Wednesday, 13 July 2011

A look at Manchester City’s commercial income

I am a United supporter, if you feel this makes me a "biased rag bastard" who is incapable of writing about Manchester City's finances in an impartial way then I believe you are mistaken. If that is however your view, I suggest you don't waste your time reading on!

Alongside the usual summer transfer speculation, the biggest football news of last week was Manchester City’s new ten year naming rights and sponsorship deal with Etihad Airways. Reports indicate that Etihad will pay City between £300m and 400m over the life of the contract making it by far and away the largest ever club football sponsorship deal. With UEFA’s Financial Fair Play rules around the corner, the Etihad deal has caused huge controversy with figures such as John W Henry of Fenway Sports Group and Arsene Wenger questioning the transaction given that Etihad is owned by the Abu Dhabi royal family of which City's owner Sheikh Mansour is a senior member.

This post takes a closer look at the sources of City’s commercial revenues and how they have grown over recent years. I have assumed a figure of £400m for the Etihad deal throughout for ease, but readers can obviously make the easy mental adjustment if they believe £300m is a more realistic figure. As with all my posts, I will correct any inaccuracies readers point out.

Splitting out commercial income from the report and accounts

Most football clubs adopt a three way split of revenue between Matchday, Media and Commercial sources. Unusually Manchester City include corporate matchday hospitality business under a catch all segment called “Other commercial activities” and then publish a separate figure for “Gate Receipts”. To make sensible comparisons with other clubs we need to deduct matchday hospitality from the “Other commercial activities” total. Thankfully the 2009/10 accounts give the details on page 55 allowing us to strip hospitality and to then disaggregate the total Commercial (ex-hospitality) revenue into Commercial partnerships (i.e. sponsors), retail and merchandising and “other” (I have rounded to the nearest £100k for ease).

2008/09 – the bad old days

The accounts show that in Sheikh Mansour’s first year of ownership the deals he inherited from the previous owner only generated £6.5m in sponsorship revenue and £17.9m in commercial income as a whole (by comparison United’s commercial revenue for the same year was £70m). 

The two key commercial arrangements in force that season were the shirt sponsorship with Thomas Cook and the kit deal with Le Coq Sportif. The kit deal was widely reported to be worth £10m over four years and the Guardian reported that the Thomas Cook were paying £3m for their two year deal with City. The only other current sponsor involved with the club at that time was the local radio station Key 103. I’ve estimated that at £500k pa, leaving £2m from other small deals.

2009/10 – transformation

The 2009/10 accounts say:
Financial highlights for 2009-10 include: Corporate partnership revenue increasing by £25.9m to £32.4m, an increase of nearly 400% on the previous year, driven by new long term deals with a number of key partners, including Etihad Airways, Abu Dhabi Tourism Authority, Aabar and Etisalat.” (page 55)
By the end of the 2009/10 financial year, the four new sponsors mentioned above, along with Umbro, had replaced all the club’s previous sponsors (with the exception of Key 103). In other words, the £32.4m generated by the club in 2009/10 came solely from six companies. The original Etihad shirt sponsorship was widely reported to be worth £7.5-8m pa. To get to a total of £32.4m therefore (and assuming Key 103 continued to pay £500k pa), the other three Abu Dhabi owned sponsors and Umbro had to generate approximately £23.9m in revenue between them. The table below shows my estimate of how this splits between sponsors:

I have used a figure of £2.9m pa for Umbro to reflect some sort of premium over the Le Coq Sportif deal, despite several press reports suggesting the ten year partnership was only worth £25m. With The Etihad shirt sponsorship in at £8m, the £7m each for the other three Abu Dhbai companies is just the residual needed to get to a total of £32.4m. This figure of £7m each (or rather a total of c. £21m for all three) is pretty staggering given they are second tier sponsors.

2010/11 – broadening the base

If the first year of Mansour’s ownership reflected the financial failures of Thaksin Shinawatra and the second year saw huge deals being signed with friendly companies from Abu Dhabi, the third year saw a decent diversification of the base of sponsors.

The German heavy engineering group Ferrostaal signed a sponsorship deal at the end of calendar 2009 shortly after being taken over by International Petroleum Investment Company of Abu Dhabi. Strangely Ferrostaal no longer appears on the club’s list of sponsors and the pre-season “Ferrostaal Cup” competition promised for 2010, 2011 and 2012 doesn’t appear to be happening this year.

