Why Manchester United can afford to play badly

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Hello, and thanks for downloading the More or Less podcast.

We're the program that looks at the numbers in the news and in life.

And I'm Tim Harford.

Manchester United were once one of the strongest football teams in the world.

But it's now been well over a decade since they won England's Premier League.

And last season saw their worst ever Premier League performance.

They finished 15th out of 20.

And if you don't want to take my word for it, just listen to their manager, Ruben Amarim.

In 10 games in Premier League we won two.

I know that.

Imagine what is this for

a fan of Manchester United.

Imagine what is this for me.

So

we are being the worst team, maybe, in history of Manchester United.

Inspirational words from Ruben Amarim there.

And yet, despite all this, Manchester United are still the second most valuable football club in the world, according to a list published by Forbes magazine.

They've just spent $80 million on a new Brazilian striker and have recently unveiled plans for a new stadium costing more than $2.5 billion.

But if they're not winning trophies or even playing well enough to qualify for European football, how come they're such a valuable club?

To find out, I spoke to Kieran Maguire, a football finance expert and the author of The Price of Football.

I started by asking just how bad Manchester United had been on the pitch.

Season 24-25 was the worst performing season of Manchester United during the Premier League, which commenced in 1992.

For the first dozen seasons or so, they didn't finish below second.

They were incredibly successful under Sir Alex Ferguson.

And there has been a dip in performance since Sir Alex retired in 2013, culminating in last season where they finished in the bottom half of the table for the first time.

And yet, and yet, despite this performance on the pitch, their financial performance is remarkable.

Forbes reckoned they have the second highest market value of any club in the world, which is Forbes' estimate of how much you'd have to pay if you wanted to buy the club.

Who's the highest, by the way?

That would be Real Madrid,

the Spanish super champions.

How much would you have to pay if you bought Manchester United?

Well, based on the most recent transactions and the Glazer family, who are the majority owners of Manchester United, a couple of years ago, they sold just over a quarter of the club to Sir Jim Ratcliffe in a deal which valued the club overall at just over £5 billion.

That is almost 20 times as much as Newcastle United was sold for in 2021.

So it does give an indication that Manchester United are more than a football club.

They are a global sporting brand.

You could argue that they're part of the entertainment industry.

They would say that they're part of the tech industry as well, which is part of the reason why their shares are quoted on the New York Stock Exchange,

because they feel that they go beyond just kicking a ball around a pitch for 90 minutes once or twice a week.

It's that lifelong relationship with football fans, the most loyal customers there are all around the world, that makes the club so valuable.

And there are lots of ways for them to cash in.

It's that long-term relationship.

Manchester United have the most

valuable merchandise deal.

They have the biggest front-of-shirt deal with the current sponsor, Snapdragon, who are probably paying somewhere in the region of 50 to 60 million a year.

Brands still want to be associated with Manchester United on both a domestic and a global basis.

And the Manchester United commercial department have been incredibly smart in the way that over the course of the last 20 years, they've gone to individual markets and they'll say, do you want to be our official snack partner in Indonesia?

Do you want to be our official snack partner in Nigeria?

Do you want to be our official snack partner in Australia?

And so on.

And

they've diversified their sponsorship arrangements.

Once you've been successful, as Manchester United were during the 1990s and during the early 2000 years, they built up a global fan base.

They say in their annual report that they have more than a billion followers around the world.

So a lot of those would have to disappear before the value started to decrease.

But why did Manchester United become so popular around the world compared to other clubs?

The English language is a good start for any international business, but it's also a matter of timing.

When the Premier League started in 1992, that was at the time of the introduction of satellite and subscription television.

And

what

broadcasters found, and not just domestically, but globally as well, that the Premier League was seen to be the best product in the world in terms of maintaining subscriptions.

So therefore, broadcasters were always willing to pay more money for those rights, which of course goes through to the clubs.

And Manchester United were the best team in the Premier League for that initial, say, 15, 17 seasons.

And therefore, globally, they became an incredibly attractive proposition.

And that's why Manchester United have such a broad fan base all around the world.

We focused a lot on the legacy of Sir Alex Ferguson, but weren't Manchester United a big club even before he came along.

Absolutely.

I think Manchester United also owe a huge debt to Sir Matt Busby, who created the Busby Babes, who

was magnificent following the tragedy of Munich and then built that new team which were so tantalising, so wonderful to watch during the 1960s, culminating in the European Cup final victory.

And that meant that Manchester United became popular with fans around the country, which had never really been that much of a feature before of football.

And I think that they've leveraged off that ever since.

They were certainly generating the most column inches in the 70s and 80s when they weren't winning trophies.

They were still generating the highest attendance figures at Old Trafford, even though it was a poor period for football in general.

But hang on, what about Manchester City, Newcastle and the European champions, Paris Saint-Germain?

Aren't they all owned by oil-rich nation-states?

Why are they not counted as being richer than a club like Manchester United?

They have the wealth of the owners behind them, but if I was to buy Manchester City or PSG or Newcastle United from the owners, I would then be looking at the club's ability to generate its own revenues and effectively be sustainable on its own own two feet.

And if you take a look at any football club, it generates money from three broad areas, which is ticket sales, TV deals and commercial income.

Manchester United has the biggest stadium.

It generates twice as much ticket sale revenue as Manchester City, probably three or four times that of Newcastle United, certainly more than that of Paris Saint-Germain.

The broadcasting deal is negotiated centrally, so

the clubs are dependent upon their performance on the pitch in terms of the money that they generate from there.

And then when it comes to commercial income, it's how many eyeballs do you attract?

The amount of money that an individual sponsor is willing to pay is linked to the amount of exposure that they're going to get from association with that club.

And Manchester United have the biggest fan base, so therefore they have the biggest value because they attract the most eyeballs.

Manchester United were a brilliant team at a critical period in the globalization of the game, and that, combined with some smart marketing, has given them an enormous fan base.

And once you're a football fan, you will put up with a lot of heartache before you give up.

Our thanks to Kieran Maguire.

His podcast and book are both called The Price of Football.

And that's all we've got time for this week, but please do keep your questions coming in to more or less at bbc.co.uk.

Until next time, goodbye.

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