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Man United’s brand strength softens blow of slump

April 23, 2014

LONDON (AP) — Manchester United’s owners will be relying on the strength of the club’s brand to soften the impact of a sudden downturn in its fortunes over the past six months.

Few clubs have the money-making abilities of United, which has been setting revenue records even as the team endured lows on the pitch not witnessed for 24 years during the brief but woeful managerial reign of David Moyes. His spell in charge was abruptly ended on Tuesday before his first season had even drawn to a close.

For all United’s success in squeezing every dollar, euro and yen out of its brand, handling a managerial succession has proved more challenging. Not only has it created uncertainty for the New York-listed business, it has also provided a renewed platform for protests against the American Glazer family that bought the club nine years ago.

The Florida-based Glazers have no emotional attachment to the 136-year-old club they bought amid street protests. They refuse to engage with fans and never justify decisions in public. While the hierarchy is silent, fans’ groups have a more powerful voice to protest against the family, which loaded hundreds of millions of dollars of debt onto the club through a leveraged takeover.

“United probably peaked on the pitch in 2009 and since then we’ve been in a gradual decline, slowed only by the genius of Sir Alex Ferguson,” said Duncan Drasdo, chief executive of the Manchester United Supporters’ Trust. “Despite some key successes in that time, if anything, the other elite European clubs have moved further ahead, while the domestic challenge has also become much stronger.”

Since 2005, more than $1.1 billion has been spent servicing the club’s debt, which is currently around $600 million. Drasdo argues the club has “limited funds available for investment in the playing squad.” United has been generating record revenue, though, each quarter, with turnover set to exceed $700 million in the 2013-14 financial year.

United fans have cast envious eyes at Abu Dhabi-owned neighbor Manchester City and Qatar-backed French champion Paris Saint-Germain. Both clubs have been investing their owners’ oil wealth during splurges in recent transfer windows.

But who could have forecast that a United side that won the Premier League by 11 points before Ferguson retired last May after 26 trophy-filled years would plummet to seventh this season under Moyes? The Glazers feared a post-Ferguson slump but never expected such a dismal showing, ditching Moyes just 10 months into a six-year contract.

Since 2012, when 10 percent of United was floated by the Glazers, the rise and fall of the club’s shares have been as keenly watched as the team’s results. Wall Street investors initially welcomed the dismissal of Moyes, with shares soaring by seven percent at one point after Tuesday’s announcement — reaching their highest level since Ferguson’s retirement.

Those gains were wiped out on Wednesday, with shares dropping by almost six percent to $17.69 in morning trading, sending the club’s value below $3 billion again to $2.9 billion.

“Following on as the successor to Sir Alex Ferguson was always going to prove a Herculean task ... with arguably deeper disappointment at stake should the trophy cabinet remain bare for a second season,” said Andrew Wilkinson, chief market analyst at Connecticut-based Interactive Brokers.

United will be hoping the 659 million followers they claim to have worldwide are more loyal to the club than some investors.

Such a large fan base has helped United attract an enviable array of sponsors across the world with innovative country-specific deals masterminded some at the club’s corporate headquarters in London’s Mayfair district. From curries in South Korea to crisps in Malaysia to credit cards across the Middle East, companies have been willing to pay millions of pounds to United to use its branding.

“They have been very innovative in the way they have carved up the rights,” said Steve Martin, chief executive of agency M&C Saatchi Sport & Entertainment. “They have broken the mold and everyone else is trying to copy them by opening up international markets.”

However, those companies were attracted by a club that has won 13 Premier League titles since 1993 — not one that has fallen from grace under Moyes. Its failure to finish in the Premier League’s top four to secure Champions League qualification will not just cost United more than $50 million in lost UEFA television revenue and gate receipts. It will also deal a blow to the club’s prestige.

“Sponsors have bought into a brand and a club based on success, being at the top of the tree which brings big exposure,” Martin said. “They will hope it’s not diluted. Any sponsor now would be slightly apprehensive ... the issue is not so much having to change manager. The issue will be if they don’t play in the Champions League every year. That’s where the sponsors get their value.”

They might also not want to be associated with a club where disenchanted fans are protesting against the owners. With three of the final four matches of the Premier League season at United’s 76,000-capacity Old Trafford stadium, the Glazers might find a hostile atmosphere if they make a rare visit to a game.

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Rob Harris can be followed at www.twitter.com/RobHarris

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