How would Manchester United be affected financially by missing the Champions League?
Champions Leaguequalification is suddenly back on the cards for Manchester Unitedafter a week that could hardly have gone better for Erik ten Hag’s side.
Never mind the exhilarating FA Cup quarter-final win over Liverpool— what about Tottenham Hotspurlosing, Aston Villaalso dropping points and various results in the European competitions boosting England’s UEFA coefficient?
Although far from certain, it is now likely a fifth-place Premier Leaguefinish in May will be enough to qualify for next season’s Champions League. United are one spot and six points off that position, currently held by Tottenham, with 10 games left to play.
Yet data firm Opta’s predictor still has United as outsiders for a spot, rating their chances of ending up fifth or better at just 15.6 per cent.
A place in European club football’s blue-riband tournament is often the minimum expectation at Old Trafford, given the financial rewards involved, and whether or not United qualify for its 2024-25 version could have ramifications for Ten Hag’s future.
So what impact would a second straight year in the Champions League have on the club’s balance sheet? And how much of a disaster would failing to qualify be?
How much money do clubs in the Champions League get?
Approximately €2.1billion (£1.8bn; $2.3bn) is shared between participating clubs each year as part of the Champions League’s current revenue distribution model.
Twenty-five per cent is paid out as a flat starting fee to all clubs competing in the group stage, 30 per cent is paid related to performances in the competition and another 30 per cent is paid according to each club’s 10-year coefficient. The final 15 per cent is paid according to the size of their domestic TV markets.
During the 2022-23 season, the competition’s eventual winners Manchester Cityreceived the most prize money of any club at €134.9million. Spain’s Real Madrid, who were the defending champions and lost to City in the semi-finals, took the second-most at €118.8m.
Compare that to the €21.8million earned by Madrid’s fellow La Ligaside Sevilla, who won the Europa Leagueafter going out of the Champions League at the end of the group phase with just one victory and three defeats in their six matches. Thirty of last season’s 32 Champions League clubs earned more for their European exploits.
You can see why there is only one competition of UEFA’s three that Europe’s elite want to be playing in.
How much of a difference does it make to United?
Every year in their annual report, United warn in no uncertain terms that failure to qualify for the following season’s Champions League will “result in a material reduction in revenue”.
And the benefit of playing in Europe’s top club competition is clear to see from their financial results so far this season, even though United were eliminated at the group stage.
Thanks largely to their return to the Champions League, having competed in the Europa League in 2022-23, United’s broadcast and matchday revenue streams have seen increases of £52million and £23.8m ($65.8m and $30m) respectively in the six months to the end of 2023 compared to the same period last season.
Those increases are only slightly offset by a rise in United’s wage bill, which has increased by £25.8million this season.
To mitigate the impact of missing out on the Champions League, the majority of United players receive a 25 per cent wage cut if they fail to qualify. After last season’s third-place Premier League finish, those salaries were restored to their original level.
And so, whereas United spent £159.6million on wages in the six months to the end of 2022, they spent £185.4m in the same period in 2023. Still, that is a small price to pay to be back at the top table rather than in the second tier of European competition.
United actually earned a respectable €32.6million from UEFA last season — the most of any Europa League team, despite going out in the quarter-finals.
And yet, a respected football finance analyst who uses the pseudonym Swiss Ramble expects United will receive €60.2million from UEFA for this year’s Champions League campaign, even though they did not reach the ongoing knockout rounds.
Does the new Champions League format change things?
Yes. From the start of next season, the Champions League will be expanded to a 36-team tournament, from the current 32, as part of changes to the formats of UEFA’s club competitions.
UEFA expects its revamp to boost revenues significantly, estimating a total income of around €4.4billion (£3.8bn; €4.8bn). Around €2.5bn of that will be distributed to clubs competing in the Champions League, with the remainder paid to those in the Europa League and third-tier Conference League.
A greater proportion of the Champions League money will be shared equally across all participating clubs and paid out on a performance-related basis, with less going according to a club’s coefficient and share of the broadcasting market.
Clubs such as United — with a strong coefficient and from a valuable TV market — may end up taking a slightly lower cut of a larger pool of money than under the current system. But a strong performance in the competition itself will still be richly rewarded.
What is the cost of missing out?
As each club’s earnings are dependent on performance, coefficient and their share of the TV pool, it is hard to put an exact figure of how much money United would stand miss out on by failing to qualify.
But the discrepancies between Champions League and Europa League prize money are clear to see and give a good illustration.
Under next season’s new model, Champions League clubs will receive an increased starting fee of €18.6million — up from €15.6m this year — compared to just €4.1m in the Europa League.
