The Premier League title-holders crashed out of Europe’s top competition following their defeat to Bayern Munich last night (10 April). It all but dashed the club’s hopes of playing in the Champions League next season, given they are currently seventh in the Premier League, seven points away from the qualifying positions with five matches remaining.
The dilemma has left the club looking to its commercial arm to replace the £20m to £40m revenue the tournament generated each year. United’s status as one of the strongest sports franchises on the planet is matched by a commercial model built on regional deals, the global profile of players such as Wayne Rooney as well as deep-rooted ties to prestige brands such as Nike.
The club’s revenue for the second half of 2013 was up 18.9 per cent year-on-year to a record £221.4m, buoyed by six new regional sponsorship deals in the period, including a tie-up with the Hong Kong Jockey Club.
United’s plan for a swift return to Europe involves a reported £200m summer transfer spree alongside more regional deals and additional broadcast revenues in emerging markets.
Joel Seymour-Hyde, vice president of strategy at sponsorship consulting group Octagon, warns any commercial charge to offset the club’s European exit could dilute the brand in the long-term.
He adds: “United’s sales process is relentless and the club will continue to cash in for as they long as they think they can generate significant revenue. There may be tipping point, however, when they are associated with almost every brand under the sun in some markets and are not seen as exclusive to potential sponsors.”
It is also reported that club officials are reportedly weighing up the offer of playing revenue-spinning friendlies next season to compensate the loss. United most recently played a testimonial match in Saudi Arabia in January 2008, the year it last won the Champions League, and is said to have spurned numerous offers since.
The importance of United’s Champions League recovery is compounded by the prospect of it losing out on millions from 2015, when the next raft of commercial deals kick in. UEFA has sold broadcast and sponsorship packages, worth €1.34bn (£1.11bn) for the 2015-18 seasons, which will see revenues in excess of €900m (£745m) passed on to the 32 competing clubs each year.
Tyson Henly, former head of sponsorship at UEFA and head of international football at Fuse Sport and Entertainment, says United will be pushing “hard” to return to the Champions League ahead of the next cycle.
The value of the tournament is growing, adds Henly, as evidenced by BT beating Sky to claim the exclusive live rights to the Champions League and its sister tournament the Europa League for £900m. The existing Champions League deal, under which Sky and ITV share the rights, is worth just £400m.
He adds: “The longer-term implications will see the club try to get back within two years because that’s when the new 2015-to-18 Champions League cycle kicks in. All the broadcasting and sponsorship contracts are aligned for that new cycle.”
“The club will want to make sure they are back in the tournament for the 2015 to 16 season because the competition will probably distribute even more revenues to the European clubs.
Despite United’s lacklustre performances, the start of the club’s 7-year shirt deal with Chevrolet, said to be worth £50m a year, next season will allow it to offset any negative impact in the short-term.
Seymour-Hyde adds: “United’s commercial success, both in terms of the size of the Chevrolet deal and their ability to sell regional partnerships across multiple categories means they are less reliant on Champions League revenue than other clubs.
“But in light of UEFA’s Financial Fair Play regulation everyone’s numbers are being watched more closely. Clubs needs to be more commercially astute in order to meet those targets. If you’re looking at a deficit at a time when you want to rebuild a squad then a lack of Champions League revenue is a significant hit.”