People take a photo with a picture of former Manchester United player David Beckham outside Old ... [+]
Manchester United’s financial update, published yesterday, provided the first glimpse of coronavirus’ impact on elite soccer.
A £28.55 million ($35.32 million) pre-tax loss, spiralling debts, slashed revenue and details of a £15 million ($18 million) rebate due to TV companies in the third quarter, all hit the headlines.
The marginal increase in commercial revenue, driven by new sponsorship deals, got a little less attention.
But the £2 million ($2.4 million) rise shows exactly why coronavirus will keep Manchester United way ahead of its rivals.
The break from soccer could well give it the upper hand.
Sponsor-expansion
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United’s investor call yesterday provided some insight into what the club was using the coronavirus hiatus for.
As well as boosting its digital engagement with fans, managing director Richard Arnold revealed it was spending the break expanding its online offering to commercial partners and working on “innovation.”
This should ring alarm bells for rivals.
In the past decade, it has pioneered the growth of commercial revenue through global partnerships like no other sporting organisation.
From a global lubricant and fuel retail partnership with Gulf Oil International to Indonesian branded credit cards. The breath of tie-ups is staggering.
According to founder and CEO of sports sponsorship marketing platform Connexi, Rory Stewart-Richardson, this is unlikely to stop.
“Rights holders have never ‘sold all of their rights,’” he says “you can always create new [ones].”
When you consider some of the challenges facing soccer, United’s efforts could be crucial.
Empty stadiums
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The three main revenue sources for soccer clubs are; TV, sponsorship and match-day income.
As I’ve explained previously, match-day revenue is not as important as it used to be.
So much so that Chelsea’s acquisition of U.S. Soccer star Christian Pulisic represents a better investment than it building a new stadium.
This means that, while hardly welcome, U.K. social distancing measures putting live games on hold for the foreseeable future will have less of an impact.
Television revenue, which for most teams is fundamental for survival, also faces severe disruption, this will bite.
Even with a flurry of live soccer this summer, the longer-term rates TV companies can or will pay for games could be affected.
As United’s quarterly results show, broadcasters will also want to claw back some of their lost revenue.
Marketing budgets for potential sponsors have been hit, but as United MD Arnold says, playing behind closed doors is less of an issue.
Corporate partners continue to get exposure through global broadcasting of the action, regardless of whether people are watching live.
Sports sponsorship insider Stewart-Richardson has heard of some deals being canned, but is positive about what he calls a “buyers market.”
“Sponsorship is a partnership. In order for partnerships to work, you have to have longevity.” He adds.
“Although times are tough for brands and rights holders [because of coronavirus], both parties are being flexible [at the moment].”
The thing is, United’s brand might even have benefited from the coronavirus hiatus.
Nostalgia power
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Consider where Manchester United were before lockdown abruptly halted the season.
Stuck outside the Champions League places, its inconsistencies on the pitch were confounded by watching bitter rival Liverpool’s march to the title.
Financially speaking, the bandwagon was firmly on the road. But questions were beginning to be asked about its ability to continue the exponential revenue growth during an extended period of mediocrity.
Then a global pandemic intervened.
Suddenly Liverpool’s 30-year wait for domestic dominance is delayed and somewhat deflated.
The intervening period has also seen most soccer fans indulge their nostalgia.
Television channels, newspapers and podcasts have filled sports segments with reruns and reminiscing.
For a side like United, where past performance currently exceeds present standing, that can only be a good thing.
The most ominous thought for its rivals should be that the biggest growth in Manchester United’s history came off the back of the last global financial crash, in 2008.
As Arnold pointed out to investors, United knows how to thrive in a crisis.
“In all times of flux, the club has been very solid. We are a safe bet.” He told them.
