Manchester United and dividends - a sign of things to come?

Manchester United announced last September, that it will pay over  £ 15 m in dividends to five members of the Glazer –family, that owns 83 % of the legendary club. Not surpisingly, this was not well received by fans. United Supporter´s Trust´s vice-chairman Sean Bones told BBC in September, ” This is rubbing salt into the wound. Profits from the club should go back into it”.  For the fans, the news about dividend payments was especially bitter, since it´s not like the Glazer-family hasn´t received anything in return for their investment until now.  Bones said; "The Glazer family have already cost us £1bn in interest payments. They are sitting on an asset worth £2bn, which still has debts of over £400m, yet are now milking it for even more. How greedy can you get?" The situation is not improved by the fact that United failed to advance from the group stage of Champions League, meaning that the club´s turnover (and result) for the current season will be substantially less that it potentially could have been. 

 The fans´reaction to the news is understandable. How else could they react? In normal business-world, profitable companies paying dividends is as normal as it gets. That is how owners get return for their investment. Some even go as far as saying that the only purpose of a limited company is to provide profit for it´s owners. While that is a bit of an extreme way of thinking, it just goes to show the calculated, often cold approach that is so common in the capitalist world of business. But that is not the way things have tended to go in football. Paying dividends has been a rare way to operate, for two distinct reasons. Firstly, football clubs have rarely been profitable businesses to begin with. Competitive clubs that play for the biggest trophies are expensive to maintain. Despite large turnovers, players´ wages and amortisations of their contracts have often kept even the most succesful clubs from making profit. The problem has been even bigger for less succesful clubs; Clubs struggling to stay in the Premier League or clubs that push for promotion to get there, have often made substantial losses. Secondly, and maybe more importantly, no matter who the actual owner of the club is, clubs are often seens as belonging to their fans. Therefore, clubs are expected to perform as well as they can, and win as much as they can. The single most important purpose of a football club is to provide entertainment and (hopefully) success that the fans can enjoy of. Making a profit is secondary to all this. If a club still manages to do this, fine. As long as the profit is not too big, because that is often seen as an indication of the club not having invested as much as they could have to strengthen the squad. The possible profit is then expected to be invested back to the squad, or the facilities, in order to improve the possibility of a succesful campaign in the future. Simply put, a football club´s purpose is not really to make money, but if it does, it belongs to the club, not to it´s owners. To be fair, many owners have also been committed to supporting the club, not extracting dividends even if they could have.  

The fans´ attitude towards dividends is understandable. A succesful club would not exist without it´s fans. After all, it is the fans who buy the tickets, merchandise, watch the games on tv, etc. They keep the whole system going. It shouldn´t come as a surprise to the Glazer –family, for example, that the fans don´t like to see over £ 15 m being taken away from the club, on top of the interest payments. So far, these kinds of operations have been rare. But with the new tv –deal for the premier league, things may be changing. Starting in 2016, a three-year deal with Sky Sports  and BT Sports worth £ 5,14 billion will make all Premier League clubs richer than ever. Potentially, even the club placing 20th can make as much as last season´s title winners, Chelsea (~ £ 100 million).  The good thing is, this will likely improve the competition. The smaller clubs will no longer be as forced to sell their top players to the traditional top clubs as before. With the support of new tv –money, they will be able to hold on to those players, and keep themselves competitive. Better yet, they will be able to acquire top players from abroad, since no league in Europe will be financially competitive with the Premier League. This is obviously not great news for La Liga, Bundesliga, Serie A, etc. On top of acquiring players and holding onto them, Premier League clubs will be able to spend more on stadiums, training facilities, youth development etc. without raising their debt levels. To sum it up, the new tv –deal really makes the Premier League a promised land of football clubs. 

But with all the increased possibilities to acquire top players and develop the facilities, the increased revenues will be so big that we will likely see many clubs making actual, large profits as well. Sure, many clubs will use this opportunity to build something great and challenge the traditional top clubs. But will all clubs share that same ambition? After all, how much of that increased money is invested to the club is a question of just that. Ambition. Transfer fees are likely to rise as a result of the deal. Again, clubs are not as forced to sell their top players as before. But it doesn´t mean they won´t. Leicester, for example, will be able to hold on to a player like Jamie Vardy. But selling him would mean an enormous profit. While there is no need to sell, the temptation may be huge. We will likely see some clubs investing more than ever, aiming to challenge the traditional top clubs and compete for Champions League places. But we will also see clubs making large profits. And where there are owners and profits, there is a temptation for dividends, as well.  

Acquisitions of Premier League clubs will is also likely increase in the future. Due to the increasing revenues in the future, the clubs are currently tempting targets for private equity firms. Recently, for example, 70 % of Crystal Palace shares were bought by an American consortium that already owns the Philadelphia 76ers and New Jersey Devils. Part of the temptation for investors is obviously the growing potential of making money. Whether it is done through dividends, or capital loans with high interest rates (or both) remains to be seen. But it would be naive to think the owners´ wouldn´t have their share of the cake, in one form or another.

While the increased tv –money will likely benefit the competitive aspects of the game, it is also obvious that the way many clubs operate will change. Manchester United fans won´t be the only ones who will have to face the fact that a part of the profit the club generates will drift away from the club. With the long tradition of being a ”peoples´ game”, this will be a bitter pill to swallow. It is not just a case of money, it also signals a fundamental change in the clubs´ status as part of the society.  Something that used to be ”our club” may eventually start to feel like ”their club”.  Whether this will have an effect on the fans´ loyalty towards their club, remains to be seen. What is certain is that times are changing, and not entirely for the  better.  Maybe that is the price that needs to be paid for the growing dominance of Premier League as a whole.