Why Manchester United Signed Tiny £2.7M Sponsor Deal With Turkish Airlines
Why would Manchester United, the world's biggest sports brand, bother to sign a piffling £2.7 million sponsorship deal with Turkish Airlines? This is a club that reported annual revenues of £278.5 million through June 2009. It also just signed insurer Aon to an £80 million, four-year, lead-sponsor deal, replacing AIG.
Turkish Airlines offers just one route out of Manchester, to Istanbul, and only one flight a day.
The answer is that despite its reach and riches, Man Utd teeters permanently on the brink of bankruptcy, swaying under £716.5 million in debts, about £504 million of which it recently refinanced on the bond market. Man Utd showed profit of only £25.6 million for the year. It also explains why Man Utd booked £35.9 million of its new Aon contract before it even begins (later in 2010). As The Motley Fool notes:
The suspicion is that this was done to flatter last year's accounts because prudent accounting practices require that revenues are booked in the years when they are earned.Man Utd needs every pound and penny it can get -- it won't surprise you to learn that the Turkish Airlines deal isn't a new one; the Turks replace Air Asia as the club's official airline.
These tiny deals give the lie to the madness of football economics. Out-of-control player wages spiral upward far faster than club revenues from ticket and merchandise sales could ever hope to keep up. Real Madrid recently paid £80 million for striker Cristiano Ronaldo, for instance; Manchester City are reportedly preparing a £100 million bid for Liverpool F.C.'s Fernando Torres. What portion of revenues is immediately eaten in player fees? About 80 percent, according to MoneyWeek, using lowly Bolton Wanderers F.C. as an example:
... take Bolton. Its most recent accounts show income of £37m from TV rights and £5m through the gate â€" but a staggering wage bill of £41m, some 80% of all football-related income.The result is that no matter how successful they become, clubs' margins are continuously razor thin. Portsmouth F.C., which won the F.A. Cup two years ago, is basically bankrupt.
That's why Liverpool commercial director Ian Ayre recently confirmed that the club would be "crazy" not to sell naming rights to its new stadium. BNET previously noted that Liverpool wants £250 million for the name of its arena -- an indicator that clubs' major income stream in the future may not be the shirt on which corporate logos are displayed but the gates through which their fans walk.
- Related:
- Manchester United's Aon Deal Not Big Enough to Appease Bond Investors
- Bayern Munich Signs Deutsche Telekom to Largest Ever Football Sponsorship Deal
- Liverpool F.C. Confirms It Wants £250M for New Stadium Sponsorship; Debts Leave It No Choice
- Chelsea F.C.'s Need for Stadium Sponsor Proves It Fumbled Samsung Deal
- Real Madrid's New Deal With Bwin Suggests Chelsea's Samsung Pact Is Underpriced
- Liverpool's Standard Chartered Deal May Be Bigger Than Man. Utd's Pact With Aon
- Manchester United Sign Aon to Replace AIG as Shirt Sponsor; Club Returns to Profitability