Forbes, the US business magazine, publishes annually lists of the leading sports franchises, players and – separately – football teams. Yesterday, the magazine published the two former lists, placing Manchester United on top as the most valuable club in sports globally at $1.84 billion (£1.2bn), ahead of a swathe of US sports franchises.
United retains the position, which depends heavily on current and future revenue, despite heavy indebtedness. Forbes values second placed Dallas Cowboys at $1.65 billion (£1.1bn), with the New York Yankees, Washington Redskins, New England Patriots, Real Madrid, New York Giants, Arsenal, New York Jets and Houston Texans completing the top 10.
The revenue-heavy analysis factors in all facets of United’s income including television, ticket sales and commercial deals, placing the club on the same standing as the football-only list Forbes published in April. The publisher’s list uses operating profits as is principal engine for measuring value – United’s earnings before interest – as explained back in April by andersred’s always accessible analysis.
Indeed, in calculating United’s enterprise value, Forbes factors in United’s debt when coming to the £1.2 billion figure – the estimated asset purchase price – with an effective multiplier of 12.26 times operating profits. It’s a significant premium, closely reflecting the £300 million ‘goodwill’ intangible assets the Glazers attach to United’s annual accounts and the $285 million ‘brand value’ Forbes proffers on the club.
While goodwill essentially amounts to nothing it’s worth remembering the Americans paid a 17 times multiple for the club on acquisition in 2005, perhaps pointing the one of the reasons why, despite the mountain of debt and probable medium-term reduction in free cash flow, the family was so reluctant to sell at £1.2 billion this summer.
The principal issue for supporters though is whether the list, which is widely reported as demonstrating that United is the world’s “richest” sports club, is relevant given the financial problems at Old Trafford. After all, if United is hemorrhaging more than half the club’s annual operating profit on interest, dividends and management fees, without paying down a penny of debt, what’s the point of topping an arbitrary rich list?
Much like the Glazer family, Forbes attaches a great deal of value to potential future United operating profits from new commercial partnerships, ticket sales and broadcasting revenues. It’s a punt though, with JP Morgan estimating that this year’s end-of-year accounts, which the club publishes on 27 August, will reveal the peak of the club’s profits for some years to come.
Indeed, with at least 4,000 season tickets as yet unsold – albeit at a drop in the ocean cost of £3.2 million to the Glazers – and a freeze on price rise this season, the accounts in a year’s time may well show slower rise in operating profit than in the past. This is compounded by new multi-million contract offers to Wayne Rooney and Nemanja Vidic, if the latter takes up the option.
However, new commercial deals such as those with Turkish Airlines and Concha y Toro wines, the £80 million shirt sponsorship by Aon, and a new Sky TV broadcasting contract will help bolster revenues in the coming year.
What the Forbes figures don’t account for is the effect of debt, with the United cash cow being milked harder than ever at one end while being starved at the other, and in that it becomes less a relevant measurement tool but an exercise in vanity.
It’s a reminder just why United supporters remain angry five years after the Glazer takeover, with the world’s most profitable club now shopping in the bargain aisle, while near neighbours raid the Harrods food hall. Following a second successive year of decline last season the Glazer family will hope, perhaps even more than Sir Alex Ferguson, that the Scot’s necessary faith in youth is repaid.
12 thoughts on “United tops Forbes list again but should fans care?”
Yawn. When does the season start?
This is why the Glazers will never leave United …
Nah, it’s why the Glazers will sell – so they can take a £300m golden goodbye
If the club was shit and average, they couldn’t ask for as much
Stories like these will put Glazers in a grerat position should they want to sell.
If they were supposedly asking for £1.5b…how much would they want now?
Point being that they’re attaching a lot of goodwill to their valuation, as is Forbes. It does nothing to strengthen the Glazers actual position but shows why the family and the Red Knights are apart. True biz value is significantly less than 1.2bn… but taking into account this mythical ‘brand value’, which no clubs can monetise, and you see where the Glazers are getting their ‘price’ from.
“but taking into account this mythical ‘brand value’, which no clubs can monetise”
True, you can’t directly monetise ‘brand value’ – especially of the mythical variety – but you can use an established brand to shoehorn yourself into a market in which you have little presence. And surely this is what the Glazers are holding out for: the time when they can make more money from nascent but fast-growing markets like betting on mobile phones, video rights on mobile, etc.
Of course, as no one really knows when these markets will be realised, it’s all speculative…
@Gaz – well yes, although it wont be mobile broadcast rights as these are sold collectively within the Premier League package. Truth is all sports ‘franchises’ struggle to monetise their brand because so much consumption is essentially free. You can pay for your ticket, buy a Sky subscription or buy a shirt.. but United don’t get any money if you read about them in the paper, discuss them on a blog, talk about them with your mates down the pub. The absolute vast majority of United’s 330m ‘fans’ don’t spend a penny annually on United. This isn’t a criticism of the club, its an observation on the economics of football.
You’re right – as the rights are sold as a package it’s difficult to see how they’d be able to capitalise upon them any more than any other top Premier League club would. I’ve also heard that there might be a market in subscriptions to a global goal update service in which you could receive a message on your phone as soon as a goal goes in, but it seems a pretty shit idea considering that’s what the Internet does already. And a video message would surely be tied to the same broadcast package.
So we are stuck with the leeches then? Can’t wait for the actual football to start!
My view excuse me if I am wrong, when you are valueing as in a buisness you put a price a valuation on an Asset wether that be a fixed asset or a disposable one.
I cant understand why with the worth of Old Trafford and Carrington and other Fixed assets depreciating how the valuation can remain almost the same as previously.
Not to mention the collective valuation of the players themselves, this is undoubtly lesser than when Ronaldo and Tevez were at Manchester United.
On a side note, I would not be to proud of the fact United recieve over four years, £80 million.
I understand Liverpool have reached a similar deal on there new shirt, and we dont want to compare Apples and Pears do we.
Bearing in mind as we all know were there playing in European arena this coming term.
Also to value goodwill as the same or higher that does not stack up in the present climate with the Glazer at the helm.
The fans are part of the goodwill, if you consider when selling a buisness that your fans will continue to be part of the future buisness.This is does not square with current information on season ticket sales.
Plus as we all know many supporters are planning purchasing less on match day in the form of programmes hospitality etc.
Also interesting to note nearly 69% of fans are planning not to purchase the official new seasons home or away top.
All this clearly does not make for a true reflection of the current goodwill.
If I am not correct also excuse me,valuation of a buisness is based on projected profits within the buisness plan. Ha Ha Ha.
Manchester United as we clearly all know require to get these people out of the club.
?How reliable are Forbes magazine in the first instance and how can they be questioned on the basis for these sums.
Well that’s the thing @RedScot the Glazers *are* counting goodwill as an asset!
So enterprise value is what Forbes is basing its value on. There’s a really good explanation at Wikipedia
Cheers Ed, thanks for directions to shed light on the topic.
This is so bleeding complex and filled with mystery and conciet and shockingly devisive.
To a simple Scots lad its a effing minefield.
All I know I agree with all the rest of the boys, United need these tricksters out of the equation but how.
I wish Andy Green was more visible and someway we could all contribute to fund his salary to work full time on Uniteds behalf.
Some radical thinking is required on this.
But Cheers again on the link, I saved it in my favourites.