Charles Dickens might have described the dynamic of English football in the 21st century as a tale of two cities. On one hand, billionaires, many from outside England, bought English football clubs and used their substantial resources to stock their clubs with top-notch international talent. In turn, they bid up player salaries and earned spots at the top of the league tables, qualifying their teams for play in the lucrative European Champions League.
On the other hand, all but a few elite clubs struggled to make ends meet and field competitive teams on the pitch. Over two decades, more than half of all English teams had been losing money. According to a 2010 report of Union of European Football Associations (UEFA), Premier Clubs were £3.5 billion in the red—56 percent of the total debt of European football’s top-level 732 teams. Michel Platini, the president of UEFA, argued:
Fifty percent of clubs are losing money and this is an increasing trend. We needed to stop this downward spiral. They have spent more than they have earned in the past and haven't paid their debts. We don't want to kill or hurt the clubs; on the contrary, we want to help them in the market… Owners are asking for rules because they can't implement them themselves – many of them have had it with shoveling money into clubs and the more money you put into clubs, the harder it is to sell at a profit.
While clubs like the wildly popular Manchester United enjoyed strong support from fans and sponsors, other clubs struggled to make ends meet. As English football gained popularity around the world, questions arose as to how clubs - and the leagues in which they competed - could become less volatile. Lucrative sponsorship deals and TV revenue improved a team's chances of sustainability; however, only the cream of the crop of English football clubs managed to broker deals with heavy-hitting sponsors like Nike.
But what would this mean to investors, especially those wanting a stake in Manchester United's IPO? Did success on the pitch translate to a sound investment? Or were there other reasons an individual might consider an investment in one of the Premier League's best teams?
Published Date: October 15, 2013
Revised Date: April 15, 2014
Keywords: Sports, United Kingdom
Suggested Citation: Charles Euchner, Jacob Thomas, K. Geert Rouwenhorst, and Jaan Elias “ Glory, Glory Man United!” Yale SOM Case 13-021, April 15, 2014