I read this thread and first thing that struck me was the debt issue. If ManU currently has no debt, then Mr. Glazer is possibly making a very wise move. You see, debt is cheaper than equity (or ownership). The cost of ownership, which is the minimum financial return that an investment must generate for an owner, can be greatly reduced by taking on debt. The cost of debt, or interest payments to the lenders, is tax-free. Simple example:
I’m using $ because I don’t know how to do the pound symbol.
Scenario 1:
Investment of $1.4 billion (all Glazer’s money)
ManU profits of $140 million.
Taxes @50% means Glazer ends up with $70 million, or a 5.0% financial return.
Scenario 2:
Investment of $1.4 billion ($1.0 billion of Glazer’s money and $400 million of 8% debt)
ManU profits of $140 million.
$32 million goes to debt-holders.
Glazer left with $108 million.
Taxes @50% means Glazer ends up with $54 million, or a 5.4% financial return.
This is very simplistic, but due to the tax benefits, the cost of debt is always cheaper than the cost of ownership. Even without the tax benefits, having debt in no way reduces the financial return of the owner. Modigliani and Miller won a Nobel prize proving this. Having debt has numerous other benefits, such as forcing organizational discipline (see Jensen’s free cash flow hypothesis). The most profitable corporations in the world hold large levels of debt. It would be stupid not to. Companies that don’t hold debt still have debt capacity, which makes them easier takeover targets. I’m guessing that’s what happened to ManU.
the first thing Glazer is going to try and do is convince 13 other clubs in the premiership that the cooperative TV deal the EPL uses isn’t to their benefit, and that they will make more money on their own.
man U currently get £20 million a year from the current TV deal, being able to run their own PPV for games could net them over £80 million a year.
Second: ticket prices.
Man Utd are potentially able to sell out Old trafford three fold on matchday for one reason. Their ticket prices aren’t ridiculously expensive. If ticket prices are raised too high, and success (EPL or europe) isn’t coming, they won’t be selling many season books.
Unless there is sunstancial money available to buy quality players, it isn’t going to happen. chelski can buy whoever they want, and Man Utd are going to have to sell a load of crap squad players to raise more funds. plus, fergies recent buying judgement has been shit.
Well, look at what happened when the Nintendo guy bought the Mariners. There’s a team with little history and no winning tradition, and there were clear undercurrents of racism when that happened.
How does this make Glazer different from other sports owners?
The part that really tickles me are the picketing fans stood outside of Old Trafford waving signs stating that Manchester United isn’t for sale. It seems to me that these fans have a different opinion on what constitutes a publically traded company than the rest of us.
Manchester United sealed it’s own sorry demise as soon as it stopped being a football club and started being a business. The Manchester United Supports Association (or something like that), the most vocal opponents to Glazer and holders of some shares (17%?) have had ample oppurtunity to get their act together and buy enough shares to ensure that the company could never be owned by a single person, yet they haven’t.
I think that their point is that you may be able to purchase the business of Manchester United, but that money cannot buy the soul that underpins the football club.
Apparently these people are unaware that a) the majority of Manchester United supporters have never set foot in Manchester b) season ticket holders and executive boxes make it so that a lot of true fans can hardly ever get a ticket to see a game c) supporting a Premiership club is supporting a business, not a sports team, akin to “supporting” McDonalds or Warner Brothers.
They haven’t given any indication of any such plan. All they’ve done is come up with the required number of zeros.
This may be his intention, but he’s making a huge mistake. Man U is a successful club, and is profitable. To make it more profitable means higher ticket prices (already discussed), TV rights (ditto), or merchandise (where Man U has led the football world in profiteering). *Where is the extra money going to come from?
The creation of the Premiership certainly takes the most blame for this - but Man U were certainly not the only force involved in that.
I take it you mean how it makes him different from owners in America & Canada? Sports teams being public property is a recent phenomenon in Europe, and is still nothing like a universal one. There’s other models, including the community-ownership systems in Spain.
So season ticket holders are by definition not true fans? And ‘true fans’ are queued up to hire out corporate boxes? Bog-standard anti-prawn-sandwich rants aren’t relevant when you’re talking about nine-figure debts being saddled around a club.
That’s true if you’re talking about the club administrators, but the fans just want to see Man.U stuff every team they play. The thread is a rant against the fans and although I hate Man.U. fans with a passion I can understand their point of view.
I still don’t follow. Like it or not, Old Trafford is still full of die-hard fans who have been paying for their season tickets year in year out, through the not-so-good times that are within living memory. Your comment about season ticket holders, with the implication that they’re not real fans, didn’t chime with this, at all.
The Yankee ownership is already planning a new facility to replace Yankee Stadium (and has made noises before about leaving the Bronx if it didn’t get the government support it wanted), so fans don’t need some furriner coming in to destroy tradition.
There was a semi-impassioned column in the New York Times yesterday written by a Manchester United devotee, railing about Glazer and suggesting that maybe some British investors should buy up the Dallas Cowboys.
Uh, this was printed in a New York paper, read by a whole bunch of people who detest the Cowboys and root for the N.Y. Giants. If some Brits bought the Cowboys and moved them to Grand Forks, North Dakota, the New Yorkers would be cheering.
Hey, relax, Manchester United is a professional sports franchise. By definition it is unworthy of fan loyalty. And isn’t Chelsea kicking their butts already?
I sympathise with them. I don’t follow Man U at all, nor do I usually give a shit about them at all, but I believe sport isn’t a business. Sure the club needs to survive and make money to compete, I see nothing wrong with that, but the people in charge should love Man U and love soccer. Anything else and it becomes more of a business than a sporting team, when it should be a sporting team that has a business element. It will be interesting to see how it pans out. I think if people who operate the club were still those with a love for soccer and Man U then it could work well.
I live in Washington State and not only would I be cheering, I’d add a Nelson Muntz “ha ha” over the news. (I’ve *always * hated the Cowboys.) Besides, if Green Bay can have a franchise, why not Grand Forks (or, at least, Fargo)?
There was some of that but it seemed to be mainly from people outside of Seattle (especially within the network of doofuses that constitutes the MLB establishment) so the fact it already had an economic foothold in the community lessened opposition. Also, the fact Seattle has a large Asian population helped.
I mentioned Murdoch’s (actually, News Corp’s) owning of the L.A. Dodgers earlier. I recall a lot of people thought, given Murdoch’s mercurial reputation, that his control over the club would be tempestuous and meddlesome (i.e., he’d become the West Coast-George Steinbrenner). Yet, the years of his ownership proved to be relatively uneventful (except for the MAJOR misstep of trading Mike Piazza for Gary Sheffield).
I find myself more amused than annoyed by the Chicken Littles in Manchester. You’d think they’d wait until Glazer actually did something they hated that involved rinning the team before declaring that Armageddon had arrived.
