Amanda Smith: Today, the volatile world of the professional sports business.

THEME

Now last month, Rupert Murdoch's British Sky Broadcasting network made a takeover bid on the Manchester United Soccer Club, a billion dollar bid that was accepted by the public company that runs Manchester United. It's a highly controversial takeover, for some similar reasons as News Limited's SuperLeague was in Australia. And at the moment, regulatory authorities in the UK are considering the bid, with a decision expected soon. So on The Sports Factor, we're looking at the issues surrounding this takeover of the world's most famous football club.

CLUB SONG

And one of Manchester United's most famous past players is Bobby Charlton. Sir Bobby Charlton as he is now. He's a director of the football club, as well as being involved in the 2002 Commonwealth Games which are being held in Manchester. And Sir Bobby was in Kuala Lumpur recently, for the Commonwealth Games closing ceremony, which is where John Doggett Williams spoke with him about his football club.

Bobby Charlton: It's a big industry, Manchester United, and it's been very effectively marketed over this last ten years, especially since we've started doing well, the team's started doing well. But the club has always been the most popular club in the world, wherever you go in every country.

John Doggett Williams: Are you still surprised when you walk down a Kuala Lumpur street and you see a Manchester United shirt?

Bobby Charlton: Not at all. We have supporters' clubs in most of the major countries in the world. Certainly in Asia. In all the Asian countries we have supporters' clubs, and of course they want to wear the same thing as the players do, and it is a big industry, a big business now.

John Doggett Williams: How do you feel about the corporate changes, the talk about a takeover?

Bobby Charlton: Well Manchester United is a successful business, and any successful business is likely to be bid for at one stage or another. Rupert Murdoch has come in with a bid to buy it for B-Sky-B, and the public limited company have accepted it, but there are still some regulations that have to be fulfilled first. You know, there's the Monopolies Commission, so that Manchester United as a football club don't have any priorities over any of the other clubs with regard to television, which may be the case with regard to it being a television company that's buying the company. But if the Monopolies Commission pass it, and I think they probably will, then Manchester United will continue to do what it's always done, been a football club, been a successful football club, and because of that will always be an attraction.

John Doggett Williams: Are the gloves off now for the big clubs trying to knock out the little clubs, in a way?

Bobby Charlton: No, that's not the case. The obligations of the club to participate in the Premier League will just be the same. Manchester United, because it's a big club, always gets thrown in as being the Big Brother and not worried about the rest. We run a very, very good business and we're very successful. We're a public company, and being a public company you have to be responsible to your shareholders. Your shareholders will be very pleased if you win your matches and you produce your profits. How you do that is the key. If it means that the future is going to be in television or it's going to be in merchandising, or it's going to be in sponsorship and that's the way that you have to raise your money, that's fine. What we have to make sure is that it's not to the detriment of the ordinary fan. The ordinary fan doesn't want to have his favourite football club outside his range, financially. But we have a very rosy future at our club.

Amanda Smith: Sir Bobby Charlton, who scored 198 goals for Manchester United; and who's now a director of the football club.

Now before we go further into Manchester United and the takeover bid, I just want to tease out some stuff about the way sports clubs and leagues operate. Because even though we're constantly hearing these days that professional sport is big business, there are some significant ways that sports organisations differ from most other businesses.

Geoff Dickson, who's a lecturer in Sports Management and Marketing at Central Queensland University, says sports organisations operate as 'cartels' (a term you most frequently hear applied to the drug trade) and it's a different way of operating from conventional business practice and economic theory.

Geoff Dickson: One of the most significant ways in which sports management or sports businesses differ from traditional mainstream or generic business organisations is that they adopt in many instances a cartel-like structure. And cartels usually involve some sort of price fixing control on their organisation's outputs, they allocate customers to each other, and they allocate sales by product or territorial definitions, and they have common sorts of sales agencies. The organisations agree to work with each other, and they agree to essentially co-operate with their competition.

Amanda Smith: So why can't a sports team compete in their market in the same way, say, as the steel industry or the bread business?

Geoff Dickson: Well the difference would be that a sports organisation can't really exist by itself. If a sports organisation has no competition, then it has no reason for competing and it's impossible to compete unless there is another organisation. Whereas McDonald's do not need the presence of Burger King or Hungry Jack to compete, Ford Motor Company does not need General Motors to exist in the industry. And in fact you would tend to argue that General Motors or Holden would be better off if there were no competitors in the industry. If a sports organisation is the only organisation that exists, and it has no-one to play, it is not capable of producing an output.

