Manchester City set new financial records

ALTHOUGH the sceptics will claim there’s plenty of smoke and mirrors at the Etihad campus, Manchester City generated record revenues and profits in the 2021-22 season. As well as lifting their sixth league title in 12 years, City’s turnover totalled £ 613 million, the second highest figure in Premier history and their pre-tax profit hit £ 41.7 million.

The 2021-22 campaign saw City win the title after a titanic struggle with modern rivals Liverpool but they also reached the last four of the FA Cup and UEFA Champions League. Since 2010-11, City have won 14 major trophies, almost double the number secured by their nearest contenders, Chelsea, with eight in that timeframe. Liverpool and Manchester United have both won five and Arsenal four. Tottenham, the other “big six” club, have not lifted a single trophy since 2008.

City’s 7.6% increase in revenues was largely attributable to their massive rise in matchday earnings, from £ 0.7 million to £ 54.5 million. The average crowd at the Etihad was 52,774 which equates to a stadium utilisation rate of 99% at Premier League games. City’s ticket prices are actually lower than some of their Premier League opponents.

While TV income went down by 15% to £ 249.1 million, the club’s commercial activity was up by 14% to £ 309.5 million, a record for the Premier League. City said this was down to new sponsorship agreements as well as the return of music events to the stadium. Commercial income among the top six clubs ranges from just below £ 150 million to £ 300 million, but beyond that there is a huge gulf with the next club generating less than £ 50 million.

City’s brand value has been growing impressively in recent years and according to Brand Finance, they have the second most valuable brand in world football, bettered only by Real Madrid. The club claim fan engagement went up by 12% in 2021-22, including a 19% growth rate in the US and 17% in Japan.

According to the club’s annual report, City’s squad has a gross value of £ 1.1 billion, while Transfermarkt’s valuation comes in at € 1 billion. City’s squad has the oldest average age among the leading English clubs at 27.3 years and comprises almost 70% foreign players. In 2021-22, their wage bill was more or less unchanged at £ 353.9 million, representing 58% of income. Only four clubs in the Premier top the £ 300 million mark when it comes to salaries – Manchester United, Chelsea and Liverpool are the others.

As ever, City were big players in the transfer market, with purchases of £ 149 million against £ 86 million of player sales. By far the biggest signing was Jack Grealish (£ 100 million), while the club received £ 55.6 million from the sale of Ferran Torres to Barcelona. City’s profit on player trading amounted to £ 68 million, which was comparable to 2020-21. The club had an enormous number of players out on loan, most of whom originated from City’s academy. Over the last five years, City have made around £ 250 million from transfers.

Manchester City are pivotal in the growth of the City Football Group (CFG) multi-club structure which was founded in 2013. In the past five years, CFG’s teams have won the league in six countries (UK, US, Japan, India, Australia and Bolivia). The most recent acquisition for the group was Italy’s Palermo.

While City will remain a controversial club in some ways but there is little doubt that they have a long-term view that may well provide a blueprint for other clubs. In 2020, they won their appeal to the Court of Arbitration for Sports after initially being found quilty of serious fair play breaches by UEFA’s controlling body.

Aside from the financial advantages they clearly have, and that is something not every club can aspire to, they have invested in infrastructure, women’s football, academies and global growth. Their ownership model remains a topic of hot debate and there are similar moral concerns about Abu Dhabi as both Qatar and Saudi Arabia. Despite their success, people still delight in criticising City and peddling conspiracy theories about their financial integrity. Do the claims have any substance or are they just examples of wishful thinking?

Red Bull and City Football Group – these multi-club models are just the first of many

FOOTBALL’s elevation to a formally-recognised business sector now attracts accountants, lawyers, financiers, speculators and opportunists, all of which have changed the way we view the game. What was once a haphazard sport is now a gravy train for many, while the entire system now exists in a Darwinian micro climate where growth is a necessity to avoid decline.

While legacy fans wring their hands at the loss of the flat-capped people’s game, globalisation and technology have transformed football into an industry rapidly assuming the characteristics of the corporate world. Whereas in the past, a club was a club, the very idea of one club buying another was unthinkable. Now, a bank’s mergers and acquisitions department is just as likely to discuss with owners the possibility of purchasing another football entity. Welcome to the slightly uncomfortable world of multi-club ownership.

