Man U’s plan is for global domination, and this is why it might all end in tears

Manchester United win things.  That is undeniable.  They have a big support (even if it is largely located in Cornwall) and they fill the ground.  That’s undeniable.  And they have an extraordinarily successful manager – something we have to admit even if we don’t like some of his behaviour.

And they are so broke it is amazing they are still in business.  That’s undeniable too.

And yet in the midst of this there is a group of people who want to buy the club.  Even more amazingly the owners (who you might think are just about ready to jump off Beachy Head) say they don’t want to sell.

But there is a reason for this and the reason is so half baked that at first sight it is near on unbelievable.

This is how I see it going…

First, the Glazers have been putting Old Trafford prices up year on year.

Second, they ordered the selling of their prima donna for £80m, with the money going back into their kitty

Third, they started manipulating the borrowing so that most of their personal guarantees were removed.  It was a complex ploy but it is the net result of the bond issue.  The family are far less at risk personally than they were before.

As a result of this, without much personal risk the family now have the opportunity to take £50m a year out of the club for their own use, safe in the knowledge that no one can interfere until 2017 when the bonds have to be repaid.

So is that it?  Personal wealth?

Up to a point Lord Copper, as Evelyn Waugh so wonderfully said in “Scoop” (which if you are interested in the way the media and stuff works, and you have never read, you should, in my humble opinion.)

There’s one more trick on the turntable (a meaningless phrase that I just made up, but which somehow seems quite appealing).  It goes like this…

They have a dream. A vision.  Which if they could pull it off would give the family power and funding that would make the possibility of a Glazer as President of the USA a near racing certainty.   But it is a gamble that is so high-risk that the chances against it coming off are enormous.  It is the sort of risk that no one in their right mind would dream of taking on – unless it was with other people’s money.

The dream is that within five years of everyone will be chatting, betting, watching, and doing all that geeky stuff on line using extra fast broadband and extra HD screens.  And the focus of their on line world will be the EPL – in particular the brand Man U.

Of course we have heard all this before, but the argument here is that what has held the internet back is the quality of the picture.  Get that right – make the picture via broadband as good as the picture on your 42 inch HD TV and then everyone will watch that way.   The TV stations will be a thing of the past, and all rights will be owned by the clubs who licence out each match on the internet.   Pay per view for the games, the reserves, the training, while you also gamble and buy the shirt.  Coronation Street no longer appears on ITV, it is on MUTV.

A new approach to football, a new approach to life, with Manchester United at its very centre.

Frightening stuff, except….

Except… if they have got this right it will be a first time anyone has made a successful guess within digital technology.  In short the history of the digital revolution has been a history of getting it wrong. or (in a few cases) getting it right by pure accident.

Here’s some fairly well known errors…  Like the moment IBM’s chief exec said that computers had a future, but there would probably only be a need for 50 of them or so world-wide.  Or the moment IBM thought the PC so pointless that they outsourced the code to a bunch of pizza eating students in a diddy firm called Microsoft.

Or the moment the Boots spin-off Freeserve came along and was quickly worth five times the value of its parent company despite the fact that it had no income stream, and then shrank to nothing.

Remember the days when everyone poured into the dotcom revolution, and the bank managers were wetting themselves because they thought they would be sidelined, because they were not lending enough to the dotcoms.  (Apparently the high street would be dead in 2001 so they had to move fast).

In fact the history of digital technology has not been a history of success, but of absolute failure, mistakes and bankruptcies.   Most people in the media remember this because they remember ITV Digital, Setanta UK, the near destruction of the music industry by digital technology because of wrong guesses, and the fact that most digital technology is cracked.  Just ask anyone in the business about the holes inside Internet Explorer – the most used browser in the world.  Or look at this week’s report on the latest botnet to be found – when asked which top companies had been compromised the man who oversaw the closing of the botnet said, “it is a lot quicker to tell you which of the top firms were not compromised.”

Or remember that texting was invented as an irrelevant add on to the mobile phone which might be of interest to a few oddballs.  Or the fact that Bill Gates and co thought that writing DOS was something to do between eating pizzas.

The Glazers might well have a dream of a ditigal empire based around the Man U brand showing every aspect of the Man U world on line all the time – but the fact is that today anyone anywhere in the world can find any EPL football match available on line somewhere.  OK the quality might be poor, but just as the quality of the Man U games will rise, so will the quality of those Chinese links that provide this sort of TV for the world to watch, free of charge.