So the professional sports leagues adopt a number of policies, specifically things like revenue sharing, salary caps and drafts, in an attempt to even up the competition. Because in professional sports or in any sport for that matter, if you put your competitors out of business, you ultimately put yourself out of business.

Amanda Smith: How do sporting organisations avoid the penalties that would be applied to any normal business that operates in that way, Geoff?

Geoff Dickson: Well the issue there Amanda is that there's no doubt that most of the practices the professional sports leagues engage in in this area are a restraint of trade. What they've been successfully able to argue over the years is that they are not an "unreasonable" restraint of trade, which is what in Australia the Trade Practices Act concerns itself with. And what they've been able to argue is that we do need to co-operate with each other because of the nature of our business.

Amanda Smith: And this co-operation to get an even competition, that's about the paradox, I suppose, of trying to ensure the outcome of any game is uncertain, yes?

Geoff Dickson: OK, the way the uncertainty of outcome principle works is it's essentially like knowing who the bad guy or who the killer was in a movie. If you know how the movie ends, you're less likely to maintain a level of interest throughout watching that movie or television show. And if we have some sort of uncertainty as to who's going to win the game, or who's going to win the premiership season, the greater that uncertainty is, the argument is the more popular those sporting events will become. And consequently, in order to maximise the uncertainty of outcome, the professional sports leagues introduced a number of policies that seek to maximise that evenness of competition.

An example of that realistically is television, whereby, again as an example, the Carlton Football Club does not sell access to its TV rights direct to Channel Seven. Rather it is the AFL, as a collective entity, sells the TV rights to Channel Seven and that money is then pooled and drawn upon equally by all teams in the competition. And that is the source of a great deal of frustration for a lot of teams, because the teams that get covered more on television receive only an equal share as those teams who are less frequently on television. And again, that's been a major criticism that the Brisbane Broncos have extended to the structure of the Australian Rugby League in recent years, that they receive as much money through television rights as what some of the lower Sydney-based teams derive from television income. Yet it is the Brisbane Broncos who appear on television, week in, week out.

Amanda Smith: Now say in the case of Rupert Murdoch's bid for Manchester United, Geoff, what are the implications of that for the "cartel" of Premier League clubs?

Geoff Dickson: It's a little bit too early to put a definitive explanation on it. I guess the immediate fear of most other clubs in the Premier League would be the assistance or the greater benefits that might flow to Manchester United, given Rupert Murdoch's involvement through B-Sky-B and his variety of media interests, with their involvement with the Premier League as a whole.

Amanda Smith: Well as I understand it, there aren't some of the same sorts of restraints in British soccer that there are say, in the major sports leagues here. For example, there isn't a salary cap - there are transfer fees for players still in contract moving to another club, and there's things like promotion and relegation of teams between divisions that tries to even up the standard of competition - but without things like maximum wages, is it possible then, for a wealthy club to buy success so the cartel idea doesn't really operate in that league to the same extent we've been talking about?

Geoff Dickson: The whole idea I guess of the cartel structure of professional sports is to prevent a team like Manchester United being able to get some sort of position in the marketplace that they can absolutely dominate all other organisations, or all other teams in the competition. And that the whole idea of the cartel is to prevent that type of team operating at a certain high level, and then have a variety of teams operating at the breadline, so to speak, who simply become uncompetitive and are therefore forced out of business. Which in turn then has long-term implications for Manchester United, because if a variety of teams end up falling out of the Premier League, then all of a sudden Manchester United might end up trying to play with itself every Saturday afternoon!

Amanda Smith: Well are we seeing here the start of a trend towards "super clubs", where some of the most commercially successful clubs with powerful owners do start to change the nature of the competition?

Geoff Dickson: Yes, I do agree with that statement. It's certainly become apparent, not only in Australian sport with the SuperLeague; of course the VFL had their threats of a breakaway competition in about 1984, where the likes of Carlton and Essendon were feeling a great deal of frustration with the socialist practices of the then VFL, and they made it very clear to the VFL that if things didn't change, then they would perhaps pursue their own agenda outside of the control of the VFL.

Amanda Smith: So the cartel idea that a group of sports teams operates within, which is as you say for the best interests of the competition, still is always something that's a source of tension within sports clubs and leagues?