At the moment, acquiring clubs is the name of the game, but at some point, we can probably expect consolidation to rear its head, in other words, clubs merging to attain critical mass, financial efficiency and a stronger brand. The hurdles in achieving this are substantial, not least in convincing fans it might be the right thing to do. But there is a growing appetite for multi-club ownership.

The two most high-profile examples of this are the City Football Group and Red Bull, but there are many across Europe and the list is getting bigger by the year. In the Premier League, there are nine clubs that are part of some sort of portfolio, namely Arsenal, Brentford, Brighton, Crystal Palace, Leicester City, Manchester City, Nottingham Forest, Southampton and West Ham United. There are another nine in the rest of the EFL, including Sunderland, Watford and Cardiff City. Overall, 20% of the 92 are already part of a bigger scheme.

Why is this becoming a trend? Firstly, the football world has become open for a more diversified investor base. American “sports team owners” are now very focused on the Premier League and in fact, own Arsenal, Chelsea, Liverpool and Manchester United, among others. They are not “football people” in the way we once define club owners, they are investors with a little of Wall Street running through their veins. They might want a return (unthinkable in the old days) and they also look for growth.

Football as it stands may have reached or about to reach, saturation point. In other words, much depends on success on the pitch and there are limited ways to make a club even more profitable. In the corporate world, the next phase of company growth may be to bolt-on an acquisition to knock-out a competitor, benefit from the acquired partner’s offering or to gain speedy growth rather than by a slow, organic strategy. For investors in football, buying other clubs offers the chance to spread their investment in the game and also mitigate financial risk.

It can also deliver benefits around synchronised business operations and also create a network that can aid player development and movement and build a pool of players that can benefit the parent company and its subsidiaries. A geographically diverse multi-club structure can also plug into football markets with a regular flow of raw talent, such as South America, Africa and Asia. The more clubs involved, the greater the strategic advantage for the group.

Chelsea’s new owner, Todd Boehly, wants his club to adopt such a model and has already been looking at Brazil and Portugal, among others. Brazil still produces outstanding footballers in abundance and most of the top youngsters want to move to Europe. Indeed, Brazilian clubs need to maintain this player path as it forms part of their business approach. In fact, more players travel between Brazil and Portugal than any other route. Boehly has tried to acquire Santos and the Portuguese club, Portimonense are also on his agenda. Portuguese clubs like Benfica, Sporting and Porto are well connected on player movements from South America and have enjoyed great success in buying and selling young talent from Brazil.

Manchester City’s success has not necessarily been down to its multi-club model, they have huge financial resources, they hire well and they have the world’s number one coach. Their idea may be to create a self-sustaining network, but it is not the reason they are dominating football. And the Red Bull structure has been successful, but it has not elevated the main clubs to elite status – yet. Their overall strategy has a lot to admire, although it has not won them many friends, mostly because their ownership status is at odds with Germany’s traditional football identity. While these two are the most visible examples, there are plenty of others, ranging from private equity firms, venture capitalists, wealthy individuals and sovereign wealth funds. These are not companies involved for any other reason than investment purposes, although in some cases, there are suggestions that attempts at “sportswashing” are taking place, notably when states with suspect human rights records invest in football or other sports.

Yet how does a club gain scale if it is left to grow organically, especially as massive cash injections of the kind that instantly made Chelsea part of the elite may no longer be possible under financial fair play rulings? Becoming part of a larger organisation is possibly one of the few ways it can be achieved, although football is different from other industries and some of the conventional characteristics of corporate life simply do not exist. Human emotions have a big influence on the decision-making process.

It would seem probable that as more driven business people attach themselves to football the expectations and methods of the game’s investors will change and become more aligned to financial markets. There is an underlying sentiment that in the corporate world you “grow, go backwards or die” that will surely become part of the football business’s mantra. As well as acquisitions, more sophisticated products and services will undoubtedly be presented to club owners in the years ahead. We won’t recognise the game we all fell in love with, but that’s supposed to be progress.