There are an estimated 5 billion football fans around the world, at least according to FIFA. For many fans of the beautiful game, it’s a beloved sport, an uncontrollable passion and some even consider it a religion (though likely not many from Singapore).
As with anything that has a grip over 60% of humanity, it is also very big business. One of the most successful and recognisable brands in football – whether you love them or hate them – is Manchester United.
The Red Devils claim to have 1.1 billion “fans and followers”. This means 1 in every 8 people is a Manchester United fan. Apart from cheering the team on, Manchester United fans can also own a piece of the club – through its New York Stock Exchange listing Manchester United PLC (NYSE: MANU).
Recently, Manchester United announced that they have commenced a “process to explore strategic alternatives to enhance the club’s growth” Or, in the humble view of this Manchester United fan, the Glazer family, current owners of the club, look like they may want to sell the club at the right price.
How Does Manchester United Make Money?
According to Manchester United’s annual report, it makes money in three broad ways: Commercial Revenue, Broadcasting Revenue and Matchday Revenue.
Source: Manchester United annual report
As we can see from the figures, revenue in 2022 rose to pre-COVID-19 levels at GBP 583 million. Revenue in the previous two years was significantly impacted by COVID-19. This will be heartening for both fans, who may want to see more player transfers, and the current owners, who are keen to explore strategic alternatives to enhance the club’s growth.
Within its Commercial Revenue segment, there are three line items: 1) Sponsorship, 2) Retail, Merchandising, Apparel and Licensing and 3) Mobile & Content. Sponsorship will refer to its shirt sponsors – and for everyone who watches football, we would know that its current kit sponsor is Adidas, front shirt sponsor is TeamViewer, its sleeve sponsor is Kohler and its new training kit sponsor is Tezos.
Many fans will also willingly contribute to Manchester United’s “Retail, Merchandising, Apparel and Licensing” revenue by purchasing the club jersey and other merchandise. Especially when the club is competing for major silverware, and we get to wear they jerseys when watching important games.
They don’t go for cheap – listed in the Manchester United online store for GBP 45 to GBP 70 – depending on existing promotions. For avid fans, this is also why football clubs change their shirts, even if it’s only the smallest details, each season.
Source: Manchester United online store
(Left: Home Kit; Right: Training Kit)
For anyone who has made the pilgrimage to Old Trafford (sadly, not me), we would expect to be treated to the Theatre of Dreams. This shows up on Manchester United’s financial statement in the form of Matchday Revenue. I.e. mainly referring to the Stadium (season tickets, box seats and away fans), Museum and Stadium Tour and its Megastore. In 2022, they were able to run at full capacity again, after being severely hindered playing behind closed doors in 2020 and 2021.
Broadcasting Revenue is the TV money it derives from playing each game as well as how well they perform in the competitions – namely the English Premier League (EPL), Champions League (or Europa Cup), FA Cup, and Carling Cup. This is also a function of the subscription charges fans are willing to pay to watch our favourite teams play.
We can also see that Broadcast Revenue fell in 2022, very likely because Manchester United did not qualify for the Champions League (compared to the year before in 2021).
Source: Manchester United
In terms of importance, we can see that Commercial Revenue and Broadcasting Revenue are significantly more important to Manchester United. That said, in the club’s latest half-year 2023 financial announcement, it stated that it has increased season ticket prices for the 2023/24 season by 5% after freezing it for 11 consecutive seasons. This should not dampen demand or earnings as Manchester United also highlighted that over 145,000 individuals are currently on the waitlist for its season ticket.
Is Manchester United A Profitable Business?
Even as a global giant commercial beast, Manchester United is still in the red. In 2022, it reported a loss of GBP 115 million. This means investors would have lost about GBP 0.71 for each Manchester United shares they held.
In fact, Manchester United has lost money in 4 out of the last 5 financial years. This hardly speaks of a cash cow-type business that we may have expected it to be. Granted that 2 of those 5 were COVID-19-related years.
Source: Manchester United annual report
We can also see within its profit and loss statement that “Employee benefit expenses” (i.e. players remuneration) is more than half of its total revenue.
Another major part is that its finance cost adds up to about GBP 86 million in 2022. This is very likely due to its total liabilities amounting to GBP 1.2 billion – nearly 40% of its market capitalisation.
Source: Manchester United annual report
How Profitable Is It Investing In Manchester United
Manchester United was listed on the New York Stock Exchange (NYSE) in August 2012 at US$14. Those who invested will be sitting on a sizeable profit of over 66%, or an annual report of 4.7%.
Source: Google Finance
However, if we scrutinise its share price movement, we will see that up till last year, we would not have been making any money. In fact, the sharp rise in price has coincided with the owners’ decision to explore strategic alternatives to enhance the club’s growth.
On top of share price appreciation, Manchester United has also paid a regular dividend over the years. Cumulatively, this amounts to US$1.26. At its current share price, Manchester United is paying a dividend yield of less than 1%.
Nevertheless, this would also bring the annual return for investors to 5.2% per annum if we had invested during its listing in 2012.
Source: NASDAQ
While we could have beaten Manchester United’s 5.2% annual returns over the past 12 years or so by simply investing in the S&P 500 Index, it is not a terrible investment from a shareholder’s perspective.
There’s also a certain amount of joy attached to holding on to a piece of your favourite club – that money cannot buy. Moreover, the more successful the team is on the pitch (and it really has not been anywhere close to successful in recent years) the better the financial performance, and likely share price and dividend distribution.
Read Also: Why Disney+ Could Be The Perfect Streaming Platform For Your Family
Advertiser Message
Get The Latest Bite-sized Investment News, Ideas & Insights
It's free! Don't miss out on the latest financial market movements. FSMOne aims to help investors around the world invest globally and profitably, follow FSMOne’s Telegram for bite-sized finance analyses and exclusive happenings.
