For my case study report I have selected Manchester Untied and their joint partnership deal with the New York Yankees that was formed in February of 2001. The deal has been called a strategic alliance between the two sports teams.
A statement regarding the partnership stated that the teams would be (?) 'sharing marketing information, developing sponsorship and cross promotional programs, and selling products from all franchises in individual team stores'. This is the first deal of its kind and has been described as 'groundbreaking' and 'revolutionary' by some parts of the media.The main pressure behind this deal is the ever-increasing demand for financial resources within sports teams, as teams try to be as successful as possible they all need to spend money.With the emphasis on succeeding in Europe the main driver for top football teams these days and the development of the Champions League Manchester United now face far more competition than in the past. The Champions League is the premier club competition in the world and with it being restructured it now involves a lot more teams and far more games than before. As a result of this United now have to compare themselves against teams such as Real Madrid and Juventus, whereas before it was mainly against English teams such as Liverpool and Arsenal.
This stronger competition now acts as a major pressure on United to keep up with these European sides who will regularly go out and spend £25million plus on new players. By signing up for this deal with the Yankees, United hope to keep on an even playing field with the top European sides. The rewards for doing well in the Champions League include winning large sums of money, which will help to keep the cash cycle flowing through the club.Although European competition is taking over these days, Manchester United are still highly focused on the domestic league.
There is certainly pressure from other English sides around them who wish to take over United's role as the UK's top side. Money is becoming more and more a major factor in providing football teams with success and there are more teams in England now than ever before with the financial means to challenge United's recent dominance.It would appear that barring some extraordinary results Arsenal will indeed beat United to this years Premier League title, so this shows United still need the funds if they want to keep challenging for the title every year. It was proven in 1995 how easily the balance of power could shift when Blackburn Rover effectively bought themselves the Premiership title by out-spending United on new players.Peter Kenyon, United's chief executive summed it up by saying,(2) "It's about paying the largest for players and investing and you don't do that by saying 'let's run up a shedload of debt.' It's yet another example of United taking a ground-breaking step in a new country and a new relationship.
"In today's world performance on the sports field is not the only factor in terms of success, both these clubs are part of organisations which are driven by the desire to make money. In their own respects these two teams are already far ahead of their competitors in their own sports, Manchester United are the wealthiest football team in the world and the Yankees the richest baseball team. The estimated potential earnings of this deal are thought to be in the 10s or hundred of millions so you can see why it appeals to both the teams and their organisations. The shareholders behind United are always looking at how much money the club is generating and there is an ever-increasing pressure from them to make the company more profitable.Manchester United's financial muscle had already been strengthened greatly in recent times with the announcement that Nike would be taking over the production of United's merchandise from the 2002 / 03 season onwards and the new sponsorship deal with Vodafone.
It is thought that in financial terms the deal United have struck with sports wear company Nike could be a lot more profitable than the partnership with the Yankees. The deal with Nike is reported to be around £303 million over the course of 13 years and the Vodafone deal about £30 million.This deal does not really involve the passing of any control or ownership from one team to the other. Neither team will have any major power to affect the other one nor have they invested in buying shares from one another. What this deal is really about is a mutual agreement in which each team helps the other to achieve certain goals they are aiming for.
The one thing you could say is that both teams have control as to how much they help the other one, but if one team put little effort then that would no doubt lead to a reciprocal reaction from the other.There are a number of stakeholders affected by this partnership. The teams themselves will be benefiting from the money and knowledge generated from this partnership. The money will help bring in new players and develop facilities while the shared knowledge will help with the teams fitness and training.The shareholders of both organisations will have made money from the increased value of the team's shares as a result of the deal.
Thousands of pounds are thought to of been made through the buying and selling of United's shares during the time around the deal being made. The long-term value of United's shares should also benefit from the deal. I would imagine the major share holders of United would definitely of been involved and consulted with the forming of this deal. I doubt very much United would have gone ahead with this deal without them being informed.The team merchandise manufacturers Nike and Adidas we be highly affected by the partnership if it results in increased merchandise sales. Profits will grow and production will need to be increased, then there is also the case of distributing the teams gear into each others countries.
Despite these potential benefits I understand Nike were unaware of this deal until hours before its announcement and I'd imagine Adidas were in the same position. So it would appear neither company was actually consulted about the deal.Another group who should be considered as stakeholders in this deal are the supporters of both teams. If the deal is financially successful for United then the fans would hope that would be reflected in the club keeping ticket prices from rising. The money could also be put into improving the stadium and facilities, which will also benefit the supporters. Although the supporters are important stakeholders it is unlikely they would ever be consulted in this type of deal and from my research could find no evidence that had been.