However you look at it, this view of the Glazers is naive.  It is based on a vision of reality that applied in the 18th century when the Duke of Newcastle had the absolute right to control the export of coal from the area.  And even in those days you had smugglers who got round the tolls that the nobs imposed.

As I have looked at the growing suggestions that the Man U owners are going to try and set up some sort of internet sports monopoly I have puzzled over whether maybe they knew something special that had escaped the attention of everyone else.  Then I heard one of the speakers at a big Soccerex football conference that they seem to hold every other week in Dubai, who said something like this.  “The internet is currently all about pornography, but in five years time with high speed HD broadband, it will be all about sport,” and I knew that there was nothing special going on.

According to the US Department of Justice, about 1.1% of the sites indexed by Google and Microsoft are “sexually explicit”.  If you haven’t got that bit of info right, then you are not going to build a brand bigger than Google.

Of course I am just a commentator sitting at home writing a blog – I have no access to the Man U files or the thoughts of their owners.  All I am trying to do is put the bits of information that are out there together, so that I can try and draw a conclusion or two.   If you come up with a different reason to explain the behaviour of the Man U owners fine.   But what I would say is if I am right, and they have decided to go down this path, it is a rather clever trick, because

a)      it has cost them nothing

b)      they are getting millions of pounds out of it each year

c)      if the internet trick proves to be a failure, so what – they keep their profits

d)      if by some quirk they do pull it off, and we all have to pay them to watch football on TV, then they don’t even have get a member of the family nominated to become President of the USA.  They’ll have more power than the President already.

e) And if as I think they have got it wrong, then Man U goes bust.  Hey ho.  Win some lose some.

© Tony Attwood 2010.

This article is taken from the preliminary sketches from my follow up to “Making the Arsenal”.  I’m not 100% sure of the title, but I really do love, “Arsene was right; we just didn’t notice”


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21 Replies to “Man U’s plan is for global domination, and this is why it might all end in tears”

  1. @Tony,

    You caught me on a couple of items….

    First, the prospect of a Glazer for President for the USA… interesting! I have seen worse although the American people are waking from 1.5 yrs of extreme drunkedness… So maybe not..

    Second, the brilliant point of IBM…. As a son of an ex-IBMr… Such a great point and so true… Oh but you should hear his bitterness as IBM wallowed in to sheer downfall and they let go the promise “work here retire here.” Meanwhile they cast off all of the employees and families associated… Sad…Sad!

    Third, Quiet on the internet… A know-all billionaire is a dangerous one… It is my only sense of staying in touch sometimes… I would hate to see the Pres. of the USA make some sort of new Tax or reg… USA is broke as is MU and extreme times call for extreme measures… So do not rule out this…

    Finally, one thing you forgot to mention…. The Key… The key of the un-doing of the so-called nominees for the USA democratic convention… SAF… He can un-do them with one single sentence… Get the @#$% out you American crooks!

  2. Tony…

    You often ask about ideas on the site..

    Sometimes for selfish reasons I like to see comments post…I find myself refreshing at least 70-80x’s a minute…

    I have seen where a mssge comes through on e-mail letting you know of a new posting….

    I have a ding on my Macbook that says “ding”… Whenever my gorgeous wife hears it she says, “You got mail…

    Do you know anything about that? (Not my gorgeous wife but that function of post/e-mail)

  3. Is not Stan Kroenke in the Broadband sector with his 50% stake in ‘Arsenal Broadband Limited’?

    Are the Glazer’s astute enough to blindside Kroenke and his ‘corporate team’ …. something they’ll need to do before their plan for Broadband domination comes to fruition.

  4. I have said for sometime that the only commercial reason for owning a major football club is the TV rights. Arsenal did a survey sometime ago to determine their Global fan base…I cant remember the final numbers but lets say that there were then c1.5m Gooners around the globe who would be interested in watching every or some of the live games. At say a tenner a go for 10% of the fan base etc etc …lots of revenue with very litle increase in overhead costs…Stan Kroenke has now surrounded hjmself with a management team with lots of media knowledge and experience. Whilst you and I want to go a match there are more armchair supporters happy to pay their £10!!

  5. What surprises me in all the talk about ManU being broke is that it hasn’t stopped their being linked with big money purchases nor has it stopped Glazer from insisting that SAF can have all the money they got from selling Ronaldo.

    Is it a case of refusing to come to terms with their looming financial handicap or is there a financial trick out there that can enable them to carry on with business as usual?