Geoff Dickson: Yes, there's this simultaneous co-operative and competitive force that exists within a professional sports league. And that's what makes I think the operation of a professional sports league such an exciting and dynamic industry which to research. At one minute they're at each other's throats, and the next minute they've got their arms around each other. And it's those dynamics, and the tension between these 12 organisations or 16 organisations, that when we see them compete on the sporting field, there's no doubt that in some respects they are absolute competitors. You know, they're trying basically to smash each other up each weekend. And yet realistically through the week, or at least off the field, they must be considered to be involved in a joint venture.

Amanda Smith: Geoff Dickson, who lectures in sports management and marketing at Central Queensland University in Rockhampton.

MANCHESTER UNITED SONG

Well, what is it about Manchester United that makes it such hot property for media mogul investment? In the UK, there are rules that say an individual can only own one soccer club. So, according to sports business analyst Matthew Glendinning, if Rupert Murdoch is going to own one, Manchester United is it.

Matthew Glendinning: Oh absolutely, it's the plum. But he's not buying it to make money out of the club. I mean although the club makes a fifth of all turnover of Premier League clubs, although it's a great business, he's not buying it to make money out of it. He's buying it for media content, he's buying it for B-Sky-B so that he can guarantee that he gets subscribers for his Pay TV stations, and in particular for the new digital station, B-Sky-B Digital.

Amanda Smith: Give us some sense of the magnitude of Manchester United's commercial growth since it was floated on the stock market in 1991.

Matthew Glendinning: Right, well purely in turnover, say in 1992 its turnover was 20-million pounds. This year, the latest results, the turnover is 87.8-million pounds. It's grown extraordinarily in ways that people would never have expected five years ago. I mean in merchandise terms, it's gone from about 2-million six years ago to, it actually turned over about 27-million last year, although that's now sort of ceilinged out a bit. But I mean the whole commercial structure of Man. United has changed completely. You've got hotels affiliated to it, you've got amazing corporate entertainment, and it's now getting so that Manchester United isn't just a football club, it's a recognised brand.

In fact the football side of Manchester United is just advertising for the brand. So the Manchester United logo now, for example, just has 'Manchester United', it doesn't have 'Manchester United Football Club'. And that enables Manchester United to be used far more readily as a brand for whatever you want to sell; you could sell coffee and put 'Manchester United' on it, you could sell whatever you like. It really is an international brand now more than a football team.

Amanda Smith: Why has Manchester United in particular been more successful at that than other Premier League clubs?

Matthew Glendinning: Obviously a club like Liverpool has a great following, and had a marvellous prestige in the late '70s and the '80s, but you're only looking at say a million Liverpool supporters, where you've got 3-million Man. United supporters. And the other thing is that Liverpool isn't a floated company. Man. United floated in 1991, and so it really geared its commercial activities to maximising revenues for their shareholders. I mean they had to concentrate on that.

And they've got a very astute Chief Executive in Martin Edwards, and he's really overseeing a commercial revolution there, which really has been a benchmark revolution. I mean other clubs have tried to follow it and some have succeeded, but really Manchester United are the only club that are out there on their own really.

Amanda Smith: And now, as of last month, Manchester United has its own dedicated subscription TV station, also the first of its kind. How successful is that?

Matthew Glendinning: Well we don't know yet, because it was only launched on September 10th, but the possibilities are quite extensive. I mean you could eventually get Man. United TV plugged through (if that's the right word) the internet, and in Australia you could see this Man.U TV. Which is really just a magazine program; you see interviews with players, you have competitions, you have quizzes. At the moment you can't see live matches, (although you can see live matches of reserve team games) and you can also see footage from previous years, say from 1997, you can see highlight footage of previous games. But the theory was that B-Sky-B, who are a third partner in Man.U TV, have put money into Man.U TV so that they could get some control of the club and some control of the TV content of the club. But of course now that B-Sky-B have bought the club outright, one wonders quite what the strategic importance of Man.U TV is. But certainly it could be a very popular magazine program, and indeed you could perhaps see pay per view experimented with on Man.U TV before it's experimented on B-Sky-B.

Amanda Smith: Now the Murdoch bid for Manchester United is being considered by the UK Office of Fair Trading at the moment. What are the issues that they're looking at?