The TV companies in America who will be hoping to screen United games as part of this package should also be considered. They will be crucially important in promoting and exposing United to the American audiences, this is the main way in which United can hope to gain recognition over there. The companies will be hoping that the United games will attract viewers and increase their revenue from viewing figures. I would imagine the Yankees would have had to consult with these TV companies before they could take their agreement in the deal to United.
One the first notable effects of the new partnership was that United share prices went up by 7% as the news leaked out, the shares soon dropped back down but they still finished the week 4% above their original position. This was all the more remarkable at the that because shares in football clubs had been plummeting all across the board.The potential benefits of this partnership are substantial for both teams in many areas of their businesses. The clubs will use each other to access markets in each other countries which will allow them to reach larger audiences, by doing this the clubs will increase their brand awareness across the world. Manchester United now have a gateway to the US markets which up until now have had little exposure to English Football and similarly the Yankees now have access to Europe and Asia where United are well known throughout.
Part of the plan involves the selling of merchandise in each of the respective clubs team-stores, so for example United fans will be able to buy Yankees caps and Yankees fans buy United shirts. One interesting debate that rose in the media concerning the sale of merchandise was the potential conflict of interests between Nike, who will be manufacturing United merchandise from next season and Adidas, who produce the Yankees team merchandise. These are the top two major sports wear companies and they are fiercely in competition with one another, so it seems a little unusual that they will be willing to sell one another's products in their sports outlets. One report suggested that Nike were unaware of the deal up until a few hours before the announcement and that they were said to be (3) 'unhappy and nervous' with the 'association' of the two teams.Although this is considered a long term deal, an interesting point I noticed while doing my research was that despite all the talk and speculation about the impact of this partnership, neither of the team's official websites could come up with any information when I tried searching for the other team. I don't know how relevant this may be but it seemed a little strange to me that a year on from this deal being struck you couldn't access any information from the supposed 'twinned' clubs.
Another part of the agreement will see the sports staff of both teams sharing information and knowledge. This will include tips on training techniques, health and fitness information and sports injuries. Although this represents a none-financial benefit for the teams it may prove to be extremely helpful in improving the teams and their performance. Obviously the teams will have little to offer each other in the way of team tactics as they play two completely different sports but any knowledge shared on the mental and fitness side of sport will be increasing valuable given the way their sports are developing all the time.A possible alternative strategy United could have undertaken would have been to set up a similar deal with other football teams in Europe such as Real Madrid or A.
C. Milan. The benefits of that would have been linking teams which are involved in the same sport, as apposed to Baseball and Football which have little in common. By setting up that kind of deal you already know that the potential customers have an interest in those products which your are marketing.
It could be said though that with competition increasing between Europe's top teams it is unlikely teams would be willing to share marketing or sports knowledge with their competitors. There would also be the argument that Manchester United fans are not likely to buy large amounts of Real Madrid or A.C. Milan merchandise when they have to play these teams regularly in European competition.Another alternative could have been to set up an agreement between United and teams from other sports within England like Rugby League or Cricket.
By making the deal with teams from within England the awareness of those teams is already likely to quite high among supporters. The deal could be set up in the same way as with The N.Y. Yankees as there is no fear of aiding competitors from the same sport. The argument against this idea would be that, as football is the number one sport in the country and far more popular than the other, it would benefit the other teams far more than it would United. It would not really involve opening up any new markets for United as its fair to say most sports fans in England will already be well aware of them.
I would say the major reason Manchester United chose this deal with the Yankees ahead of the alternatives I've suggested, would be the fact that it involves the U.S. market rather than Europe. Despite the fact football is far more popular in Europe than in America, United do already have considerable support across Europe whereas the U.S. is an untapped resource.
Most fans of football in England and Europe already have chosen the teams they support but in America, Manchester United would have little if any competition from other European sides for the support of fans over there.(4) 'Clearly, what the clubs are trying to do is promote each other in markets where the other has a relatively smaller fan base.'Only time will tell whether or not this deal will be as successful as many parties predicted it would be. Despite a lot of scepticism from certain areas of the media there certainly seems to be enough potential for this to be massively beneficial for both teams in the long run. It would appear this deal will be yet another rung on Manchester United's ladder to gaining worldwide recognition and success, they are certainly setting the benchmark for all English teams and most of the Europeans teams at the present time.