    Indeed, the above question applies to all EPL clubs suffering financially: all of them remain stuck on making Football2.0 work; hardly any is talking about looking closely at Football3.0, so well developed by Arsenal under Lord Wenger. What makes it so difficult to look at or even begin to make postive noises about Football3.0 – the gall of admitting that Lord Wenger, a Frenchman, could have one or two things to teach the EPL Club owners?

  6. Any business model that is built on tv/pc viewers having to plonk down x or y dollars per view is built on quicksand. Most of readers on this site are probably unaware that Setanta-North America finally went bust on February 28th. They were nicking viewers like me an extra $10 per month and I am convinced the reason they went bust was insufficient subscribers. Only the hardcore Arsenal supporter like myself is going to think this expense is worthwhile when Fox Soccer Channel gives you 75% as much football. But people with money, much of it gained by shady means, always think they know more than everybody else.
    The most telling information in Tony’s piece is how the Glazers have wiggled out of their personal guarantees for the various loans. Heads up – they win, tails up – the MU supporters lose.

  7. The main difference between the Man U owners and the rest is indeed their lack of any personal involvement plus their ability to make money out of the club. Stan K has put his own money in, in buying the shares,and he makes nothing out of the club in management fees. His ownership of the broadband stuff at Arsenal is a bolt on business venture in its own right.

    I see that as very different from Man U.

    But it is vital for the success of the gamble that the situation at Man U is talked up all the time while the owners wait for the next technological revolution. They can’t admit that times or tough or the whole strategy collapses.

    Indeed it is commonplace for companies going down to continue to say that any talk of such a thing is just a rumour, right up until they call in the administrators.

  8. Interesting piece Tony. You do however miss one point which I believe to be very important. Tesco’s do not need Sainsbury’s or Asda to function, in fact they would be better off without them. ManU however do need other football teams to play against. I used to have an Arsenal supporting friend who lived in Spain for a couple of years. I bumped into him on one of his visits home and asked him how much he missed seeing Arsenal matches, his response surprised me but in hindsight is obvious “I see more Arsenal games on telly than you do”. In Spain the only PL league matches they are interested in watching feature ManU, Chelsea, Arsenal and Liverpool so nearly all of the televised games feature those teams. If the online revolution does happen without a “group” agreement such as that exists currently with Sky most of the PL teams will go instantly bust because they cannot survive without TV money and who in China is going to pay to watch Bolton, Hull, Blackburn, Everton etc. You would not end up with a small group of super rich clubs and 15/16 poor teams, the poor teams would cease to exist. The European Super League will also not happen because I and nearly all other fans want the banter with friends and colleges who support other teams. Therefore ManU cannot go down this route, even assuming the technology and desire from fans was there. They would have no one to play against.

  9. FemDee, it’s all smoke and mirrors PR stuff as Tony says @ 5.16 pm. Saying you have money to spend is easy, but the fact that SAF has not spent at his previous level suggests otherwise.

  10. Thought provoking piece.

    The footballing landscape as we know it, is certainly nearing a crossroads.

    The unsustainable debt bubble has finally popped with pompey becoming the inaugural members of the “big league” bustinos.

    They won’t be the last, and the next wave are not that far behind.

    I personally think Liverpool are on the precipice… manure have the revenues from the 70,000 supporters through the turnstiles every other week… old trafford is a huge asset.

    LFC have zip, and they won’t have champs league next season either, i’m convinced the trio of spuds, villa and citeh will finish ahead of them in the league.

    Once a proper big boy hits the wall.. that’s when the powers that be will really sit up and listen.

  11. If the article on the front of the observer is to believed… SAF is already shifting alliegiance.

    Now.. there is a fella who always knows what side of his bread is buttered.

  12. Strongfellow Hawke: gotta disagree with you on the LFC front. Only a week ago I put a fiver on them to finish in the top four. If I was gambling to make money, I would’ve happily put much more on.

    Villa aren’t in the same league as the other three, Tottenham will be there or there abouts, while City have a vastly tougher fixture list than Pool. Liverpool have stayed in touch without Torres, so with the Spaniard back, they should get 4th. Which is a shame.

    REalistrically though, Liverpool are screwed. In football economics, you talk of “transactional efficiency” and “transformational efficiency” The first basically means getting more out of every pound you spend, be it on wages or transfer fees. The latter term is getting the msost out of the resources you have on the pitch, which rafa does well. However, he is POOR in the the transfer market, and only a club with high net profits can afford to sustain his hit and miss approach. Liverpool FC cannot afford to do that, and yet they have to in order to keep their place in the top four given the pressure exerted on them from City.

