Manchester United: Not a team, but a business

Sports play a role in many different people’s lives. Soccer or Football depending on where you live, takes the cake as far as being the most popular sport in the world. Manchester United happen to be the world’s richest and most popular soccer team. Often criticized for their large amount of spending in order to acquire the world’s greatest talents in the sport, Manchester United has managed to win the most Premier League titles and 3 UEFA Champion’s League titles. Although, Manchester United has had a lot of success on the field, they have had even more when it comes to the business aspect.

Wall Street Valuation
From a financial standpoint, Wall Street has valued Manchester United as being the richest soccer club in the world. Mike Ozanian from Forbes states, “Wall Street now affords United an enterprise value of $3.6 billion. Math: market value ($3.05 billion) + long term debt ($613 million) – cash ($57 million).” This valuation is very impressive due to Manchester United having a poor season due to their shift in management after Sir Alex Ferguson retired last season. 

Manchester United and Adidas:
Recently, Manchester United ended their partnership with Nike and moved on to Adidas. Mike Ozanian from Forbes tells us, “English soccer team Manchester United and German sportswear maker Adidas have agreed to the richest uniform deal in the history of sports. Adidas will pay $1.3 billion over 10 years to United, or $130 million a year, beginning with the 2015-16 season.” You would think that 1.3 billion is enough, right? Not for Manchester United. Mike Ozanian also states, “But the Adidas kit deal, coming comes along with the team’s $559 million, seven-year shirt deal with Chevrolet (also the richest in sports) means it will continue to have the cash flow to turn an operating profit and sign elite players.”

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Capacity and Inventory:
Since Manchester United are very popular, there will be a huge demand as soon as the new Adidas uniforms roll out. However, until then Manchester United will still have a lot of the Nike uniforms available. Manchester United will have to decrease their capacity slowly and lower the price of the Nike uniforms as the end of the season approaches. This will result in a decrease of the Nike inventory due to more sales, which is what they want as soon as they can start selling the new and highly anticipated Adidas uniforms.

Manchester-United-new-Kit

The Competition:
Manchester United may have the lead but other teams are getting closer. The two most popular teams in Spain would be Real Madrid and FC Barcelona. Forbes put a value of 3.44 billion for Real Madrid and a 3.22 billion valuation for FC Barcelona. Another advantage for these clubs is that they have the two best players in the world, Cristiano Ronaldo (Real Madrid) and Lionel Messi (FC Barcelona).

Questions:

  • Do you think that sports teams are nothing more than a business?
  • What are some good ways to sell inventory that consists of jerseys with decreasing demand?
  • Do you agree with Manchester United’s valuation?
  • Do you think it is fair to fans to constantly release new jerseys, which causes them to keep repurchasing?

Sources:

Valuations:
http://www.forbes.com/sites/mikeozanian/2014/07/15/wall-street-says-manchester-united-most-valuable-team-in-world-after-adidas-deal/

http://www.forbes.com/sites/mikeozanian/2014/07/14/manchester-united-and-adidas-agree-to-richest-uniform-deal-ever-in-sports/

Images:
http://img.bleacherreport.net/img/images/photos/003/038/545/hi-res-afe91e10675aad43b3dcf4438437a283_crop_north.jpg?w=630&h=420&q=75

http://i3.mirror.co.uk/incoming/article3823301.ece/alternates/s2197/Manchester-United-new-Kit.png

7 thoughts on “Manchester United: Not a team, but a business

  1. I really think sports teams, while people get so enthralled with passion, are really just a business. We here it over and over again, even Dez Bryant recently said, while he claims to be loyal, will want to be paid for his services. This is the player’s jobs and the owner’s income. People like the Buss family (Lakers) only have one source of income – that of the team. It’s important to remember. I think in order to sell the old jerseys we will see steeper and steeper discounting; simple economics states lowering price will increase demand. It’s also extremely hard to value a team, because there is no real comparison. Basing it off of the Clippers and their 2billion+ fair valuation, I think ManU is valued properly.

