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.