More importantly than whatever is happening with Ferrostaal, the last financial year saw City sign deals with Amstel (i.e. Heineken), Malmaison Hotels, Thomas Cook Sport and Jaguar, none of whom are owned by Abu Dhabi or its royal family. Assuming £2m per partnership (and the same for Ferrostaal), this will add c. £10m to the £32.4m achieved in 2009/10.

2011/12  - The second Etihad deal

A massive deal

The £400m, 10 year deal announced last week is a staggering piece of business for City. A club that could only muster £6.5m in total sponsorship income under Thaksin has signed a deal worth over six times that from just one source.

It appears that City and Etihad are suggesting the partnership splits into three areas; shirt sponsorship, naming rights for the (former) City of Manchester Stadium and naming rights for the wider “Etihad Campus” in East Manchester (see below). Even with the c. £40m split into these three areas (and perhaps £4m pa going back to Manchester City Council for the first five years), these are sums that match or exceed the best deals seen in European football. United and Liverpool’s shirt deals with Standard Chartered and Aon respectively are worth around £20m pa. Bayern Munich’s 2009 three year extension of its shirt sponsorship with Deutsche Telekom is worth around £23m pa. Precedents for naming rights in Europe are somewhat scarce, and if City’s Etihad deal is worth around £10m pa, it is the highest seen in European sport.

Etihad is a young airline benefitting from significant investment from the Abu Dhabi royal family but it is hard to see the business logic for a deal of this scale. Etihad’s annual turnover is only around £2bn (annualising its recent half year figures). On 12th July it proudly announced it had broken even for the first six months of 2011 (the first breakeven result in its eight year life), but this “breakeven” is as measured by “earnings before interest, tax, depreciation, amortisation and rental payments (on leased planes)”. Few airlines ever achieve an operating margin of more than 15%, and even if Etihad could hit that sort of level of profitability, this deal would mean it was then paying out 10-15% of its annual profits to City. For such a company to pay out £400m over ten years to a not especially well known European football club is somewhat strange from a business perspective.

Other sources of commercial income

So far I have just discussed commercial partnership income. Like all clubs, City has a merchandising operation (in conjunction with Umbro) which turned over £7.9m in 2009/10, an impressive increase on the £5m figure for 2008/09. It seems unlikely that this growth rate can be sustained, but it is reasonable to expect some growth as City’s international profile begins to rise.

Streets soon to be paved with gold....

Far more intriguing than shirt sales is what City can do with the 80 acres of development land around the stadium. Formally called (by the council) “Openshaw West”, this is now going to become the “Etihad Campus”. So far nobody knows exactly what will be built on this land, although suggestions include retail and office space (including a new Etihad call centre), a new training ground for the club, a sixth form college, a sports science complex etc, etc. Any construction costs borne by Sheikh Mansour fall outside the scope of “expenses” under Financial Fair Play rules but any profits from activities on this land can be included (as the “campus” is on land adjoining the ground).

How City compare to other clubs

The £46.7m City earned from all Commercial activity in 2009/10 took it above Arsenal and Spurs for the first time.

In the season just finished the five additional sponsors will have added another £10m and no doubt merchandising revenue will have risen too on the back of the club’s first trophy in thirty five years. When the additional income from Etihad is added from this year onwards, City will almost certainly overtake Chelsea (2009/10 Commercial revenue £56m) and be close to Liverpool (2009/10 Commercial revenue £62m but this predates the Standard Chartered and Warrior deals) and will be reporting total commercial income of around £90m (depending on the exact size of the Etihad deal). In English football only United (where commercial income will exceed £100m in 2010/11) can rival this.

The elephant in the room - Financial Fair Play and the reliance on Abu Dhabi

Unlike most clubs, City’s search for additional income is not about boosting their firepower in the transfer market or (as with the Glazers) boosting the club’s value, it is about compliance with Financial Fair Play. In my piece on 8th April I estimated that City would have reported a deficit on 2009/10 results of around £121m under the new FFP calculations (although importantly this is before the permitted adjustment for player contracts which were entered into prior to June 2010 that applies to the first two years of the new regulations).

The incremental c. £44m the club has added in Commercial income since 2009/10 reduces that deficit by a third, and Champions League participation and top four finishes (if repeated) will add another c. £30-35mpa. That begins to make the €45m (c. £40m) loss allowable over two years under FFP look achievable, but there is still much to do, especially with a bloated squad costing £130m+ in wages and £70m+ in annual amortisation charge on transfer spending.