Whereas Europa League clubs will only receive €450,000 for each win in the group stage and €1.75m for qualifying for the knockout stages, Champions League clubs will get €2.1m and €11m for those achievements respectively.
And the fact that United are set to earn almost twice as much from this season’s early Champions League exit compared to last season’s run to the Europa League’s last eight shows the disparity between the two competitions.
Then there are the potential hidden costs of non-qualification. Since the 2015-16 season, United have had a kit deal in place with Adidas which contains a Champions League non-participation clause. If they fail to qualify for the Champions League two seasons running, Adidas cuts its annual payment of £75million by 30 per cent — essentially, costing United £22.5m.
That clause has never been triggered and it won’t be activated this summer as United achieved a top-four Premier League finish last season. However, it has been amended as part of the new £900million deal signed with Adidas last summer, which extended the partnership until 2035. From the 2025-26 season onwards, a £10m deduction will be made by Adidas every year United fail to qualify for the Champions League.
United do not need to worry about that for now. The 30 per cent clause still applies until the end of next season, but failing to qualify at the end of this one would put them at risk of finally triggering it just before it expires.
How does this impact United’s FFP?
Clearly, qualifying for the Champions League can only be beneficial for United’s compliance with financial fair play (FFP) regulations. But would failing to qualify put them at risk of a breach?
United fell foul of FFP rules last season after a year without Champions League football and were fined €300,000 for what the club described as a “minor” breach of UEFA’s break-even test.
Clubs in European competition were not subject to the same break-even test this year as UEFA migrated to new rules, but the test will be in force again next season, alongside UEFA’s new squad cost ratio.
United have also preached caution over their compliance with the Premier League’s profitability and sustainability rules (PSR), which allow clubs to lose no more than £105million over a three-year monitoring period.
They have lost a lot of money in recent years but, from next season onwards, the £150million pre-tax loss suffered during the 2021-22 season will no longer be part of either UEFA’s or the Premier League’s monitoring periods.
With that £150million loss out of the equation, so long as they do not post a similarly huge deficit at the end of this season, United should have more FFP headroom going forward, whether playing in the Champions League or not. Qualifying would certainly help, though.
https://theathletic.com/5359906/2024/03/23/what-would-missing-out-on-champions-league-mean-for-manchester-united/
How would Manchester United be affected financially by missing the Champions League?
Champions Leaguequalification is suddenly back on the cards for Manchester Unitedafter a week that could hardly have gone better for Erik ten Hag’s side.
Never mind the exhilarating FA Cup quarter-final win over Liverpool— what about Tottenham Hotspurlosing, Aston Villaalso dropping points and various results in the European competitions boosting England’s UEFA coefficient?
Although far from certain, it is now likely a fifth-place Premier Leaguefinish in May will be enough to qualify for next season’s Champions League. United are one spot and six points off that position, currently held by Tottenham, with 10 games left to play.
Yet data firm Opta’s predictor still has United as outsiders for a spot, rating their chances of ending up fifth or better at just 15.6 per cent.
A place in European club football’s blue-riband tournament is often the minimum expectation at Old Trafford, given the financial rewards involved, and whether or not United qualify for its 2024-25 version could have ramifications for Ten Hag’s future.
So what impact would a second straight year in the Champions League have on the club’s balance sheet? And how much of a disaster would failing to qualify be?
How much money do clubs in the Champions League get?
Approximately €2.1billion (£1.8bn; $2.3bn) is shared between participating clubs each year as part of the Champions League’s current revenue distribution model.
Twenty-five per cent is paid out as a flat starting fee to all clubs competing in the group stage, 30 per cent is paid related to performances in the competition and another 30 per cent is paid according to each club’s 10-year coefficient. The final 15 per cent is paid according to the size of their domestic TV markets.
During the 2022-23 season, the competition’s eventual winners Manchester Cityreceived the most prize money of any club at €134.9million. Spain’s Real Madrid, who were the defending champions and lost to City in the semi-finals, took the second-most at €118.8m.
Compare that to the €21.8million earned by Madrid’s fellow La Ligaside Sevilla, who won the Europa Leagueafter going out of the Champions League at the end of the group phase with just one victory and three defeats in their six matches. Thirty of last season’s 32 Champions League clubs earned more for their European exploits.
You can see why there is only one competition of UEFA’s three that Europe’s elite want to be playing in.
How much of a difference does it make to United?
Every year in their annual report, United warn in no uncertain terms that failure to qualify for the following season’s Champions League will “result in a material reduction in revenue”.
