Nobody called Manchester United a brand in 1986. In his first game in charge, Alex Ferguson lost 2-0. His opponents were the plaything of a wealthy and charismatic industrialist whose team wore shirts bearing the corporate logo of an exotic sounding hi-tech company. The team was Oxford United, the owner was Robert Maxwell and the sponsor's name was Wang.
This, should we be in any doubt, was a long time ago. In terms of how football has evolved, it was a lifetime away.
Ferguson entered Old Trafford on November 6th, 1986, replacing that tandoori-tanned underachiever Ron Atkinson, who left the club second from bottom in the old First Division.
If you were seeking a club in which to invest, the “clever money” would have pushed you towards Everton, that year’s League Champions, or Liverpool, still the dominant force in the domestic game.
But in reality, football was not a business that attracted much interest from the money men. This was four years before Italia ’90 and six years before the launch of the Premier League.
Decaying stadiums
There was little talk of European football – English clubs were still banned from Uefa competitions following the Heysel Stadium disaster in 1985.
Exotic foreign stars were the exception rather than the rule. The money was in Italy not England, it was Juve, Milan and Lazio of Serie A which had the deepest pockets.
This was the year that attendances at Football League matches fell to their lowest since the league expanded to four divisions in 1922.
Fans paid at the gates of decaying stadiums to watch boring, attritional games which tested the appetite of television’s BBC/ITV duopoly. The previous winter there was no football shown at all in England due to a blackout caused by a pay dispute between the league and ITV.
When a solution was found, television paid £600,000 for the rights to all four divisions, conveyed via highlights on Match of the Day .
“It’s a long time to be sitting down,” said one television executive at the time, dismissing the idea that viewers could stomach regular live football.
Peter Robinson, the popular Liverpool club secretary during the club's glory years, told a story that summed up the mood of the times. Under instruction from their managers, clubs tried to restrict appearances on Match of the Day , said Robinson.
“They wanted to make a deal whereby no club was shown more than once a month because they thought they were being overexposed and they were worried other clubs would see what their tactics were.”
In 1992, the relationship between football and television changed forever. The Premier League became, to use Rupert Murdoch’s famous phrase, “the battering ram” into people’s homes.
Sky’s money did more than make average players very rich. It altered the equilibrium between clubs such as Manchester United and the people they used to refer to as fans. Today, the club is a global brand. The people who watch are referred to as consumers.
When Ferguson took over, television money accounted for a mere 9 per cent of turnover, the bulk coming from ticket sales. Today, Manchester United earns 30 per cent of its income from “match day sources” – a figure that will surely fall further next year, when the new £3 billion television deals start to flow in to the club’s coffers.
In the week they won this season’s Premier League, Manchester United announced record third-quarter turnover of £91.7 million, more than 13 clubs in England’s top flight achieved in the whole of the 2011/12 season.
Media rights income from Premier and Champions League were bolstered by a dizzying array of new deals which saw the commercial income grow 32 per cent in the third quarter compared with the same period last year.
Manchester United has amassed 33 sponsors, garnering £21 million, a 52 per cent increase. The most valuable piece of real estate remains the team's famous red shirt, which has been sold to US carmaker Chevrolet in a deal worth £45 million, a world record for a football shirt sponsorship and more than double the £20 million paid by Aon, the incumbent shirt sponsor for United.
Despite ceding the shirt sponsorship, the insurance firm will remain a fixture in the media via an innovative naming rights deal for the club’s Carrington training ground. And its logo will be seen on the training kit and on overseas tours. Figures are sketchy on this deal but press estimates vary between £120 million and £180 million over eight years.
Ownership structure
The other major contributor to the bottom line is the makers of the kit, a deal which finishes at the end of the 2014/15 season. Nike pays £25.4 million a season, but since then other teams – notably Liverpool and Arsenal – have signed bigger deals. United are unlikely to drag behind for long.
But it is TV money that remains king: Ferguson’s greatest trick was to create winning teams during a media rights boom.
American owners abhor the risk inherent in European football’s snakes and ladders game of promotion and relegation. Ferguson’s presence in the dugout offered football investors something close to certainty, a commodity craved above all others.
Against this backdrop, Ferguson is the link between the old world and the new. When he took over, Manchester United’s ownership structure reflected football’s past; owned and controlled by the Edwards family.
The coming of the Premier League coincided with the United’s stock market flotation in 1991, an exercise that made £6 million for Martin Edwards, the majority shareholder, who sold a slice of the shares that had originally cost him and his father about £600,000. Edwards ultimately made £93 million selling his Manchester United shares.
In 2005, the club was taken over by the Glazer family in a controversial £525million leveraged buyout which loaded debt onto the club. That takeover has cost the club in the region of £550 million in interest, bankers’ fees and charges; eight years on, £367 million of debt remains.
Huge opportunity
United fans fear the loss of player-buying power when set against the new money of Chelsea and Manchester City, and, further afield, Paris St Germain, Real Madrid and Barcelona.
In recent times, the Glazers reduced the debt, with a bond issue in 2010 raising £500 million, and a 10 per cent flotation of the club on the New York Stock Exchange raising around £150 million. Half of that went to paying off the debt.
In his official retirement announcement this week, it was notable that Ferguson thanked the Glazers who, he said, “have provided me with the platform to manage Manchester United”.
This was a nod to what has been the most delicate part of the late-Fergie era. The totemic manager acted as an – albeit very well paid – frontman to the Glazer family, whose takeover so alienated the Man Utd Supporters Trust.
The role of long time chief executive David Gill is not to be underestimated during this period. It was Gill who oversaw the transition from the Edwards family to the Glazers.
Like Ferguson, Gill steps down this summer, succeeded by Edward Woodward, a former Goldman Sachs banker who played a pivotal role as adviser to the Glazers during the takeover.
Woodward is bullish about the future, telling anyone who’ll listen that “the opportunity remains huge”: whether he has the political skills of his predecessor remains to be seen.
For now, Sir Alex Ferguson leaves the club as leaders, on and off the field.
Richard Gillis writes the Unofficial Partner blog. @RichardGillis1