The club’s reliance on companies owned by Abu Dhabi’s royal family is stark. Although the deals with Malmaison, Jaguar etc reduced the percentage of sponsorship income coming from such companies from 90% in 2009/10 to c. 73% last season, the new Etihad deal takes it back to 85%. Other clubs are understandably aggrieved at what they see as an attempted flouting of the new FFP rules. My personal view is that UEFA will not stand in the way of any of the Abu Dhabi related transactions, as each could just about be justified individually.

Manchester City clearly believe they have found a way through the FFP regulations that effectively channels Abu Dhabi's wealth into the club in bite sized and UEFA compliant chunks from various nominally independent sources. It will be very hard for UEFA to argue against these deals, but there is surely a limit to how far City can push this process. With commercial revenues now rivalling United, Real Madrid and Barca, further closing of the FFP gap is going to have to come from the more traditional source of controlling costs and winning trophies.....



Anonymous said...

Your point seems to be that the deals compare with the higher deals being done elsewhere and are therefore likley to be fine within FFP constraints. In which case, I agree.

andersred said...

Cheers anon,

And also that they can only push this method of routing AD money so far. Barca earned £122m in commercial revenue last year. If City suddenly achieved that with 90% coming from AD, I think UEFA would call foul...


Anonymous said...

Maybe - although it's always hard to compare. The "campus" is a unique development. The Manchester City "story" has a unique value in the Middle East that companies want to be a part of. It's hard not to be cynical but I think they'll be fine. I also think FFP is a scandalous initiative so good luck to em.

Ryan said...

Brilliant as ever, thanks for this.

Personally I feel that the economics of the deal are not nearly as important as the political/ philosophical side of the debate.

As I understand it, FFP is designed to ensure clubs operate within their means. It is meant to ensure that the meltdowns we've seen in the past don't occur in the future.

City is quite obviously deriving its income from 'friends and family' of its owners. This is obviously not new in football, the only thing that is new is the scale and the speed of it.

As such, I don't see how City's new deals are against the 'rules' of FFP. Much as, say, a prominent Italian can own a club and have his various organisations and colleagues sort out sponsorships.

However, it does seem to go against the 'spirit' of FFP. If another aspect of FFP is to ensure that clubs aren't able to take the p*ss in terms of having sovereign wealth put them at serious risk of monumental collapse should their owners have a change of heart, than it should absolutely fail a standards test.

And for the life of me I still have no understanding of how such an investment makes any financial sense to the owners/ sponsors. It's either a rich boy's plaything, or the biggest PR stunt in history.

nsaraswat said...

I'm not sure how many major European clubs outside of Germany and possibly Arsenal will really complain about this.

If UEFA let this deal pass which the only objection could be the "Etihad Campus" (in my opinion), you would think that most other clubs would happily use this as a benchmark.

Next time Arsenal sell their kit deal, they'll ask for £20 million plus or when Liverpool sell naming rights to their possible new stadium they'll ask for over £10 million.

Do you know if UEFA will actively monitor all deals or whether these will be reactive based on objections raised?

Anonymous said...

Thanks for the data, Anders.
To me though it looks like it's the size of the commercial deals that Uefa will accept and not the market place that is determining City's commercial plans. You get the feeling that whatever limit (fair value wise) Uefa place on a particular contract, City will match it; they are making the market for their own contracts and that smacks of a workaround.

Scarlet Cuniculi said...

Looks to me like a football club is manipulating 'loopholes' left by uefa, and all because uefa haven't been good enough to have the foresight to see this far, or did they but they don't care?

chick said...

If these rules were primarily intended to stop Sovereign Wealth Funds from investing then they are laughably unfit for purpose. Guess what; no-one ever said that was the intention.

One aspect was the desire to stop people just wafting in and blowing the whole market to pieces. But you can't accuse City of doing that as at no point have they come close to breaking the world transfer fee record, or paying the highest individual salary or wage bill.

Anders, as a financial expert I'm sure you will recognise the difference between the meaning of the term used in the regulations ('Fair Value') and the term that seems to be used by the press ('Market Value'). The market value of a hiring a limousine for your Wedding is determined as the going rate for similar transactions. But the Fair Value may be different; if your bride to be has a fetish for White Aston Martins, and there is only one guy in the country with one for hire, and upon talking to him you establish that he could use a little more than the going rate in order to do some cosmetic work....

That's what's happening at City. Nearly every discussion about the club involves someone talking about Abu Dhabi. How could Etihad get this at any other club? How can UEFA compare that with, say, the value Emirates get from sponsoring Arsenal? When was the last time anyone talking about Arsenal mentioned Dubai? Does anyone in this country even know what AON do?