  2. Sports teams in a sense are businesses they have to make profits to pay their players. Without money to pay to players sports would be something you play in a park when you have time, since people have to have money to live. No pay no play. But besides being a business the opportunity to become a sports star exists which is a great thing for many people who have the talent to perform at a high level.A good way to sell off the old jerseys is to lower their price.

  3. Sports are absolutely a business. Sports teams simply sell entertainment. That entertainment is used to advertise with, whether it be TV commercials, a Chevy logo on a jersey, etc. Athletes make their biggest money from endorsement deals. 100 million dollar shoe deals are not out of the norm for great athletes. Two important things in marketing are finding advertising space people see and associating products with influential people. Athletes are perfect for this, and this is why sports is such big business.

  4. I agree with you 100% of the way. I think that every national organization, whether it may be a football team, soccer team, basketball team, or even a cricket team. At the end of the day its all about the money, if you stop paying all of the basketball players to play the game only 50% of them will stay, thats just a guess it might be way less. The players know it, the coaches know it, even the refs know it, at the end of the day they are all there because of the money. Sports are not in the wrong doing for making money because its a type of business. If you want to talk about how that can be wrong, lets look at doctors. They are simply helping the need that are trying to stay alive and be healthy yet they make the most money on average people. I think its right for companies like Adidas and Nike to sponsor teams and change up jerseys because of the money part but it keeps consumers interested. It is right to make money because I gamble on sports myself so technically I am using them as a business so why cant they.

    -Jay

  5. as a fan for soccer i can say everything around the world leading by the business even the wars. so if the football the most popular sport in the world so i think it is logicality to be a target for the all big companies to use it for marketing where is some matches millions around the world watch it but we still enjoy the matches so that is mean football is football and business is business.
    to sell the inventory i think the company should sale in poor country with a good discount where this people would like to have the original color but they do not have the money for that so if you offer the original one they will take even if is it old.
    Agree with Manchester valuation to be a strong competitor you should have the money.
    it is fair because even your pants you can wear it for ever.

  6. I disagree with the statement, ‘Sport is nothing more than a business’especially from the football (soccer) perspective. Last year’s world cup final recorded a 1.1 billion views over television for that one match, no other major sports event can match even 20% of that figure (i.e. Superbowl, NBA, Formula 1 …etc). On the other hand, the business element does exist in football but why wouldn’t it if it is widely supported? The only downside in my opinion would be the change in degree of competitiveness between teams, where the clubs with higher incomes would be able to purchase/attract better talent. (There are some measures that are being practiced by the concerned football associations in order to reduce the severity of such action).

    In addition, while Manchester united have secured the Adidas deal, it has to deal with the declining demand of its Nike shirts. I do not believe that this is a main issue for Manchester United, they secured a 5-year deal worth 750 million GBP, discounting or even donating the shirts would not have a significant effect on Manchester United. They must be more worried about their relationship with Nike, the deal does not ‘kick-in’ until the season starts, meaning that Man United’s pre-season tour in the United States must be performed in a full Nike kit.

    Manchester United was recently valued at $3.6 billion making it the richest/highest-valued football club in the world, which is not a surprise, looking at its global fan-base which is also the largest in the world and not to mention its brand name.

    In relation to the release of new kits at the beginning of the new season, I think this is just the industry standard, it has been this way ever since football turned professional (23 years ago in England). The only issue is the rising prices, not the periodic release of the kits.

  7. Sadly i agree that a lot of the football clubs are thinking from the business side rather than the football idea itself. If the clubs like Manchester united, Real Madrid and Barcelona wants to have the best players they need to have a lot of funds to get these players so the clubs need to have contracts with big companies like Nike or Adidas to achieve that goal. Even the players think about their salaries and bonuses rather than how they can do their best to contribute to their clubs.
    For Manchester united they have a huge base fan in the Middle east so we do expect to have a lot of jerseys in this area. I agree with the valuation because Manchester united in Sir Alex Ferguson’s era was considered one of the best teams an it is still is but due to the changes that happened recently by introducing a new head coach Louis van Gaal the team and the new coach couldn’t find the right chemistry to bring the team back to where it was before.

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