Chichonomics
Could Manchester United’s acquisition of Mexican striker Javier Hernandez provide a financial boost to the debt-ridden club, with million’s of Hispanics turning away from Barcelona and Real Madrid to proffer their football love (and money) on Sir Alex Ferguson’s team? Perhaps, although probably not in the way it is often reported.
It has long-been the critical refrain of United’s detractors – both internal and external – that the club has sought a marketing benefit from player purchases as much, if not more, than performances on the pitch.
After all, the law of received wisdom tells us that Chinese player Dong Fangzou was bought not for his ability – it turns out he had little – but for the potential to tap into the spending power of one billion Chinese.
Similar arguments are made about United’s far less hapless but no less loved South Korean midfielder Park Ji-Sung, for whom a legion of millions stay up way beyond bedtime to catch the occasional glimpse of the 28-year-old in action on Korean TV each weekend.
Repeat law for US, Irish, Argentinean, Italian, African and perhaps, although unlikely, Scouse players it is said. The globalisation of football, this received knowledge says, is a gold mine to the club, with new found friends happily parting with Won, Dollar, Kroner, Rupee and Groat to wear the club colours, buy United Callypso on polyphonic ringtone and download a wallpaper.
The effect of Hernandez’ financial magic dust will surely be felt in Mexico and the wider Latin world too?
Indeed, the excitement generated among Mexican supporters – perhaps even more so second generation fans – by Chicharito’s appearance in a United shirt is palpable. The striker’s debut against an MLS All Star Xi in Houston on Wednesday night was met with fervor not experienced on any leg of United’s North American tour to that point.
The baying hordes so associated with the club’s tours of Asia had largely stayed away from United’s trips to Toronto, Philadelphia and Kansas City, via a charity diversion in New York. Not so Houston, with the new striker’s 30 minute cameo and well-taken goal met with a frenzied response in the packed 70,000 capacity Reliant Stadium.
The challenge for United’s management, however, stems from the apparent separation between fandom and revenue generation in overseas markets. It is one the club is slowing beginning to address.
The passion with which United is held in Asia is undoubtedly a boon to the club, although until recently largely unmonetisable. After all, much against common wisdom but a reality nonetheless, there are very few ways in which football clubs – even those as famous as United – can generate cash from its supporters, especially away from the club’s core domestic market.
Firstly, and perhaps most obviously, clubs generate cash from ticket sales. About a third of United’s £279 million revenue in 2009 came from ticket sales. It’s a cash cow the Glazer regime has milked of course, with aggregate ticket prices rising by 48 per cent during the family’s five year tenure at Old Trafford.
Then there are broadcast rights, which United sells collectively to both domestic and overseas markets with the other 19 Premier League clubs. As a successful team, finishing each Premier League season within the top three to date, United garners a larger share of the pot from appearance and success fees than most other teams. It’s a reward for both success on the field and popularity off it, although the disparity between top and bottom earners in England is far less than say in Spain where Barcelona and Real Madrid account for 90 per cent of all broadcast income.
Thirdly, the club makes around another 30 per cent of its annual income from commercial enterprises, including sponsorship and merchandise sales. Within this block Aon, the US-based risk-management firm who paid the club a reported £80 million over four years for shirt sponsorship, and Nike whose £315 million shirt production deal runs to 2015, are the principal partners.
While millions of supporters garnered from overseas markets is a headline-grabber, the percentage contribution to the club’s bottom line is in fact minimal. After all broadcast rights are sold collectively, fans in many markets – more than 90 per cent according to the best guestimates – buy only counterfeit goods if any at all, and the much lauded digital content markets offer almost no incremental revenue streams yet.
In fact the real boon to United’s commercial activity is not from individual fans’ spending per se but the brand association commercial partners garner from the country-specific exclusive partnerships the club has struck over the past 18 months. Ed Woodward’s London-based commercial team has inked a claimed £200 million worth of such deals in the past year – albeit with the benefits spread over many seasons – including sponsorship arrangements with Turkish Airlines, Singha Beer, and Collo y Toro wines.
Hernandez’ acquisition is unlikely to create any significant direct revenue streams though. Shirt sales may well increase in Latin markets, but it’s doubtful that it’ll be at a rate that will herald any relevant increase in turnover. More Mexican supporters may tune into Premier League games, but with broadcast rights fixed for the next three years and sold collectively the other 19 Premier League clubs will benefit just as much as Ferguson’s outfit. United may even benefit from the occasion day-tripping Mexican tourist, although it is unlikely to fill the empty spaces at Old Trafford.
Where the Little Pea’s impact is more likely to be felt by the Old Trafford bean counters – aside from his inevitable sale to Real Madrid cynics might add – is in a new addressable Latin American market for the aforementioned commercial partnerships.
Expect to see Chicharito’s baby-face adorning giant billboards in Mexico City some time soon.
It’s a market unsurprisingly cornered by Real Madrid and Barcelona to date but with the poster boy of Mexican football now firmly on the club’s roster, both Ferguson and the Glazers may have equal reason to hope he hits the ground running come August.
