Is there still a profit in football?

Feb 13 2008 by Peter McCusker, The Journal

MANCHESTER United are expected to regain top spot in the annual world football rich list when it is published tomorrow on the back of a record turnover of £245m.

But servicing the massive loan they secured to buy the club means that by the time its new American owners, The Glazer family, pocketed nearly £60m profit from that turnover, there was only a few dollars left.

Newcastle United expect to remain around 13th in the Deloitte Football Money League. But with Mike Ashley’s new management team now in place he will be expecting a leap up the Premier league to be accompanied by a leap up the rich list.

The Glazer family were the trailblazers for a new breed of American football club owners. Buy why have the Glazer family gone into so much debt to buy Manchester United when they have netted such a paltry initial return?

And can any Premier League football club make serious money for its owners?

Last week’s announcement that the Premier League is hoping to play a weekend of fixtures across the globe netting each club around £5m in extra revenue pleased the money men while angering fans.

But Professor Tom Cannon, dean of Buckingham Business School and an expert in football finance, says some clubs will be looking for an even bigger pot after the games around the world.

He said: “They will be hoping that in time they will be able to negotiate individual TV contracts and at the end of that particular rainbow there will be a pot of gold.”

He also believes there are moves afoot by some of the new US owners of Premier League football clubs to establish franchises similar to those operating in American sports.

Prof Cannon added: “By establishing a franchised Premier League, this will in effect do away with relegation.

“There could be an 18-club Premier League. Their income with TV money will be significant and they will be too concerned to suffer a financial hit from the prospect of relegation to allow that to happen.”

This doomsday scenario for smaller clubs who some day may want to live a Wimbledon-style dream is not the only dire prediction Prof Cannon, a regular expert pundit on Five Live, offers.

“Teams like Newcastle United are now firmly entrenched along with the likes of Everton and Tottenham and Aston Villa in second class seats of the Premier League.

“There is a big four at the top of the table who regularly win all the trophies – Liverpool, Manchester United, Chelsea and Arsenal. This could soon become a big three with Liverpool falling by the wayside and then a big two.

“Manchester United and Arsenal are both well-run clubs. Chelsea are aiming to break even by 2009, but you wonder if that is achievable. If Abramovich’s interest wanes than we could be left with a big two.”

Mike Ashley, Kevin Keegan and now Dennis Wise will no doubt have other thoughts.

Mr Ashley’s takeover of the Magpies was completed six months ago, in early July last year, after he bought the club from its shareholders for £134m and de-listed it from the Stock Market.

One of the reasons Kevin Keegan left Newcastle in 1997 was because the constraints of being a PLC was putting pressure on his purchasing plans.

So Newcastle’s de-listing from the Stock Market, which followed Sunderland’s last year when Bob Murray sold his controlling stake to an Irish consortium fronted by Niall Quinn, was met with approval from both sets of fans.

Last week Ashley’s Sports Direct retail empire agreed a strategic alliance with the Chinese ITAT Group which will see brands such as Slazenger, Dunlop, Karrimor and Lonsdale sold at 120 of the Chinese firm’s stores.

No doubt a surge in on the field success by Newcastle United would see greater prominence given to Toon shirts in the Chinese store increasing the penetration of the Magpies’ brand in a key market.

Manchester United’s search for additional revenues has been highlighted by their recent mid-season trip to Saudi Arabia which included a testimonial match – something unheard off just a few seasons ago.

The club’s next season’s pre-season tour will take them to South Africa.

Recent research published by Manchester United highlights how successful such efforts have been in expanding their brand overseas.

It showed the Old Trafford club have 139m “core” fans worldwide and 333m “followers”.

Core fans cited United as their No 1 club while followers said United are among teams who interest them. This compares to previous figures in 2006 which showed United had 75m fans worldwide.

The 2006 figures also showed that United had a financial relationship with just 352,041 of their 75m fans.

That was 171,987 who have attended a game that year plus 180,054 who bought United merchandise, goods or services.

That figure has more than quadrupled, with more than one million South Koreans alone owning a United-branded credit card or debit card.

But Prof Cannon issued a note of caution over the voracious charge into new markets.

“Football clubs initially tried to crack the US market, but this has proved unsuccessful as they have been unable to break the predominance of their home-grown sports.

“The Asian markets offer a high potential for growth, although it may not provide the riches that many crave.

“In Japan the football fans tend to follow one particular player such as Ronaldo or Beckham.”