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Ronaldo signing buffers Man Utd’s revenue loss

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After Manchester United’s revenues suffered a financial hit from Covid, Mark Bisson explores the price of football and assesses whether Cristiano Ronaldo’s £12.85m signing will balance the books.

22nd Sep 2021
Sports business reporter
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As Manchester United reported a net loss of £92.2m in its yearly results, executive vice-chairman Ed Woodward insisted the club coped with the Covid pandemic better than many others “because of the strength of our business model”.

Describing the past year as among the “most challenging” in United’s history, he put a positive spin on the 12 months ended 30 June 2021, hailing the club’s resilience in dealing with Covid and talking up the return of Cristiano Ronaldo.

The club’s ability to invest in the summer, he said, when many clubs were retrenching “reflects the strong commercial model we have built over many years, ensuring that our spending is always underpinned by revenues that we generate ourselves”.

Revenues drop to £494.1m

United’s net loss was mostly attributed to the accounting impact of a £66.6m tax charge. Covid-related impacts contributed to total revenues dropping from £509m to £494.1m. Commercial revenues of £232.2m took a hit, down £46.8m over the prior year, with income from sponsorship plummeting by £42.5m.

But broadcasting revenues cushioned the pandemic blow, with the £254.8m filling club coffers showing an 81.7% increase. It helped offset commercial and matchday revenue shortfalls; during fiscal 2021, 33 home games across all competitions were played behind closed doors.

Amid the fall-out from Covid, Woodward said the club was building towards recovery “from a very solid foundation”.

Saying that the club was committed to working with football’s domestic and European stakeholders to promote greater financial sustainability, he warned: “It remains clear that football as a whole faces major financial challenges caused by years of material inflation in wages and transfer fees, exacerbated by the impact of the pandemic.”

United’s chief strategist can hardly relinquish responsibility for playing a part in football’s economic boom and the widening inequality between the haves and have-nots.

Price of football

Football finance expert Kieran Maguire, who covers English football economics on his Price of Football website and podcast, notes that United’s total squad cost £861m, as of 30 June, compared to £318m when Sir Alex Ferguson left after the 2012–13 season.

And with a £322.6m wage bill, up 13.6% – primarily due to contracted increases in player salaries as a result of participation in the UEFA Champions League – United continue to be among European football’s biggest spenders.

Maguire says Woodward, who leaves his role at the year’s end, has done a “good job” on the commercial side – but delivering on the pitch has been “a relative failure”.

Ronaldo ‘a bargain’

United’s fortunes this season, both on and off the pitch, revolve heavily around their showpiece summer recruit, Ronaldo. Signed for an initial €15m (£12.9m) with €8m (£6.8m) in add-ons linked to the club’s success on the pitch, Maguire believes it’s a smart piece of business for United.

“From an amortisation point of view, it’s a bargain,” he says, adding that Ronaldo’s wages of up to £20m per year is factored into the club forecasting a 20% rise in wages for the coming financial year. New recruits Raphael Varane and Jadon Sancho are part of that, too.

“The cost base is certainly going to rise this year,” Maguire adds, noting that TV revenues will be broadly flat or slightly down.

While there was much hyperbole over Ronaldo shattering United’s shirt sales records, Maguire believes the impact on retail revenues is a little overstated. He expects a “lot of substitution”, with fans deciding against buying shirts with the names of other players in favour of jerseys emblazed with “Ronaldo”.

The bigger impact will be on United’s sponsorship revenues. Maguire says new sponsors or those renewing partnerships across different tiers will be prepared to pay more to have the club legend endorse their products. “That’s where the main driver of revenues will come through from the CR7 brand,” he says.

Fresh sponsorship deals

It’s a view supported by Spencer Nolan, Nielsen Sports managing director for the UK & Ireland, who says Ronaldo will generate significant exposure for the club’s current sponsors and also help the club secure fresh sponsorship deals.

“When star players move teams there is typically a positive ripple effect throughout the organisation in which, after the buzz of the announcement, a lasting shift has occurred,” he says. “We saw this happen when Ronaldo moved to Juventus in 2018, which resulted in a 15% increase in cumulative TV viewership globally during his debut season playing for the club.”

According to research by Nielsen Sports, the combination of “two of the most powerful brands that transcend the world of sport” will deliver benefits for both and their portfolio of sponsors. Nolan predicts that United will become the most watched club in the world this season. And Ronaldo’s signing could potentially add over 60m viewers in the Premier League.

Increased reach

He says United and Ronaldo’s commercial partners are set to gain hugely from the increased reach and engagement across the season driven by the creation of engaging content for their fans.

“Coupled with the expected increase in TV audiences, Man Utd’s sponsorships will become more valuable and the likes of Teamviewer and Kohler will benefit from the increased exposure from the media coverage generated week in, week out,” Nolan says.

“The widening of the fanbase will also generate a broader audience for partners and sponsors to engage with, which will in turn generate additional commercial value. 

Only time will tell if Ronaldo’s much-hyped return will translate into immediate success and trophies on the pitch. United’s group managing director Richard Arnold, the man set to replace Woodward as chief executive, last week said Ronaldo had not been signed solely for commercial reasons

But there’s no doubt United will tap into Ronaldo’s image, brand and influence – and global social media following – to maximise a slew of commercial opportunities. Maguire says: “Ronaldo’s social media presence and power of influencing is something the marketing guys will be trying to leverage.”

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By AndrewV12
23rd Sep 2021 11:56

Extract above
Ronaldo is ‘a bargain’
United’s fortunes this season, both on and off the pitch, revolve heavily around their showpiece summer recruit, Ronaldo. Signed for an initial €15m (£12.9m) with €8m (£6.8m) in add-ons linked to the club’s success on the pitch, Maguire believes it’s a smart piece of business for United.

Ronaldo may be a bargain off the pitch but I don't believe he will be an success on the pitch, he is 36, past his best, he wont paly all of the matches, there is a saying in football never go back and this is a classic example (just ask spurs fans re Bale).
It was the big move he was looking for before retiring and Manchester United took the bait, but I have to say he is still in good nick and he will do okay on the pitch, but don't expect the return of the player that left Manchester United.

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