So I think you underestimate the venture at your own risk, and I'd be careful about the easy cynicism of saying 'it's just a way to circumvent the rules'. We're just at the start. What unfolds could prove to be a huge step forward in club/sponsor synergy. We'll just have to wait and see, I guess.

Anonymous said...

The Etihad deal is undisclosed, and the £400m quoted by the media is highly speculative.

Today's plans approved by Manchester City Council indicate that the Etihad sponsorship deal includes a dimension that no other football club has ever achieved - transformation of their City.

Scarlet Cuniculi said...
This comment has been removed by the author.
JF said...

City fan here, and can say in reference to your intro that you appear to be an UNbiased rag bastard ;o) I will try to be as unbiased in my response.

I can see what is in this for Etihad,beyond just seeking favour with an important person in their country - though I concede that may well be a factor. Etihad is a growing and ambitious airline that seeks to get a much bigger slice of the world market than in currently has and seeks also to fulfil a role of promoting Abu Dhabi as a major high class travel hub. Advertising through sponsorship is clearly beneficial to them. With Man City itself being seen as an Abu Dhabi linked brand there is more value to them in advertising through City than through an unrelated media.

Similarly I can see the benefits to the Abu Dhabi Tourist Authority of their secondary sponsorship

What I find less obvious is the benefit to the other minor sponsors that don't have a clear need to advertise their companies to such a high value, basically Aabar and Etisalat. The fact these deals were done even before Champions League qualification makes them more concerning.

City is basically a vessel to sell Abu Dhabi brands to the world. That is what people need to get their heads round rather than screaming foul without thought (not this article obviously, but many others out there!)

In a league where all the cash was grabbed by the biggest clubs of the day 2 decades ago this is the only way those clubs that were then left behind can bridge the gap. FFP just places some limit on this ability, it will enable City to still punch with an equal weight but not to outpunch their rivals in the way Chelsea were allowed to. It is something we all have to live with, though all sides may feel aggrieved!

Mark said...

Great article Andy. A correction (I think) for you - I'm pretty sure that Emirates will not want a call centre in the "Etihad Campus". I may be wrong. I think it's highly suspicious but, having worked in the airline industry and knowing Etihad management before they sponsored City (they looked at United before AIG) I have to say this has been superb for their profile. Can you put a price on that?

Anonymous said...

Defo not biased and thanks very much for the excellent read alot of hard work put into this article.
I think it sums up the class Arsene Wenger and John Henry have when they moan about this deal. Arsene Wenger should concentrate on trying to keep his star players and possibly opening up the Arsenal coffers and buying experience players so they can be called serious title contenders instead of ending their season in February every year, and as for this new clown who heads the consortium for LFC well i've never heard of an owner Tweeting the fans in any club of any sport. Maybe he should look at his tweet and realise he did something wrong because he makes out City should have a bigger deal, make your mind up Mr Henry!
Once again thanks for the article and keep them coming.

Anonymous said...

City will get THE best lawyers money can buy to challenge anything and everything thrown at them.And rightly so. The big boys don't like any new kid on the block, tough crap, good luck to City, wish it was us, from an Everton fan.

Anonymous said...

Another city fan, nice to see an unbiased analysis.

I do think you are underestimating the potential scale of the developments around Etihad stadium (that's going to take some getting used to). I'm pretty sure the proposed campus is only stage 1 of a much bigger plan. With the amount of derelict land around the stadium and virtually unlimited funds to develop it (not subject to FFPR restrictions) City could possibly end up with commercial income that dwarves the commercial revenue of even teams like Real, Barca etc.

How many other clubs have over 200 acres of redevelopment land (albeit some in a partnership model) such as . Also, there is the potential for even more land to be added and I doubt Manchester City Council will be against any plans to completely rejuvenate the area into a world class visitors destination. After all, Abu Dhabi spent £800m just to get Formula 1 into their country..........

Anonymous said...

Shouldn't have wasted your time writing, article is worthless... Clearly stated in the FFP rules... Clause B. (k) in Annex X allows clubs to included revenue (and associated expenses) from “Operations based at, or in close proximity to, a club’s stadium and training facilities such as a hotel, restaurant, conference centre, business premises (for rental), health-care centre, other sports teams”, so long as these are closely associated with the club." That is so wide open to making money it isn't funny.

Anonymous said...

Well balanced, well written article, great analysis, from a Blue.

Anonymous said...

The Emirs and Sheikh's are known for their extravagant gifts and generosity. If a 'given deal' is worth 10 million in the EPL - 20 million in the US and 50m million in Abu Dhabi, so be it! The Sheikh may be showboating for his friends, does this preclude the sponsorship.

