Thursday 14 December 2017

Manchester United could potentially lose £50m with defeat in Europa League final to Ajax

Jose Mourinho
Jose Mourinho

Ian Herbert

Manchester United will lose around £50m if they fail to win next week’s Europa League final against Ajax, with a drop of £30m less revenue next season and a £21m reduction in their Adidas kit sponsorship deal, the club admitted on Tuesday.

United’s chief financial officer Cliff Baty said that competing in next season’s Champions League – the prize for Jose Mourinho’s players if they overcome the Dutch in Stockholm – is up to £50m in revenues, while the Europa League will collect the club a maximum £20m. There is £5.57m prize money prize-money for next Wednesday’s winners but £3m for the losers.

With manager Jose Mourinho already complaining that the Dutch side have the advantage of their season being wrapped up - while his own have Southampton and Crystal Palace to play - United also stand to lose 30 per cent of their Adidas kit deal if they do not qualify for the elite European competition.

“Receipt of sponsorship from Adidas next year would be £70m if we are in the Champions League, so if we are not that would be 30 per cent less of that so that’s a £21m reduction,” Baty said, though the club would not take the full financial hit immediately. The penalty would be spread out across the eight remaining years of the contract: a £4m hit in the 2017 fiscal year and then a further £2.1m annual hit for the remaining seven years.

The club have attempted to mitigate the losses attached to not being the Champions League through their bonus system, which attaches a substantial salary uplift to qualification. 

United’s third quarter results revealed revenues up three per cent to £127.2m, with only the club’s huge interest payments on £366.5m acquisition debt dragging them into the red by £4m. This stellar earning power has led to Real Madrid’s James Rodriguez being offered to United. The player’s failure to flourish in Spain reflects former Real manager Rafael Benitez’s indifference to him two years ago. It is thought United have higher priorities than investing £65m in the Colombian.

In a conference call with United’s investors, executive vice chairman Ed Woodward painted a picture of the club’s huge digital footprint, which by many measures dwarfs that of other Premier League clubs. The 140m followers of the club on various social media platforms make United the subject of half of all Premier League social media interactions. There were 250m shares, likes or re-tweets in the last quarter. One investor asked Woodward to explain the “broadening out” of the club’s retail operation beyond Old Trafford “and conquering the world.”

The club’s new App is seen as a key earner, tapping into new markets, with Woodward delighted that three quarters of the subscribers are under 24. There has also been a ten per cent increase in online merchandise sales, “particularly from fanatics in the United States,” according to Woodward. 

But despite the commercial success, United’s on-pitch earning power has been partially dependent on the failure of Southampton and Tottenham Hotspur to make an impression in the Europa League. That has increased United’s share of the TV earnings pool paid out to British clubs.

“This year we’ve benefitted from the performance of other teams in the Europa League,” Baty said. “Because only ourselves and Southampton went through into that first round we get a bigger share of the market pool (of TV money.) And because of the performance of Southampton and Tottenham later on in that competition, it meant we picked up a bigger share of that market pool.”

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