Not just a team
MANU is not only a team but a prestige brand. The advertisers seem to think so with record breaking deals with Chevrolet. The Jersey sponsorship with Chevrolet will bring in $559 million over seven years beginning in the 2014-2015 season. MANU has also increased its exposure to Asia by opening a marketing office in Hong Kong. This has lead to sponsorships with China Construction Bank for MANU branded credit cards and Wahaha their official soft drinks partner in China.
Are you a fan?
MANU had a rocky start to listed life completing its IPO at $14 down from the proposed range of $16-$20 given investors concerns over governance. The voting structure put in place by the Glazer family means the rest of the shareholders are subordinate to the families interests. However recent sponsorship deals including the purchase of 100% ownership of their content network has lead to re-rating. George Soros is officially a fan, his hedge fund bought into the stock after the IPO reporting a 7.85% stake in the company in a regulatory filing.
What are the risks?
There are plenty if the team doesn't perform the value will go down, luckily MANU has a pretty consistent track record.
Unfortunately the man who should get most of the credit for MANU's trackrecord Sir Alex Ferguson is now aged 71. Sir Alex is the key, he was appointed manager in 1986 and according to public comments Sir Alex is 'hoping to stay on for a bit of time.' 27 years have passed so it is a big risk to the investment given players not only want to play with MANU but under Sir Alex as well.
Another risk are billionaires with way too much money investing in premier soccer teams without regard to financial returns. This is a big risk given football teams tend not to have salary caps. Hopefully for investors new fair play rules requiring teams to fund operations from cash flow and operate on the basis of their own revenue rather than debt will help mitigate some of this behaviour.
The customer base is concentrated. MANU's main customers are the Premier League, UEFA, Nike and Aon representing 51.5% of revenues in 2011. Though going forward this reliance will decline as more Asian based sponsors are brought on board.
Goal!!!
MANU's main opportunity is tapping into their overseas fanbase leveraging the smartphone. MANU now own 100% of their media network. MANU will increasingly offer video on demand providing subscribers with limited access to match highlights and news. In the UK coverage of MANU and the premier league is everywhere, in international markets there is less coverage and competition. MANU believe they can directly develop exclusive content to international fans in their language and local context. I think I will stay tuned.
Jason
Disclosure:
Decisive has no position in MANU
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