Doncaster couldn't get a million pound deal so it would be 'fixed' if they did; City got lucky. We are getting fair value from the Arab market.

The citizens of east Manchester are getting a deal too. Imagine a successful sports campus ... the global branding of Etihad. Etihad are a global business, their interest in City lies in using it outside of the UK. This is similar to Emirates/Arsenal ... but Emirates are more present in London.

The Etihad/United translation reaction sent the Etihad name around the world. Lots of people, non soccer people heard the name ... this is what the payment is for.

ALL publicity is paid for, and they believe ... in the Blue moon rising. Why would you not invest.

Sports like the Arts have always reuired patronage. Commercially viable only theatre is not possible. FFP will in the long run reduce money growth in the sport which will effect the smallest teams most. The transfer money permeates to every level in football.

Anonymous said...

Interesting analysis and unbiased which is a refreshing change from the norm.

I think the interesting part about this deal is the 'Etihad Campus' part of it. The area that is to be developed as part of the regeneration program stood at 200 acres as of May this year... it's believed that more land purchases have been made since that time, and that another purchase will be made within the next week or so. To put that into perspective it's an area that could hold 111 average sized football pitches, or 8,712,000 square feet if you prefer it that way. The Arndale in Manchester is 1,400,000 sq ft and hold 210 stores! The revenue potential for an area of that size is monumental.

Anonymous said...

A good fairly unbiased article - though one that doesn't understand what Sheikh Mansour wants from owning Manchester City.

You simply fail to understand the seismic shift in world power that is taking place.
[1] Europe the USA and Japan have near zero growth yet South America, India, China and other parts of South East Asia are booming
[2] The royal family of Abu Dhabi is loaded they have billions in the bank and sit atop 9% (nine percent) of the worlds known oil reserves.
[3] Their sovereign wealth fund invests heavily all over the world and will make huge profits regardless of oil in the future. In the money markets Sheikh Mansour made more money out of Barclays than he will ever spend on MCFC.
[4] They know that their position in the world provides the ideal communications link between east and west going forward.
[5] They want the world to know that they are the monetary super power of the future.

They have a two pronged Advertising strategy to do this.

First they have founded Ethiad Airlines to exploit the communications advantages there position in the new world gives them. Founded in 2004, it broke even this month for the first time ever and increased revenues 28% in the first quarter of this year. It undercuts the Western Airlines by up to 10% yet makes a profit. It will be one of the worlds biggest Airlines within 5 years. Airlines advertise a country to every businessman and air traveller and everyone will know who Ethiad are

Second, they bought a football club with a large fan base for not very much. Luckily (for once) my club MCFC drew the ‘Golden Ticket’ and boarded the great UAE elevator to success. Why a football club? Quite simple really: Advertising. The world is football mad. Mostly everyone knows about football and The Premier League is the most followed league in the world. They are simply using football to draw the world’s attention to Abu Dhabi.

Sponsor City with Ethiad and it's double whammy. In every Premiership and Champions League game brand Abu Dhabi will be pushed into your face. The fact a plane has been branded after City is no fluke. More will be so branded. The branding forces Abu Dhabi into your mind. Using a football club is the cheapest form of Advertising you could possibly hope to pay for.

Anonymous said...

If you don't believe Ethiad's business model also note that Etihad's total turnover on the most recent half year would be more like £3bn in fact; more significantly the airline currently has some 200 planes on order - 64 to be delivered in 2011. It could be said that Ethiad's turnover will grow to £7b during 2011 and and to £14b within further year to a year and a half. They fill evey plane they take delivery of because on each route they take on they undercut their European competitors (e.g. Lufthansa) on fair price yet still make well over 15% profit!

Small company? Er No. They are a big company in a hurry to be a massive company.

Etihad are facing competition from three other airlines that run a similar cost model - the Gulf Three' including Qatar Airways and Emirates - both of whom enjoy similar cost advantages, and both of whom are also growing at breakneck speed.

Against this background the high-profile sponsorship of a Premier League football club makes a lot of commercial sense. So I think you can throw out your 'Somewhat Strange' comments out withth bath water. Indeed, Quatar investors can see the Abu Dhabi trick is working and have recently bought controlling interests in PSG and Malaga. Watch the same model come in to play with them.

