ManU Gets Kicked In The Head--Again
It's early in the game, but Malcolm Glazer is already down a few goals. Glazer, the American sports tycoon who took control of British football team Manchester United last May, has suffered a series of setbacks in recent weeks that threaten to undermine his ambitions of raising the club's global presence. The once-dominant ManU is struggling on the field for the second season in a row, falling far behind rival Chelsea in its bid to finish first in its league. Then, on Nov. 18, star midfielder Roy Keane, ManU's captain, bolted. Now, Vodafone, which pays $16 million a year to splash its name across players' bright-red jerseys, has pulled out of its sponsorship deal two years early.
Owning Britain's most celebrated football team has become a growing headache for the 77-year-old Glazer, a reclusive billionaire best known for his U.S. football team the Tampa Bay Buccaneers. The loss of Vodafone Group PLC (VOD ) has dealt Glazer, who gained control of the team in a $1.47 billion takeover, a particularly harsh and unexpected blow. Now he must replace the Vodafone cash he'd been counting on to help him service the $490 million in loans and $509 million in preferred securities he issued when he took over. ``Glazer is under more pressure than ever,'' says Allyson Stewart-Allen, a director at International Marketing Partners Ltd. in London.
Vodafone's decision to walk is also a public-relations nightmare for a team that is already dealing with growing ranks of disgruntled fans. Vodafone isn't talking, but sources say the company retreated to focus on a deal with broader appeal -- its new three-year sponsorship of the UEFA Champions League. Vodafone has a history of backing out when its teams start to falter. In 2004 the company stopped sponsoring Australia's rugby team after it lost to England in the Rugby World Cup.
Now Glazer and three of his sons, who sit on ManU's board, must find another deal. Vodafone put in about 5% of the team's annual revenues of $300 million. ManU sources expect 2006 operating earnings of about $99 million, up from $83 million this year. But given ManU's recent setbacks, ``it will be difficult to get there,'' says San Datta, a director at Hermes Sports Partners, a London corporate finance adviser that specializes in the European sports market.
Although Glazer declined comment, team executives insist they'll soon line up another strong sponsorship. ``There are not many sports properties that have the global appeal of Manchester United,'' says ManU commercial director Andy Anson. A number of Asian companies have already approached the club about a shirt deal or other sponsorship. Companies from China, where ManU says it has 20 million fans, are especially keen. While talks are still in early stages, one possibility is a sponsorship involving Macau Island and its gaming industry.
MISSING THE CUT
Even so, unless the team's performance improves, it will hit another financial snag. If ManU loses a Dec. 7 match against Portugal's Benfica in Lisbon, it will fail to qualify for the so-called knockout round of the Champions League for the first time in a decade. That means the Glazers will miss out on lucrative TV revenues worth as much as $10 million, says Phil Carling, global head of football at sports marketing agency Octagon in London. Says Carling: ``This is income that goes straight to the bottom line.''
The Glazer family is taking big steps to shore up the club's financials. They've cut more than 20 staff members, including some executives. They also plan to raise ticket prices 9% next year, and they have O.K.'d lending 23 players to other clubs, saving ManU more than $20 million in fees and salaries. ``They are cutting expenses everywhere they can,'' says Jeffrey Bliss, president of Javelin Group, a Washington sports marketing firm that specializes in football. That makes business sense, but it could be tough to build ManU's brand image and rein in costs, too. Being the boss of a British football team is a lot rougher than Glazer ever imagined.
By Laura Cohn and Stanley Holmes