Manchester United’s American Owners Are Playing A Game Against Uncertainty

Manchester United’s owners know they need to act now.

A win against Paris Saint Germain and draw with Chelsea this week have helped divert attention from the £23.2 million ($29.64 million) loss it recorded for the twelve months to 30 June 2020 on Wednesday.

But the financials are stark, the corporate powerhouse built by the Glazer family is showing signs of fallibility. 

Although it is the coronavirus pandemic rather than declining on-field performances that have revealed United’s vulnerability, the owners are taking bold steps to protect the asset.

A 132.9% increase in net debt to £474.1 million ($605.94 million) in 2020 surely hastened the club joining forces with Liverpool to devise a plan to restructure English soccer.

The initial attempt, made public two weeks ago, failed at the first hurdle.

But, as executive vice-chairman Ed Woodward told the club’s investors on a call discussing its results, Manchester United hasn’t given up.

“There will always be intense debate around any changes to the structure of football just as there was before the formation of the Premier League
PINC
20 years ago,” he said.

“Now, at this critical juncture for the game, we must ensure that the huge success of the Premier League is reinforced.”

Reinforcement is an apt description of what the plans put forward by Manchester United aimed to do.   

Beneath the suggestions for hundred-million-pound cash advances, voting right changes and the axing of competitions is one underlying objective: certainty.

It was certainty the smaller clubs were being sold; principally in the form of an immediate cash bailout, but also through rules which would force other lower-level teams to behave in a more financially prudent manner.

The benefit for Manchester United, Liverpool and the rest of the big six was also certainty; through the introduction of a system that guaranteed more power.

Certainty off the pitch is universally accepted as a good thing, there are countless soccer clichés about its benefits.

Few, however, would argue that it is welcome inside the sporting arena. The unscripted drama of European soccer is one of its main selling points.

The trouble is, this doesn’t exactly line up with what the owners of the multi-national corporations, that some of the teams playing it have become, want. Investors demand certainty.

Eliminating the Champions League risk

Owners of teams like Manchester United do understand that part of the allure of European soccer is its inherent unpredictability. What they don’t like is the extent to which it sometimes affects the club’s financial performance.

The Glazers are long-term owners of an NFL team so it makes sense that they would gravitate to the American professional sports league structure, which typically has no promotion or relegation.

New franchises are added to competitions from time to time, but these decisions are based on business cases rather than romance or sporting credentials.

“American’s see sport is a business first of all”, founding chief executive of the Scottish Premier Football League and owner of consultant Albachiara, Roger Mitchell tells me.

“They can’t get their heads around a thing like promotion or relegation, they can’t get their heads around [the idea that you] have to have trickle-down economics to subsidize smaller teams.

“In Europe, we always saw sport coming from traditional amateur communities that eventually got professionalized at the start of the 90s, before then it was principally amateur, and money was a dirty word.”

In the past decade, both Manchester United and Liverpool have provided ample evidence to their US-based backers of the extent to which the game’s unpredictability impacts even household names.

United has missed out on participating in the Champions League three times in the last six seasons, in the ten years of FSG’s ownership of Liverpool the club has only participated in Europe’s elite competition half the time.

Over that same period the teams the English clubs see as their peers; Real Madrid, Barcelona, Juventus, Paris Saint Germain and Bayern Munich have been ever-present.

The English club’s financial protection against the occasional seasons without Champions League soccer has been the continued revenue growth of the Premier League ahead of its European counterparts.

Woodward pointedly gave last week’s story that new plans were afoot by elite clubs to set up a breakaway European Premier League tournament short shrift during the investors’ call.

What he did say, however, was the club was “actively involved” in discussions to expand the Champions League to 36 teams.

“Every time the breakaway league is talked about, what they managed to get out of it is more concessions from [European soccer governing body] UEFA,” continues Mitchell.

“Principally it is for more guaranteed teams from the big five leagues in the Champions League. It wasn’t that way 20 years ago, but they just kept pushing at it, they kept coming out with these threats. And they got more and more.”

The expansion of the Champions League, described by Woodward, would likely result in sixth place in the Premier League being a high enough league position to qualify.

Manchester United’s lowest finish of the past 20 years was seventh, on one occasion; the season after long-term manager Sir Alex Ferguson retired.

Hand the Premier League another two Champions League places and you’d get the type of certainty Manchester United’s owners and investors want.