    Oh, and they want to build a new stadium. LFC is a mess, it’s just a matter of time before the media realises their problems

  13. 90 minutes is only one potential offering. There are many others.

    Globalising media rights and branded merchandise is clearly the way ahead. Because there’s only so large a stadium that you can fill.

    The only question is how you do that successfully. That will be the next ‘dotcom bubble’ and, like that spike, there will be winners and losers, short-term and long-term.

  14. The next three years will tell us everything about Manchester United and the Glazers. If they are able to pay down the PIK’s, with their massive rate of interest, then the servicing of the 500million bond issue becomes quite straightforward. That requires Utd stay at the top of the League and in the latter stages of the European Cup for that time. That is what is killing them at the moment and what the whole bond issue was intended to ease. With their revenue even servicing a 50million interest bill per year is not a problem.

  15. “With their revenue even servicing a 50million interest bill per year is not a problem”.

    It’s not a problem but it demands a reversal from their current approach.

  16. Paul C “With their revenue even servicing a 50million interest bill per year is not a problem.” ManU’s revenue is only marginally more than ours if you remove the income from property deals. That should see Arsenal have almost £50 million a season more to spend in the transfer market in less than 5 years.

  17. Can United afford a net spend in their transfers? Nope. Can they stay where they are without it? Unlikely, go through their squad, players need replacing and few of their young prospects are taking over from them as Fergie would’ve expected them to by now.

    And don’t forget, the bond issue has a time limit (2017 I think) by which time they have to pay it back. Where are they going to find that from?

  18. The Red Knights aren’t going to go away. The Glazer’s have the comfort now of knowing that they can sell at £800m+, make £200m profit, anytime. The bonds have been refigured to mature at 2017. They’re not personally responsible for the debt anymore. Man Utd’s still an inherently profitable club. So why not wait it out for another 5 years, see how the internet revolution thing is going to go?

    As an Arsenal supporter in Australia, I can tell you that internet streams are jerky, unreliable and the so small it’s difficult to see anything. Pay-TV is expensive, and requires you to pay for a lot of channels before you get fully PL coverage. If ArsenalTV offered a reliable HD connection for £10 a year, I’d consider it. And I bet a few million other global gooners would as well. As long as they don’t make it too expensive and rely on mass subscriptions, it’ll be a money-maker.

    The difference between football broadcast and other internet supplied products (music, games, movies) is that the companies that will rake in the money (the clubs) own the product 100% and will be able to control the output. And because the value of sports broadcasting drops dramatically after the initial live showing, there’s little risk of piracy. This idea has legs.

  19. I would be happy to pay for every game live on my pc directly to the Arsenal. The Burnley game was not live on our paying sports channel so I had no choice to come over to London this weekend. 😉

  20. If we all paid directly to Arsenal, I’m not sure it’d necessarily make Arsenal richer, since people would watch just a handful of teams, and the other teams will get less money and become less competitive, and the league itself will suffer.

    That’s what happened in Serie A.

  21. Marc – I think you read the accounts wrong. Man Utd’s revenue is only slightly higher than ours WITH all the property deals included. once our property dealings cease then our revenue will settle back to a nice comfortable level, but we are not at Utd’s level simply because they are, and will probably remain, a marketing and merchandising giant, in a similar league globally to Real Madrid and Barcelona.

    I agree with WEG, why would the Glazers want to sell? They were caught out by the recession and property crash just like everyone was, and it put the PIK element of the debt at greater risk, but it doesnt change the eventual end-game. The Glazer’s viewed Utd as an under-valued asset and were prepared to take on large amounts of debt in order to finance the pruchase of the club, with the thought that increases in revenue would gradually decrease the % of debt compared to revenue. That has not changed, or it shouldnt have changed.

    It is the PIK’s that are killing Utd right now. They are paying a ridiculous rate of interest on those and the previous agreement with the banks stated that they had to pay down the bank debt each year first, which meant they couldnt pay down the PIK’s, which kept rolling up at huge rates. Over 95% of the increase in Utd’d debt in the past 3 years has been down to the PIK’s. The bond issue gives Utd the flexibility to finally begin to pay down the PIK’s. Will they be successfull at that? I have no idea. However the Glazer’s now have the flexibility to try, something the financial and property crash denied them 3 years ago (they were about to refinance the PIK’s at a better rate when the crash occurred).

    The fact is that if they can get rid of the PIK element of the debt then the remainder is serviceable. But the key is the PIK element. The Glazer’s (not Manchester United) will sink or swim according to their success in reducing that portion of the debt.

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