While we're on the subject of finance the next stage in Manchester City's legal wealth creation exercise will be for Abu Dhabi to give preferential treatment to European Exporters who help them out promoting the Abu Dhabi brand. Jaguar and Malmaison are the first to invest in this way, but soon every European firm that wants to gain preferential treatment in Abu Dhabi will take the same root. I would guess there will be 25+ Jaguar type sponsorships within 3 or so years. By your figures that would push City well past United in terms of Commercial revenue.

Everyone should be looking at what Abu Dhabi can gain from this but are instead focusing on what the vested interests within Europe will lose.

Anonymous said...

Fair play to you mate - that's a good article that isn't loaded with bitterness and hate. Opposing fans, Wenger, and Henry should take note, rather than make throwaway comments about something they know little about.

I don't think it covers everything and it probably under-estimates things like the proposed development around Eastlands plus the projected growth of Etihad as highlighted by another poster but it's a good article nonetheless.

Anonymous said...

Great post as always! One slight error: "United and Liverpool’s shirt deals with Standard Chartered and Aon respectively are worth ..." You have the sponsors the wrong way round.


United Rant said...

To be fair to Citeh Barca and Real have benefited from sovereign wealth for years - how else can we explain the respective local government(s) bailing them out so often. UEFA won't block this because they're weak and it'll allow others to follow suit. How long before Gazprom becomes a sponsor at Chelsea etc

Anonymous said...

Good luck to them. Why should UEFA dictate from where football clubs derive their income.

FFP is designed to keep the current big clubs where they are and preventing any 'new kids on the block' joining the party.

I'm amazed the press is so supportive of it (FFP). Can't they see through it?

Good to see City throwing a spanner in the works.

Anonymous said...

Etihad is not a small company - the point is though is that it is government owned. As are Etisalat (1 of only 2 telecoms companies in the UAE - the other being DU, which is primarily based in Dubai) and the Tourism Authority or TDIC. Sponsorship from these 3 organisations are essentially payments from the same sources - of which City's owner is a representative of. That's why this deal is a total sham. Not that anybody really believed that City would be undercut by FFP. It was just an initiative passed to shut up the moaners about what City had started. UEFA want City to be in the Champions League because they are a cash cow, they are not going to go out of their way to stop them or any other club from UEFA competition. Like someone mentions - soon it will just be various russian companies backing chelsea. But this is what you get when you allow foreign governments and russian oligarchs own football clubs eh.

Anonymous said...

There is a larger question and shift at stake here than just football finance. You Mancunians need to decide if you are comfortable allowing another country to slowly, but very surely take over your city and remake it in their own image. The short term benefits are unquestionable. The long term ramifications will challenge your city and it's cultural identity in ways that we can only speculate on now. If I were a resident I'd be very, very skeptical.

threecows said...

"The Manchester City "story" has a unique value in the Middle East that companies want to be a part of." There speaks the authentic voice of modern City fandom. Not.

mark said...

With all the attention on City's deal the great crime of Barca's shirt sponsor slips by unnoticed.

From the figures here, €150m for a five year deal with a non-profit organisation looks even more suspicious.

PeteG said...

Great article.

As a Forest fan, I just want to turn up to my local stadium and watch some football. I couldn't give a rats ass about leveraging advertising opportunities for middle Eastern companies / countries. If this is what the Premier League and what it brings - you can keep it. I know there are City fans out there who despair at what their club is being turned into & I share their sentiments. It's ridiculous - yes, the club has totally sold it's soul and mortgaged it's future so some Arabs can promote whatever business venture they care to be involved in. All the while adding to the problem of making the Premier (laugh!) League less competitive.
We all crowed at Chelsea when Roman took over, pointing out what they are going to do when he gets bored and pulls his investment - it's a lot worse for City.

City are a team I like to watch, I like that they are shaking up the top 4 (now 5) but the legacy their fans will be left with is worrying.

Anonymous said...

Good point re: the Qatar Foundation deal and Barca. Yes that is just as much a sham - how convenient that a non-profit organisation with next to no marketing interest in Europe should invest over $100 million in shirt sponsorship. How convenient that this should be confirmed days after Qatar win the world cup bid, helped by exchanging votes with the Spanish 2018 bid.
Good point also 'PeteG'. I've got a city fan mate who says that they are still keeping touch with tradition and respect the history of the club and nothing really has changed...Sorry, but buying a completely new squad at huge expense, paying them appalling amounts of money, naming their stadium (which was given to them after the commonwealth games) after an airline. I fail to see much of a legacy being preserved nor one being created. I agree - from an entertainment point of view it is fun to see the top of the league shaken up a bit. But I don't care what any hardened city fan says, they may not have started this but the 'city project' is anything but good for the game.

