Manchester United's Exit From Champions League May Cost Club $173 Million

Dec. 8 (Bloomberg) -- Manchester United's elimination from the Champions League may cost the world's second-richest soccer team 100 million pounds ($173 million) in lost revenue, according to Professor Tom Cannon of Kingston Business School.

United, owned by U.S. billionaire Malcolm Glazer, last night exited Europe's elite club tournament at the opening group stage for the first time in 10 years after losing 2-1 to Portugal's Benfica in Lisbon.

Failure to reach the last 16 will deny the club 8 million pounds in prize money and ticket, broadcast and commercial revenue this season, Cannon said. It may also affect the value of future sponsorships after Vodafone Group Plc said last month it will end its accord two years early, in 2006.

``It could be a disaster in the short, medium and long terms,'' Cannon said yesterday in a telephone interview. ``It could impact on the perception of United as a truly global team and ultimately cost 50 to 100 million pounds.''

United got 16.3 million euros ($19.1 million) in prize money and television fees by reaching the round of 16 a year ago. The northwest England team is the third-highest earner from the competition since 1992, with prize and broadcast revenue of more than 156 million euros. On top of that, it gets ticket sales.

Glazer, who bought United in May, aims to boost the club's revenue by more than 50 percent by 2010, the Times reported June 10, citing a leaked copy of his business plan.

``If they don't reach the Champions League target, it makes everything that much harder,'' said Nick Towle of Shareholders United, which opposed Glazer's takeover. ``It's another ratchet'' in the financial pressure on the club, he said.

`Negligible'

United budgets for reaching the last 16 of the competition and would have dropped into the second-tier UEFA Cup by finishing third in the group. Even so, the impact on the club's balance sheet is small, said spokesman Philip Townsend.

``The impact is negligible in terms of what we budget,'' Townsend said in a telephone interview.

United manager Sir Alex Ferguson said the European performance won't affect his ability to buy new players in January. He might sign one or two then, he said.

``This is certainly a low moment and not one of the best for the club or the supporters, but the only thing you can do now is regroup and start again,'' Ferguson said after the match.

Real Madrid has overtaken United as the sport's top earner by revenue. United reported sales of 169 million pounds in fiscal 2004, while the Spanish club made 275.7 million euros, or about 186 million pounds, through June.

United's accord with Vodafone, the world's largest mobile- phone company, brings in 13 million euros a year, according to consultant Sport+Markt AG. That's the fifth-highest in a field topped by the 22 million euros that Benq Corp. pays Madrid.

Loans

Glazer, the billionaire owner of the Tampa Bay Buccaneers, financed his 790 million-pound takeover in May with loans of 373.9 million pounds that may end up costing 88 million pounds a year in interest.

United's exit may hinder attempts to increase a global fan base that the club says totals 74 million people. They helped contribute to commercial revenue of 47.8 million pounds during the 2003-04 season, 28 percent of total income, according to accountant Deloitte and Touche LLP.

``It's a disastrous season as far as Manchester United are concerned,'' former United midfielder Ray Wilkins told Sky Sports. United trails English Premiership leader Chelsea by 10 points in the domestic league.

Liverpool's victory in last season's Champions League final resulted in more than 10 million new fans across Europe, a Sport+Markt report said. United lost about 5 million, slipping to sixth on the list of Europe's most popular teams, after exiting in the round of 16, according to the report.

Fan Drain

``Success, especially in Europe's premier club tournament, can be so influential in the size of support,'' Oliver Butler of Sport+Markt said.

Among other plans, Glazer intended to raise ticket prices, including an increase of 12.5 percent on admission to matches in the last 16 of the Champions League and 25 percent for games in the quarterfinals and semifinals, the Times said.

``By itself, going out of the Champions League wouldn't be critical,'' Towle said. ``But it's just one of a number of things that make it that much harder for the Glazers to achieve their aggressive plans.''

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