maria take the tide at the flood at Etihad Stadium on Sunday just as they did against Chelsea on 26 October. If omitted, it could well be the starting point for the cumulative effects of another season of underachievement against top teams. In such a scenario, followers in our neck of the woods might well be the first to desert the rocking boat.

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Published: 30 Oct 2014, 12:21 AM IST
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