By Colin Savage
In one of Steely Dan’s (many) great songs, they sing “…and I’m never going back to my old school”.
In September 2015, I did go back to my old school to hear a talk from and take part in a Q&A with former United CEO David Gill. This was part of a series of talks given to mark the school’s 500th anniversary and Gill’s connection was that his son was a former pupil.
I didn’t realise that I was about to help make a bit of history myself.
After Gill talked about his life, career and specifically his time at United, he took questions from the floor. I got to ask the final question of the evening and asked him how they’d seen our takeover at the time and what, if anything, had changed in their thinking as a club in reaction to it.
He was very complimentary about our ownership, calling us a well-run club who have done incredible things for the local area, but he stressed that they were United, the biggest club in the word (in their eyes) and they didn’t worry about anyone else.
His final words were along the lines of “…I’m not being arrogant here, but they’ll never be as big as us in Asia…” which was a line reported locally, nationally and even globally.
Four years on, with three Premier League titles under their belt since United last won one in 2013, as well as enjoying what’s now nine consecutive seasons in the UEFA Champions League, there’s no doubt that City are the top dogs in Manchester these days, at least as far as football is concerned.
The one area where United have held the upper hand is off the field, specifically with their finances.
They’ve reported revenues of £581m, £590m in the financial years to 2017 and 2018 and whatever their fans may think of the Glazer family ownership, they’ve capitalised on United’s global presence and football success to turn them into a financial superpower.
City have reported £476m, £503m in the two equivalent periods, closing the gap a bit but still a fair way from catching United’s revenue, let alone surpassing it.
But Gill’s “non-arrogance” was misplaced, as things are going to change in Manchester and, barring something dramatic and unforeseen, United will soon be in a position where they’re playing second fiddle to City financially, as well as in football terms.
United’s recently released financial results were very impressive on the surface, with revenue of £627m and profit before tax of £27.5m, although £26m of that was from profits on player transfers, meaning they’ve more or less broken even from normal operations when you take transfer dealings out of the equation.
They generated over £50m free cash and their wage bill crept up slightly to 53% in 2019 which is still very respectable.
Everything looked great but a black cloud appeared on the horizon when Woodward talked about the projected figures for the current financial year (to June 2020). Lack of Champions League football means 2019’s £627m revenue is estimated be in the range of £560-580m next year, impressive by any other club’s standards but well down on their 2019 figures.
And this is where City come in.
City’s 2019 results will show total revenue of somewhere in the range £560-580m compared to United’s £627m. In revenue terms therefore City are still playing second fiddle but the situation changes when you look at how they might fare in the current financial year (to June 2020).
The two major boosts to City’s revenue stream will be from the new kit deal with Puma and the first year of the new 3-year cycle of the new Premier League TV deal. The former will add something like £40-45m a year to the previous Nike deal while the new TV deal may add £20m or so.
City have signed other commercial deals as well; let’s say they add another £10m.
That means City’s revenue for the year to June 2020 should be around £630m, possibly more. A better Champions League performance will add further to that figure.
Even discounting that, the estimated £630m revenue will comfortably beat United’s estimated £560-580m and that will hurt them.
But things could get even worse for them. They haven’t spent two consecutive seasons out of the CL for some time but their on-field performance so far this season doesn’t suggest they can secure one of those coveted top four spots in the league.
To illustrate what European football means to their bottom line, it added £45.9m for winning the Europa League in 2018 and £93.1m for the Champions League in 2019.
But they’ll also lose out on commercial revenue, due to penalty clauses in their Adidas kit deal that kick in if they spend 2 consecutive seasons out of the Champions League.
That could cost them another £15-20m. There may be similar penalty clauses in other commercial deals, including their shirt sponsorship from Chevrolet, and these could reduce their revenue still further.
The worst-case scenario, i.e. no European football at all in the 2020-21 season, could potentially see their revenue fall to under £500m in 2021, which would probably have consequences for their cashflow.
Players may have to be sold and the wage bill reduced drastically as a consequence.
City, on the other hand could be looking at revenue of over £650m for 2021. If that happens City’s value as a club could be in the region of £3.75bn while United’s could be closer to £2bn.
Even up to relatively recently, City overtaking United in revenue and value would have been almost unthinkable.
But in the next 12 months, the unthinkable is going to happen.