And the benefit of playing in Europe’s top club competition is clear to see from their financial results so far this season, even though United were eliminated at the group stage.
Thanks largely to their return to the Champions League, having competed in the Europa League in 2022-23, United’s broadcast and matchday revenue streams have seen increases of £52million and £23.8m ($65.8m and $30m) respectively in the six months to the end of 2023 compared to the same period last season.
Those increases are only slightly offset by a rise in United’s wage bill, which has increased by £25.8million this season.
To mitigate the impact of missing out on the Champions League, the majority of United players receive a 25 per cent wage cut if they fail to qualify. After last season’s third-place Premier League finish, those salaries were restored to their original level.
And so, whereas United spent £159.6million on wages in the six months to the end of 2022, they spent £185.4m in the same period in 2023. Still, that is a small price to pay to be back at the top table rather than in the second tier of European competition.
United actually earned a respectable €32.6million from UEFA last season — the most of any Europa League team, despite going out in the quarter-finals.
And yet, a respected football finance analyst who uses the pseudonym Swiss Ramble expects United will receive €60.2million from UEFA for this year’s Champions League campaign, even though they did not reach the ongoing knockout rounds.
Does the new Champions League format change things?
Yes. From the start of next season, the Champions League will be expanded to a 36-team tournament, from the current 32, as part of changes to the formats of UEFA’s club competitions.
UEFA expects its revamp to boost revenues significantly, estimating a total income of around €4.4billion (£3.8bn; €4.8bn). Around €2.5bn of that will be distributed to clubs competing in the Champions League, with the remainder paid to those in the Europa League and third-tier Conference League.
A greater proportion of the Champions League money will be shared equally across all participating clubs and paid out on a performance-related basis, with less going according to a club’s coefficient and share of the broadcasting market.
Clubs such as United — with a strong coefficient and from a valuable TV market — may end up taking a slightly lower cut of a larger pool of money than under the current system. But a strong performance in the competition itself will still be richly rewarded.
What is the cost of missing out?
As each club’s earnings are dependent on performance, coefficient and their share of the TV pool, it is hard to put an exact figure of how much money United would stand miss out on by failing to qualify.
But the discrepancies between Champions League and Europa League prize money are clear to see and give a good illustration.
Under next season’s new model, Champions League clubs will receive an increased starting fee of €18.6million — up from €15.6m this year — compared to just €4.1m in the Europa League.
Whereas Europa League clubs will only receive €450,000 for each win in the group stage and €1.75m for qualifying for the knockout stages, Champions League clubs will get €2.1m and €11m for those achievements respectively.
And the fact that United are set to earn almost twice as much from this season’s early Champions League exit compared to last season’s run to the Europa League’s last eight shows the disparity between the two competitions.
Then there are the potential hidden costs of non-qualification. Since the 2015-16 season, United have had a kit deal in place with Adidas which contains a Champions League non-participation clause. If they fail to qualify for the Champions League two seasons running, Adidas cuts its annual payment of £75million by 30 per cent — essentially, costing United £22.5m.
That clause has never been triggered and it won’t be activated this summer as United achieved a top-four Premier League finish last season. However, it has been amended as part of the new £900million deal signed with Adidas last summer, which extended the partnership until 2035. From the 2025-26 season onwards, a £10m deduction will be made by Adidas every year United fail to qualify for the Champions League.
United do not need to worry about that for now. The 30 per cent clause still applies until the end of next season, but failing to qualify at the end of this one would put them at risk of finally triggering it just before it expires.
How does this impact United’s FFP?
Clearly, qualifying for the Champions League can only be beneficial for United’s compliance with financial fair play (FFP) regulations. But would failing to qualify put them at risk of a breach?
United fell foul of FFP rules last season after a year without Champions League football and were fined €300,000 for what the club described as a “minor” breach of UEFA’s break-even test.
Clubs in European competition were not subject to the same break-even test this year as UEFA migrated to new rules, but the test will be in force again next season, alongside UEFA’s new squad cost ratio.
United have also preached caution over their compliance with the Premier League’s profitability and sustainability rules (PSR), which allow clubs to lose no more than £105million over a three-year monitoring period.
They have lost a lot of money in recent years but, from next season onwards, the £150million pre-tax loss suffered during the 2021-22 season will no longer be part of either UEFA’s or the Premier League’s monitoring periods.
With that £150million loss out of the equation, so long as they do not post a similarly huge deficit at the end of this season, United should have more FFP headroom going forward, whether playing in the Champions League or not. Qualifying would certainly help, though.
https://theathletic.com/5359906/2024/03/23/what-would-missing-out-on-champions-league-mean-for-manchester-united/
