Wednesday, November 28, 2012

Brand Messi versus Brand Ronaldo

Lionel Messi and Cristiano Ronaldo are currently peerless in their choice of profession. In the world of football, there is the two of them and then there is a chasing pack of players who just can’t seem to catch up. The two of them have been smashing records for fun and own the last four. Messi recently broke Brazilian football legend Pele’s age old record of most goals scored in a calendar year and Ronaldo can’t seem to stop putting the ball in the net for Real.  

But this article is about their individual brands and not their on-field expertise. It is well established that both these players are the leading protagonists when their respective teams step out on the pitch and are hence tied down to lucrative long-term deals. 

As per France football magazine, Messi is currently the highest paid football player in the world with estimated earnings of 33 million Euros in 2012. Ronaldo features at the 3rd position in the same list with reported earnings of 29.2 million Euros. However, according to Forbes if off-the-field income is taken into account, Ronaldo and Messi are 2nd and 3rd respectively. David Beckham continues to rule the roost at the number one position.

Monday, November 26, 2012

A tribute to the boy from Belfast - George Best

A few readers have asked me about my previous work hence here is a featured article from India's largest all sports website - Sportskeeda. This article was also selected as an Editor's pick.

“Boss, I think I’ve found you a genius” were the only words Manchester United manager Sir Matt Busby read in a telegram, which was sent from Belfast to Manchester. The ‘genius’ in question was a 15 year old George Best and the words to describe his precocious talent were used by Bob Bishop, who was a talent scout for the football club. In 1961 George Best made the move across the sea to Manchester and he would go on to be a cornerstone of Sir Matt Busby’s historic European Cup winning side and a part of United’s much vaunted trio of attacking players – Sir Bobby Charlton, Dennis Law and George Best, popularly known as “The Holy Trinity”. However, everything could have gone horribly wrong, as on moving to Manchester an increasingly homesick Best decided to return to Northern Ireland. Sir Matt had to use all his powers of persuasion (something us younger folks have seen Sir Alex Ferguson do time and time again) to convince young Best that playing for Manchester United lay in his best interests. Both George Best and Manchester United were to never look back.

Manchester - 1991: George Best controls the ball during an Exhibition match held in 1991 at Old Trafford, Manchester, England.

Sunday, November 25, 2012

Could Catalonia’s freedom change Barcelona football club’s future?

Today, Catalonia goes to vote for a new future, one that might lead to independence from Spanish rule. Artur Mas, the leader of political party Convergència i Unió (CiU), called for these elections after the historic protest march in September. More than 1.5 million people had stepped out of their homes with Catalonian flags in hand and onto the streets to demand freedom.  This freedom march was the biggest since World War 2. 

Artur Mas, leader of Convergència i Unió (CiU)

Friday, November 23, 2012

Manchester United's IPO: A Masterstroke?

Manchester United announced its first quarter financial results on Wednesday (November 14). United’s decision to go public and launch an IPO seems to have the desired effect at least for the short-term. As per the club, they are well poised to hit their promised financial targets. For the financial year 2013 Manchester United expects to earn revenue in the region of 350 to 360 million pounds.
Old Trafford
The equity generated from the shares sold after being listed on the NYSE has helped reduce their debt down to 360 million pounds (572$ million). The club has been under debt since Glazer’s purchase of the football club. The IPO has been successful in bringing the debt down and would allow precious funds to be re-invested into the football club. United’s summer recruits especially Robin Van Persie have begun the season well and have successfully navigated to the knockout stages of the Champions League. In 2011, United made it to the finals of the competition and received over 80 million pounds in revenue. Their failure to make it beyond the group stage last year resulted in a huge revenue loss, almost to the tune of an overwhelming 65 million pounds.

The pertinent question is whether the United can sustain its value on the share market. Most market analysts are of the opinion that Manchester United’s (MANU) shares shouldn’t be touched with a bargepole. Historically, sporting enterprises have usually performed below the market. The last sports club to go public in the United States was the baseball club, the Cleveland Indians. The Cleveland Indians opened in 1998, priced at $15 per share and when current owner decided to take over the team, the shareholders were paid $22.63. The improvement in share price was more than 50% of the initial price. But this was far less than the growth shown by the NASDAQ Composite index, which grew by 124%.

Also, the owners of the club have ensured that the shares released out to the public have less voting rights. The owners hold “Class B” shares which carry 10 times more voting power than the “Class A” category farmed out to the public.

Share performance of MANU and MSG, Source: Yahoo Finance
Manchester United hoped to sell its shares for $16 to $20 but its shares went public at $14 per share at a valuation of $2.3 billion. Furthermore, the share price has not been able to generate any sort of frenzy and the reaction has been relatively lukewarm. Since the time it has been launched fellow sports entity Madison Square Garden, owner of both New York Knicks and New York Rangers, has performed far better than United during the same time period, as shown in the graph above. For United to increase shareholder value, they have to increase their commercial revenue because revenue from both Broadcasting and Matchday usually evens out during the course of the season.

Key Financials, Source: Yahoo Finance
As a sign of intent, Manchester United have gone on a sponsor signing spree including a deal with American auto giant General Motors (GM) worth $559 million. The United team will be sporting the car brand Chevrolet from the 2013/14 season. United have also confidently decided to buy back the training kit deal they had in place with DHL for $64 million because they felt they could negotiate a better deal with other sponsors. Also, following Shinji Kagawa’s arrival at United, Japan’s biggest export to the premiership since Nakata’s stint at Bolton, has seen a spate of Japanese sponsors queuing up.

In the short term the decision to go public seems a good one as it has injected much needed funds to reduce debt and make it more competitive. United’s worldwide fan base of 650 million is its biggest strength and there would be no shortage of sponsors across the world. There will be pressure though to maintain their business model as well as sustain their performances on the pitch. As last season’s results suggest Manchester United are no longer the top dogs of either the country or Manchester. It won’t be an easy fight but as United’s history suggests they always like to do things the hard way.

Sunday, November 4, 2012

Where Sport meets Business

A sporting stage is never ignored. It brings together fans, divides them and in extremely extreme situations is also the reason for nations to go to war with each other.

Present day sport is an intensely competitive profession and performances on the pitch alone are no longer the only yardstick of a sporting entity's success. Professional sport is now an industry by its own right. The business of sports is a subject of discussion that is usually restricted to boardrooms and the corridors of power. All that is left for the regular fan to see is the blood and sweat that players leave on the pitch.

As a business student, I aim to unlock and unfold the different business dimensions in sports. In this pursuit, I will also try to remain as objective as possible and keep my Manchester United loyalties aside.

Some of the subjects I will be looking to explore include decisions taken by sports teams to go public, branding and image rights of teams and players, the use of data analytics in sports, increasing clout of sports agents and transfer markets of players.