Inexperienced executive missed out on players
4 September ~ Manchester United executive vice chairman Ed Woodward has come under heavy criticism for the club's failure to land more of their transfer targets this summer. If Woodward looked out of his depth that may be because his main task is to oversee the club's commercial deals. As Ed Thompson's article in WSC 319 explains, United are continuing to attach their name to a huge range of products and services to increase their global presence and income.
At the launch of the Premier League in 1992-93 Manchester United’s total annual revenue was only £25 million – it is now around £320m.
The club are keen to promote an image of business as usual under David Moyes, as is shown by the two new corporate partnerships that have been announced in the short period since his appointment, including one with Aeroflot. They have also unveiled the new Aon training kit and the rebranding of Carrington as the Aon Training Complex.
Manchester United now employ 70 full-time marketing staff to identify and secure commercial tie-ins. The club has increased the number of “official sponsors” from just ten in 2002 to a current total of 32. Ed Woodward, the executive vice chairman, explained that when it comes to maximising income, the club “aren’t even at base camp” and that the only limitation was a shortage of skilled resource to write the deals.
Woodward joined the club as part of the Glazer takeover and has overseen a growth in commercial and sponsorship income from £49m in 2005 to £118m last year. Rather than focus exclusively on large global deals, Woodward’s strategy has been to secure regional sponsorships, meaning similar deals could be resold in different parts of the world – for example United have 12 official telecoms sponsors. They also have official sponsors for noodles, paint and tomatoes.
The Glazer ownership has coincided with a period of unprecedented footballing and financial success. The club debts are starting to fall (currently around £360m) and interest payments are reducing below £50m a season. With the increased TV deal starting this season, a renegotiation of the Nike deal imminent and the world record General Motors sponsorship deal (£45m a season commencing 2014), Moyes inherits a club which, in a couple of years, should regularly enjoy an £80m-plus annual surplus.
Unlike Alex Ferguson, who famously struggled for the first few seasons, Moyes is unlikely to be given the luxury of time. In 2010 the sole trophy-win came in the League Cup, coinciding with the “Green & Gold” anti-Glazer protests and the short-lived Red Knights takeover campaign. Having won 11 Premier League titles and two Champions Leagues at that time, criticism was directed towards the owners rather than Ferguson. Moyes would be considerably more exposed if he were to “only” win one trophy.
The club owners are reportedly keen to utilise David Beckham to promote the Manchester United brand further. Beckham currently works as an “ambassador” for UNICEF, BSkyB and Chinese football and it seems likely that he will soon be banging the corporate drum for his former employers. Although United have recently undertaken another extensive pre-season tour of Asia, Woodward has declared that “the US is becoming the number one opportunity” and it is here that Beckham’s ambassadorial role would be of particular benefit. We perhaps shouldn’t be too surprised if United follow Manchester City’s recent lead and create a second Manchester-branded club in the US.
From their position of financial and marketing strength, United are happy to reject arrangements that have the potential to pollute the “brand”. The club are aware of the value of weaving tradition into their image and recently renamed the North Stand after Ferguson, while also categorically ruling out selling naming rights to Old Trafford. With top companies wanting to be associated with the elite clubs, United can afford to close off avenues that other clubs might explore.
The club’s worldwide merchandising is carried out through MUML, a company managed by Nike. This company isn’t hugely profitable (selling two million replica shirts globally each year and making around £1m annual profits), however this is largely because Nike pay £25m a year to United for the marketing rights. For Nike, the main benefits come from association with the United name and image rather than income
from shirt sales.
Despite having the largest commercial income in the Premier League, the high interest payments required under the Glazers’ leveraged buyout has meant that Manchester United only pay the third-highest wages (behind City and Chelsea). Under the new spending constraint rules in place in the Premier League, United, like the other top clubs, start from a fixed position and are now only able to increase their wages by £4m a season. Crucially, the club can exceed the £4m limit if they write increased commercial deals. Maximising commercial income will therefore continue to be the key area of focus for the legions of staff at Old Trafford.