Football’s cash derby

Manchester in the north of England has a number of claims to fame. The birthplace of the industrial revolution; a fountainhead of musical outpouring and two football clubs amongst the planet’s best-known teams in a sport often referred to as ‘The World Game’.

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Raheem Sterling of Manchester City and Marcos Rojo of Manchester United. (Photo by Robbie Jay Barratt - AMA/Getty Images)

In the blue corner we have Manchester City; in the red Manchester United. Not only do the two teams have different coloured shirts, their business models are also very different, even if they both seek to maximise returns from the investments of their owners.

"The different models represent differences of opinion as to whether football clubs are to be ‘cash cows’ to fund other activities or long-term investments.”

‘City’ is well on top of ‘ManU’ this season having set an English Premier League (EPL) record for most consecutive wins and toppling their cross-town rivals in the process. But is their business model better?

The EPL has negotiated over 80 worldwide broadcasting deals on behalf of all 20 teams and the Manchester derby in December – won by City - was reputedly watched by an audience of around 900 million people in 212 countries.

The crowd in the stadium was over 75,000 including 2,000 Manchester United fans from Norway. Overseas fans who wish to enjoy the ‘atmosphere’ of an EPL game are increasingly seen in attendance.

Indeed, the UK’s official tourism body conducted a study in 2015 which revealed more than 800,000 international visitors went to an EPL match in that year, spending in total nearly £700 million.

Tragedy & triumph

ManU has a history which combines tragedy (the Munich air crash in the 50s which killed many of the team) with triumphs in both European and Domestic competitions. 

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According to the Deloitte’s annual Money League report, Manchester United achieved record revenues of €689 million in the 2015/16 season, displacing Spain’s Real Madrid as the continent’s highest earning club. 

Their rise in revenue is the result of sponsorship deals, increases in broadcasting rights revenues and match-day takings. Both Manchester clubs have embraced the 21st Century narrative of social media, with Manchester United having 73 million Facebook likes and 16 million Twitter followers.

The ownership of Manchester United is firmly in the hands of the American Glazer family who took over the club in 2005 via a controversial highly leveraged buyout.

The family’s then-patriarch Malcolm Glazer effectively bought out the existing shareholders by using the club’s own cash and Manchester United were left with a debt of £525 million.

The business model here is to use the revenues of the club, both actual and projected, to fund the activities of the US parent company which also owns the National Football League’s Tampa Bay Buccaneers.

The analogy often used to describe the Glazer’s business model is of a household mortgage: if there is a steady income which can comfortably cover the interest payments, the mortgage debt is not a problem.

Manchester United certainly has several steady and indeed appreciating income streams.


The owners of Manchester City have a different business model, based on their ambition of having a club in every continent in the world.

Sheikh Mansour bin Zayed Al-Nahyan, a member of the royal family in Abu Dhabi, bought Manchester City in August 2008. This was a private investment by Sheikh Mansour and it has grown into the City Football Group (CFG), which now owns clubs in Australia (Melbourne City), the USA (New York City) and in Uruguay (Club Atletico Torque).

The CFG also have a financial interest in clubs in Japan (Yokohama Marinos) and in Spain (Girona) and it is reputedly interested in buying into a club in China.

The CFG is valued at around $US3 billion, based on the sale of 13 per cent of its equity in 2015 to private equity groups China Media Capital and CITIC Capital for $US400 million.

The ’City Project’, as it is often called, has paid off in the men’s team winning the EPL title in both 2012 and 2014 and with a women’s team who won the English Women’s Super League in 2016.

Manchester City has also embraced social media, with 28 million Facebook likes and five million Twitter followers. The CFG now employs players to compete as a team in professional competition video gaming, known as eSports.

One way to look at the CFG business model is as an exercise in the creation of ‘soft power’: successful teams playing in the top leagues in every continent open doors to economic and political contacts for its Abu Dhabi owner.

As an added benefit, the teams can provide positive revenue streams which will cushion Abu Dhabi when its natural resources run out. Manchester City’s revenue in the 2015/16 season was €525 million and it made a profit on that, of £97 million.

Best of both

So what about a City United? Bring the best of both teams and business models together?

Well Manchester is a united city in its love of football and the attention the game brings to Manchester.

But the different business models of City and United represent differences of opinion as to whether football clubs are to be ‘cash cows’ to fund other activities or long-term investments which require money going in to build for the long term. And whose ownership brings kudos as the major benefit.

Of course, no self-respecting City fan could ever support United. Nor vice versa. That said, a growing tension in the EPL is over what is being done just to grow revenue and what is being done for the hardcore fans.

Steve Worthington is a Professor at Swinburne Business School.  A Mancunian, he is a card-carrying City member.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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