The Business Model Of Manchester United

Friends,

According to Forbes, Manchester United is the fourth most valuable soccer team globally, valued at about $4.2 billion.

Top 5 Most Valuable Clubs

1. Barcelona: $4.76 billion

2. Real Madrid: $4.75 billion

3. Bayern Munich: $4.21 billion

4.  Manchester United: $4.2 billion

5. Liverpool: $4.1 billion

The interesting part? As one of the world’s few professional sports teams that are publicly traded ($MANU), we get an inside look at how one of the most recognizable global brands monetizes its intellectual property.

Manchester United’s finances can be broken down into three main categories:

1. Commercial Revenue

2. Broadcasting Revenue

3. Matchday Revenue

In a normal year — before the COVID-19 pandemic — commercial revenue would represent about 44% of Manchester United’s total revenue, while broadcasting and matchday revenue represented about 38% and 18% of total revenue, respectively.

Commercial Revenue

Within the commercial revenue sector, Manchester United monetizes its global brand through three main ways:

1. Sponsorships

2. Retail, merchandising, apparel & product licensing

3. Mobile & content

Without a doubt, sponsorships represent the largest piece of commercial revenue. Manchester United has 20+ “global partners” at any given time, selling everything from airline & hotel partnerships to wine, spirit, and fuel partnerships.

Point being, whether a category has a direct relation to the world’s most popular sport or not, a global brand like Manchester United will monetize the relationship.

Partnerships Include

• Adidas — Official Kit Supplier

• DHL — Official Logistics Partner

• Marriott Hotels — Official Hotel Partner

• Aeroflot — Official Carrier Partner

• Apollo Tyres — Official Tyre Partner

• Chivas — Official Spirits Partner

The most lucrative sponsorship? A new principal shirt sponsorship deal that the club signed with German-based software company TeamViewer earlier this year. The deal officially replaces Chevrolet, which had been in place since 2014, and makes TeamViewer just the sixth shirt sponsor in club history.

The best part: TeamViewer will reportedly pay Manchester United $325 million over the next 5 years, or $65 million annually. That represents the second-largest shirt sponsorship deal in the world.

During a typical year, Manchester United brings in about $240 million in sponsorship money in total — representing slightly over 25% of total club revenue.

Sponsorship Revenue

• 2017: $237 million

• 2018: $240 million

• 2019: $240 million

In addition to a lucrative revenue stream from sponsorships, Manchester United has also done an exceptional job monetizing its globally recognized brand. They sell everything from t-shirts & sandals to coffee mugs & bedspreads, all featuring the Manchester United brand and trademarks.

Retail & Merchandise Revenue

• 2017: $143 million

• 2018: $142 million

• 2019: $141 million

The good news: Commercial revenue has proven to be resilient throughout the COVID-19 pandemic. For example, despite matches being closed to fans for more than a year now, Manchester United only saw its commercial revenue drop by about 5%.

Annual Commercial Revenue

• 2017: $362 million

• 2018: $363 million

• 2019: $349 million

• 2020: $345 million

In total, commercial revenue represented a higher-than-usual 55% of Manchester United’s 2020 revenue.

Ps. category-specific revenue numbers are estimates based on current currency conversion rates.

Broadcasting Revenue

Outside of indirect global exposure for its commercial partners, Manchester United benefits directly from live content distribution through global media rights deals. They also have a television channel themselves, MUTV, which delivers Manchester United programming to over 56 countries & territories around the world.

Broadcasting Revenue

• 2016: $184 million

• 2017: $255 million

• 2018: $168 million

• 2019: $306 million

• 2020: $173 million

TV-related revenue dropped significantly due to COVID-19 — falling about 44% last year — but considering they averaged just north of $100 million in annual TV revenue a decade ago, the growth has still been impressive.

Remember, Broadcasting revenue varies significantly year-to-year based on the performance of Manchester United’s first team.

Matchday Revenue

Here’s an interesting stat: Seating more than 74,000 fans per game, Old Trafford is the largest stadium in the English Premier League. Even better, Manchester United has averaged 99% of attendance capacity for its Premier League matches for 21-years-straight.

The result? Matchday revenue accounts for almost $150 million in a typical year.

Matchday Revenue

• 2017: $146 million

• 2018: $144 million

• 2019: $140 million

• 2020: $111 million

The absence of fans due to the COVID-19 pandemic crushed expectations. Still, as restrictions are lifted, and fans return to stadiums globally, expectations are that pent-up demand will cause revenue to return to pre-pandemic levels rather quickly.

In conclusion, here’s how the different review streams have added up over the years.

We all know the stats by now: From 2011 to 2020, the average franchise across the NFL, NBA, NHL, MLB, and Premier League increased in value by over 500%.

Manchester United is no different, increasing from a $1.8 billion valuation in 2010 to $4.2 billion today.

Professional sports teams and leagues have proven to be premium, scarce assets with a strong record of value appreciation. But post-pandemic, it will be interesting to see how clubs like Manchester United further maximize underdeveloped revenue streams to make up for lost profit.

As always, I’ll keep you updated :)

Have a great Monday. Talk to everyone tomorrow.

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