Comparing Man City and Bayern Munich is certainly not a good idea!

 

 

 

• Why this summer’s transfers will tell us little about Arsenal in 2023/4
• “Arsenal just need a striker to complete the team” Really?

By Tony Attwood

Football is by and large about comparisons – what one team has done compared to another both in terms of results and in terms of their financial situation.

We have seen this of late with wild celebrations in the media about Manchester City getting to win three trophies at once, and if we leave aside any mention of money, it is indeed a fantastic achievement.

Indeed we might also say that it is a fantastic achievement even with the money mentioned because of late Manchester City don’t seem to have been spending huge net amounts each summer.  But that of course is because they now have an extraordinarily good squad, with each player worth a huge amount.  Since even Manchester City haven’t yet found a way to get around the 25 player rule, they clearly need to flog off a player each time a new one is brought in, and most of those players put up for sale, are themselves highly valuable.  They haven’t bought many duds.

But that is not to say that clubs haven’t been spending; in fact Premier League clubs have been spending billions.  And I mean that literally.  The spend across 2022/23 was close to £3bn around twice the amount as Tottenham Hotspur spent its new, but still un-sponsored stadium.

And interestingly, this is primarily something of a Premier League phenomenon.  According to an article in the Athletic the Premier League accounted for “79 per cent of the total spent by Europe’s top five leagues put together.”

Which rather begs the question: how are the clubs getting hold of all this dosh?

One of the tricks pulled by Manchester City when the Sheikhs took over was to wipe out the debt by converting it into shares.  So if a company that I own had debts of £100m I could put £100m into the company to pay off the debt.   In return I get £100m worth of shares that the company issues.   I hold onto those shares as an investmeent in the future, either hoping to sell them when the company is making money, or have the company pay a dividend to me when it is making a profit.

This is what Sheikh Mansour did when he tookover Manchester City.  They had debts of £305m, which were effectively paid by the Sheikh and in return he got £305m worth of new shares.

Then, because being debt free, the club could work its way through the transfer windows buying anyone they wanted, even on occasion offering to pay cash for a player rather than paying across a period of four or five years.

With the resultant upturn in results the club was able not only to sell out all its seats with some going at higher prices than before, it was also able to up the money it could get from other companies wanting to be associated with the club. 

Of course other clubs were doing the same thing.   (In 2021 Swansea City told anyone willing to listen that they had an official turmeric supplier”).  It was just Manchester C did it bigger, and more often.

Now the problem with deals like this is that they tend to be hard to quantify.  How much might an official tumeric supplier pay?  Of course that’s up to them unless, of course, your official tractor fuel supplier is a company owned by your brother-in-law.  (I just made that up).

As mentioned earlier, it’s important to note that City’s stated financials are under scrutiny but, in the absence of better information, we will have to work from them.  And it does seem according to the books that Manchester City earn more from sponsors, advertisers, broadcasters worldwide, transfers and fans than most companies.   And because of those nifty cash-for-shares deals they don’t have much debt at all.   

In fact most estimates quote the Manchester City debt as less than 10% of the Manchester United debt.  And that you might remember is because of the way Manchester United’s owners bought the club.   The Glazers bought the club for £790 million in 2005 but then as owners borrowed something quite close to £790m from the club which effectively meant the club had paid for itself.  Except that it left a hole in the Manchester United finances.

What’s more the Glazers own a unique bunch of shares which pays a dividend irrespective of whether the club makes a profit or not.   Manchester City has a debt of around £64m, Manchester United have a debt of around £600m.    Manchester City has no obligation to pay its shareholders any dividend.  Manchester United have to pay the B shareholders every quarter.

So while Manchester United’s financial model is there simply to provide huge riches for the owners, Manchester City model is to generate positive images for the owners.

In the last 10 years, net owner funding for Man City was £684million. By contrast, Manchester United’s net owner funding is negative £154m in the same time frame. The Glazers view Manchester United very much as a cash machine to exploit for personal gain, while it’s hard to disagree with the statement that the Abu Dhabi royal family, have seen an uplift in their popularity.  It is called Sportswashing Worldwide.   City Football Group own 13 clubs across the world.

All this, which is covered by the Athletic in its article is fine and accurate.  Anyone who doesn’t mind a football club being owned by the royal family of a state with no human rights for most of its population, won’t mind at all.  But where the Athletic went wrong in its “analysis” is by relating Manchester City to Bayern Munich, saying both are “good examples of clubs that leverage a solid mix of cash sources and money being utilized effectively.”

But Barcelona’s descent into financial peril is a frightening example of what can happen when cash raised is badly deployed.  As FootballTransfers put it recently “Bayern Munich’s revenue generation comes from three distinct places; matchday revenue, broadcast revenue and commercial revenue. These three areas combine to create a club’s overall revenue for a season.

“Bayern are a domestic behemoth, extremely well-run and able to generate a gigantic commercial revenue from within their own market.”

Just to compare and contrast FC Bayern recently appoint Einhell Germany AG as a “Gold Partner”.  This is a family business from Bavaria where Bayern Munich is based.  You can see the difference.

The point is that the values of Bayern seem to me, as a total outsider, to be those of its sponsors.   The values of Manchester City tend to be those of its owners.  It’s a good idea to get these things clear.

To complete the picture Arsenal is a mixed bag.  The values of Arsenal’s owners are those of its American owners.  The values of the ground sponsors are those of Emirates Airlines.

It is, as they say, a funny ol’ game.