Anonymous said...

Any club with similar aspirations as City's i.e., breaking into the monopoly of top clubs in Europe, will have to look at doing such deals if it has the slightest hope of competing, or even beginning to compete. If UEFA prevents this sort of deal they may as well scrap FFP & make the CL invite only!

Anonymous said...

How is the Quatar deal any way comparable. Foundations and PLC's are free to throw money around as they see fit. The Quatar deal was a vanity project, but Barca earned the deal as the best bidder for Quatar's vanity. Barca is a separate corporate entity.

City, Etihad, Abu Dhabi for these purposes, are wings of the same organisation. Etihad itself is a vanity project, financing another vanity project, all in the aim of promoting Abu Dhabi, for vanity.

This deal will be renegotiated every five years or so, frontloaded, and make a total mockery of an already horribly governed sport.

JF said...

Hang on a minute. Every club in the world, big or small, starts up by the club owner putting in capital that is spent to attempt to build that club up. For generations the sale of clubs was regularly used to bring in more capital. This was seen as a good thing!

Now we have an elite who's owners have bought clubs to make a profit and take money OUT OF THE GAME it is suddenly wrong for new owners to introduce new money into the game?

The whole idea of FFP is wrong, encouraging debt and discouraging the introduction of new capital is NOT good for the game. Just the opposite.

And one other thing, the sinister tones being introduced by the poster above who thinks that an Arab development can consume the culture of an urban city zone of 2.6m people is being utterly ridculous.

Anonymous said...

The reason the elites have been welcomed as false saviours, is precisely because of rich owners destroying the need for responsibility and spending half a billion in a few years. The next best thing was Hicks and Gillet, Glazer.

Owners putting their own capital into small, medium or Everton size club, out of love or loyalty, or sport (Almost nobody earns a profit in football it is a horrendous investment)are restricted by their lack of capital, they have to balance their books as best they can.

andersred said...

Thanks for all the comments.

I remain wary of benefactor owners on the scale we now see in football. Football is an odd industry because it has a finite number of participants (i.e. clubs). Pour more money into football and all that really happens is that wages rise, increasing the costs for all clubs. Look at some of the evidence given to the DCMS Select Committee by the likes of Peter Coates from Stoke City. People like that want FFP enforced to stop the wage spiral madness. It's worth remembering as well that FFP doesn't prevent what you might call "long-term investment" in stadia, infrastructure, youth set-ups etc, etc...

A benefactor is obviously great for a City or a Chelsea but if these huge inflows of cash means most clubs run at losses it’s just storing up trouble for the future across the game. I wrote about Everton a while back, sensibly run, well supported, good manager and in constant financial peril despite the Sky windfall. Do we really want a situation where if you haven’t got a billionaire owner you haven’t got a hope? Great if one swans in and buys your club, shit for everyone else.

I know a lot of people will put these views down to sour grapes from a United fan, but football needs levelling out across the board including United. Bring back gate sharing for one thing and distribute a chunk of the Champions League cash to national leagues for distribution to all their clubs. Barca and Real need forcing into a collective TV deal too.

I hope AD does transform East Manchester, just a shame we don’t have the balls to transform our own inner cities ourselves....

Thanks again for the comments.


Anonymous said...

FPP was a joke of a ruling to start with - football is the only business worldwide that is telling the business owners they cannot invest their own funds into their business .. it would be a very different story should HRH be leaving MCFC with £500m debts/loans, ala Glazier ... if they rule against this new Etihad deal, it's likely that HRH will see Platini in the European Courts for restriction of trade

UEFA are just ensuring that the elite stay elite and nobody can join the group ... the debts being announced from Barca, Real (who are regularly resuced by the Spanish Royal family) and MUFC are the real problems with football, not an owner who says 'We lost £100m this you go don't get a loan and pay interest' ... it's his business and should be allowed to invest freely in it, as long as the investment is not in the form of loans

Anonymous said...

Anders - you've done a fine job here and I agree with most of your conclusions with a couple of excetions:

"A benefactor is obviously great for a City or a Chelsea but if these huge inflows of cash means most clubs run at losses it’s just storing up trouble for the future across the game" - Why? City being reach doesn't force anyone else to spend beyond their means? If their owners walk away and leave City/Chelsea in financial difficulty - fine. That's their problem.

"Do we really want a situation where if you haven’t got a billionaire owner you haven’t got a hope? Great if one swans in and buys your club, shit for everyone else.

