Cristiano Ronaldo’s return to Manchester United (NYSE:MANU), is welcome news on all sides.
After the collapse of the European Super League earlier this year, and the inevitable effects of the pandemic, the club certainly needed a boost. Shares rose 5%, from $17.28 to $18.29 on the news, and of course fans were happy too.
Ronaldo’s transfer from Juventus (BIT:JUVE) has not come cheap though. It is costing Manchester Utd £12.9m (Euro 15 million) payable over 5 years, as well as another £7 million (Euro 8 million) in add-ons. It is said to be the highest transfer paid for a 36-year old player. And, according to reports he could be earning around £400,000 per week. Also added to the list of signings was Jadon Sancho, Tom Heaton and Raphael Varane.
For those who do not know much about football, Ronaldo is a legend. He scored 118 goals in his 292 games for Manchester United and according to Time, he is considered one of the 100 most influential people in the world. A social media phenomenon, on Instagram alone he has 337 million followers – by comparison Man Utd has 46.7 million Instagram followers.
Matchday losses mitigated by broadcasting and commercial
The deal with Ronaldo is costly when you consider that matchday income dropped almost 95%, from £84.3m for the nine months ending 31 March 2020 to £4.8m for the same period in 2021. But Man Utd is not all about ticket sales. Overall revenue was down by only 6.4% (£27.5 million) to just over £400 million during this time.
This was because of a jump back up in broadcasting revenue from £123.6 million in 2020 to £214.9 million in 2021. The drop in 2020 revenue was due to non-participation in the UEFA Champions League and fewer home matches. For the record, broadcasting revenue for the same period in 2019 was £200.3 million.
Ronaldo could boost commercial revenue
Commercial revenue – sponsorship, retail, merchandise and product licensing which generally accounts for up to 50% of total revenue – produced around £220m in Q3 2019 and £208m in Q3 2020, whereas Q3 2021 commercial revenue dropped to £180.4m.
While the $559m shirt deal with Chevrolet expires this year, as does the training kit deal with Aon (NYSE:AON), the club still has a £750m kit deal with Adidas contracted out to 2025. But we hope that with Ronaldo’s return, Man Utd’s commercial side will, at least for this year, make up the shortfall in matchday revenue and any lost sales during the pandemic.
Looking ahead though, the Ronaldo brand could potentially create opportunities for huge commercial deals for the club. Sales of ‘Ronaldo 7’ shirts had already netted £32.5 million in the first 12 hours on sale according to lovethesales.com. There is every chance that sales will remain strong, just as long as he keeps scoring the goals of course.
With a share price that really has not moved much since listing – it was $18.51 in February 2013 – a ramp up in commercial deals could be just what the club, and its investors, need.
