We sometimes mock the so-called science of ‘brand valuation’ – a company is worth what someone is prepared to pay for it and, in the case of quoted companies, the valuation is in the share price.
But football clubs are different – and not just because so few of them are public companies. One that is is Manchester United, even though it’s controlled by the American Glazer family.
By most measures Man U is a small company, expecting a turnover of about £420m this year and a profit of about a tenth of that, although that depends on how much it spends on players.
But Man U is valued at $2.9bn, courtesy of a vertiginous price to earnings ratio of around 60. This means that investors, those foolhardy souls, expect earnings to catch up with their high expectations one of these days or someone even richer than the Glazers to come and buy it. Its brand value is, effectively, judged to be $2.9bn.
Under Moyes, who took over from long-serving and successful manager Sir Alex Ferguson last summer, the team has stuttered and will fail to qualify for the lucrative Champion’s League next season. All those marketing companies, including General Motors and Aon, that have pledged to pour hundreds of millions into the club over the next few years, will be feeling somewhat sick.
What they thought they were buying was guaranteed exposure to a global TV audience and a big chunk of that is off the menu for at least the next year. We don’t know if they put a clause in their contracts saying their contribution to United would go down if the club wasn’t in the Champion’s League. They should have.
Man U, thanks to the Glazer’s use of the company’s own money to buy it, still has over £360m of debt. We keep reading that it plans to spend up to £200m buying new players this summer (players now denied to the unfortunate Moyse). But, if does this, then its debts will rise even further as its immediate revenue will go down.
Only the top three clubs in England are guaranteed entry to the Champion’s League proper (the fourth has to win a play-off). Local rivals Manchester City (owned by the Qataris) and Roman Abramovitch’s Chelsea both have more money than Man U. So United is, effectively, playing for one place.
Whichever way you look at it, Manchester United is a brand on the brink.