I'm sorry - but that view from a Utd fan is completely untenable. The same sentiment can and should be applied to anyone who isn't part of the Champions League cartel - a cartel that Utd and others knowingly constructed. The City "model" is the only way that the marginalised clubs - like Everton - can ever aspire to joining the party and FFP is closing that down.

Anonymous said...

Hi Anders,

After a earth shatteringly generous sponsorship deal from a company that can't afford it. We now read a mind blowing £40 million offer for Tevez from a club that doesnt have any money. Astoundingly not one of the papers today has even questioned where a club like Corinthians can possibly get this money, and how this offer seems to be happening at a time most helpful for City's finances.

There latest financial figures are published here
It would be very interesting to read your views on how 'sustainable' this transfer is to a club the siz of Corinthians.

Celly said...

Cheers for the article!

I think you raise some very interesting and serious points that will give UEFA a headache. Say what you will about Platini and his cronies, but my gut feeling is that even they are suspicious of this type of activity and will try to stop this from spreading to other clubs (i.e. PSG, Malaga, etc).

Manchester City had a pre-season friendly with Club America at AT&T Park in San Fransico...Total attendance: 11,000+...The capacity of the Park is 41,000+. ;-)

Anonymous said...

Good article and I agree with Anders, I don't think UEFA will do anything about the deals. Unless they want to completely overhaul the whole game in Europe and introduce a particular way of how to run a football club using the principle of parity ie; a wage structure and ownership rules and how they spend, they will find implementing the FFP rules tricky.

Apart from the Forest fan it's interesting to read how people now see football, particularly in this country, and how they basically refer and liken it to a business rather than a game and that is a sad indictator of our times. No wonder the FC United crew left the Premier league behind. It seems money is now the be all and end all.

The person who thinks that the city deal won't change things financially is living in cloud cuckoo land. Players are already demanding wages of £200k+ a week (take Rooney as the perfect example) and the average fee paid for players is rising again as it did after the chelski takeover. For clubs to compete will take an even bigger financial risk in a time of severe austerity for most clubs which is why UEFA wanted to introduce the FFP rules I believe.

Also regarding the complainants of the 'elite' teams. Ask yourself why these teams, or indeed any sporting icon, became elite and If you're not sure then read up on sporting history and glory to find out why. It's taken decades of vision and ambition to create a dynasty for the like's of United, Barca, Real etc. Monetary success followed the glory. How is it right for any more profitable well run club with a huge fanbase not to be able to compete with a club that is never in profit?

We all know that the AD deals are ethically and morally unsound and I have to wonder what, if United were taken over by a similar group and started to blow everyone out of the water in financial terms, would the clamour be for a change to the 'game' in England.

Anonymous said...

Interesting article. But I can't help thinking this idea of naming rights for the "campus" is a bit of a scam.

Naming rights for football clubs are valuable because of the national and worldwide publicity. The company name is mentioned practically everytime the club is mentioned. Splashing your name on a big commercial complex doesn't have the same effect. It should be worth much less than the stadium rights, not many times more.

Another thing with this "campus" is that they want to channel the profits from it into the football club. But why would there be any profits? If there were profits to be made building something like this (it's telling that they haven't even decided what it will be yet) why weren't people queuing up to build it for commercial reasons? Isn't it quite possible that it (whatever "it" turns out to be) will be a giant white elephant that only loses money?

Anonymous said...

The above person comment is wrong in many ways the fact nothing has been built there does not mean you can not make money i do not see that and what ever is done will be done by the private sector for profit in partnership with MCFC and East Manchester development furthermore given the economic climate the fact that the site was marked for the super casino and and owned by the council it would have been hard to develop The other point the person above is missing is the ETIHAD deal is for shirt stadium naming right and the ETIHAD campus naming rights so the break down would suggest that the shirt then the stadium then the campus in size so adding value not lessoning it they expect millions of people to go to the campus soem of whom will not watch football not to mention people from the local area and people who drive thru

Muhammad Amjad said...

Etihad is not a small company - the point is though is that it is government owned. Interesting article.Thanks for sharing.
Abu dhabi tourism

Angry Birds said...

Really Thanks for sharing...

HcoRealEstate said...
This comment has been removed by the author.
ben linus said...

Great article Andy. A correction (I think) for you - I'm sure, Emirates will not want a call center in the "Campus Etihad". I could be wrong. I think it's very suspicious, but after working in the airline industry and knowing Etihad management before they sponsored the city (see States before AIG), I must say it is wonderful to their profile.
Ben Linus,
Here My Link

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Good year for Manchester City FC and good luck.

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