The sale of Manchester United
Press release issued: 8 December 2005
Malcolm Glazer’s purchase of Manchester United represents a massive expropriation of money and time donated by supporters over decades, according to economics professor Patrick Francois, writing in the first issue of a new publication from the University of Bristol.
What’s more, according to Glazer’s business plan, Manchester United supporters can expect the average season to be one that most of them would call a disappointment. Glazer projects revenues based on the club averaging third place in the premiership and the second round of European competition – not great news for a supporter used to considerably more success.
Malcolm Glazer bought Manchester United Football Club because he calculated that the club’s assets could be organised and run in a way that would raise their value. This is what asset trade is all about. So why should we be concerned?
The answer is that Manchester United had an implicit agreement with its fans, which led to mutually beneficial reciprocal efforts on the part of both club and supporters over a number of years. This agreement will be violated when the club is run in a way that maximises the financial interests of its owner.
The agreement between the club and its core fans went something like this:
‘Support us as best you can, come to our games, help the club (volunteer perhaps), become a member and (more recently) buy one of our many products or the products our club endorses and we’ll be as successful a football team as we can. Give us your money or your time and you too will benefit because the thing you care about – the success of the team – will be enhanced.’
Though the club had long been privately owned, the owners respected this implicit agreement. But what form did the fans’ donations actually take? Surely many of the transactions were similar to standard consumer purchases. Buying a ticket to a game allowed an afternoon’s entertainment, buying a Manchester United shirt meant having one to wear. What exactly were the donated transfers that fans made to the club?
The first are supporters’ clubs with thousands of members, all organised by volunteers. Apart from the fabled direct efforts of these volunteers – like the post-war clearing of rubble at the site of the original Old Trafford – these individuals gave to the club in countless ways. When football was a much less professional sport and volunteer efforts played an important part in fielding a team, they provided the manpower necessary to make the organisation run.
But such efforts have not played an important role for a long time; the club is professional and employees are paid good salaries. Where are the ‘donated’ contributions to be found now? More importantly, where is the evidence that the club is benefiting from, and asking for, such donations?
Manchester United’s product advertising gives some clues as to what the club’s marketers at least think is going on. Consider the following lines quoted from the club’s official credit card advertisement on its website:
‘Support Manchester United? Then apply for the Manchester United credit card today. Show the world you're a United supporter. New designs, new benefits and a new reward scheme – and every penny we earn goes to benefit the Club and the Academy. What more could you ask for?’
The marketing for Manchester United products appeals to the implicit agreement with fans in a crystal clear way: 'Buy good x, not because it’s the cheapest or the best (it may not be), but that doesn’t matter because any profits that we make from it will go towards advancing something you really care about – the on-field success of Manchester United Football Club.’
Just what these appeals to the greater good mean now is not so clear when the club is owned by an individual with no interest in soccer, who has purchased it to make money. What could ‘every penny we earn goes to benefit the club’ mean in the present context?
So the bottom line is this: the club was a good purchase for Malcolm Glazer because it had been run in a way that honoured a previous and longstanding implicit agreement with its supporters. The supporters gave it resources and in return the club was geared around maximising winning, not the value of the assets built from those resources.
The club’s assets reflected those years of donations and were ripe for the picking. By buying the club at a value that reflects it being run as a success-maximising institution, and selling it later (which no doubt will happen) at a value that reflects it being run as a value-maximising institution, there is a large profit to be made.