Matthew Glendinning: Well they're looking at whether it's anti-competitive. I mean if you've got B-Sky-B owning Man. United, and obviously B-Sky-B have been the paymasters of the Premier League for the last five years. And Man. United are the biggest club in the Premier League. Although they don't officially have a larger say in issues per vote, inevitably they do have a larger say because a lot of the value of the Premier League is based on the worth and the popularity of Manchester United. So people are getting rather upset over here. I mean you have Tony Banks, who's the Sports Minister, as soon as the bid was announced saying, 'Well we've got to look at this, and regulations have got to be put in place to stop this happening'. But really I can't see anything to stop it happening. It's not anti-competitive, I mean media ownership of clubs is nothing new, you see it in Italy, you see it in the US, and I'm fairly sure that the deal will go ahead.

Amanda Smith: Now last week, Rupert Murdoch's B-Sky-B also launched Britain's first digital TV service. Is the interest in owning Manchester United linked to this at all?

Matthew Glendinning: Yes it is, because you need some unique content to sell to the subscribers. It's quite an expensive affair, getting plugged into digital. You have to buy the set top box, you have to subscribe to pay TV. And he really needs something that's going to make people say 'Well, this is a must-buy'. And actually putting Man.U TV on digital is a pretty good idea, because you've got this new product, which dedicated Man. United fans will want to have. Now with B-Sky-B digital again he needs to get the best content for this new platform, and as everyone knows, football is the most popular content, and Man. United the most popular team in the land.

So it's quite a canny bit of business really. I think Murdoch has proved himself to be very astute in knowing what the public really wants and then marketing football. And he can market Man. United even better than Man. United could.

Amanda Smith: Sports business writer and analyst, Matthew Glendinning. And despite what he was saying there, the Rupert Murdoch B-Sky-B bid for Manchester United is still a highly contentious issue for many people involved with the club, as supporters and shareholders.

Michael Crick is the organiser of a group called 'Shareholders United Against Murdoch', which, as the name suggests, is opposed to the takeover.

Michael Crick: Well we think that Manchester United should be run by Manchester United fans. It's a very old-fashioned view I suppose, but we think that that's in the best interest of the club. We want people who want Manchester United to succeed as a football team rather than to see Manchester United succeed as a business, and we don't want people who are there to take profits out of United and use them for other purposes, which is what we think B-Sky-B would be up to.

Amanda Smith: Why do you believe the board of Manchester United accepted his bid?

Michael Crick: Well because they're all going to become very rich men is one of the reasons why they've accepted the bid. I mean the chairman, Martin Edwards, will make 87-million pounds from this deal. Well I calculate that that, together with the money he's made over the years from selling his shares, his profits from being involved in Manchester United are more than all the Manchester United players in history have earned combined.

Now that is wrong, that the owner of a football club should make a lot more than the people who are actually playing for it. I'm quite happy to pay the best players the right sort of sums of money, but an owner who happened to be in the right place at the right time, who went round Manchester buying up people's shares, literally knocking on people's doors to acquire them, and then made enormous profit because of the success of his team, I don't think should be making that kind of money out of the club.

Amanda Smith: Though Michael you're a shareholder and the group you represent are shareholders. Don't you all stand to make a fair bit of money out of this?

Michael Crick: Well we do, I suppose. I mean if we're forced to sell our shares, which we will do if B-Sky-B get more than 90% acceptances, if we're forced to sell our shares I suppose I'll make about 2,000-pounds. But that's not the point, I didn't buy my Manchester United shares to make a profit, and in fact I always send the dividends back. I bought my Manchester United shares to have a share of the club. So did tens of thousands of other people. And indeed seven years ago when the company went public, we were all encouraged, as supporters, to buy shares for that very reason. We're now being told, 'Oh well actually you can't have your shares any longer, B-Sky-B and Rupert Murdoch would like them.'

Amanda Smith: Do you know if the majority of Manchester United's shareholders and supporters are opposed to the takeover?

Michael Crick: Yes I think they are opposed to the takeover, certainly the supporters. The shareholders it's a bit more difficult to say because there are of course some people who've invested in the club purely for investment reasons, who aren't Manchester United fans, but I think the vast bulk of the shareholders are Manchester United fans, and I think most Manchester United fans are terrified by what's going to happen here. We think this club is going to be taken over by this outside body, B-Sky-B, 40% of which is owned by Rupert Murdoch and his News Corporation, and will be used purely as a cash cow to fund the rest of his media empire. And that the football interest, the interest in terms of winning trophies and having an attractive team playing entertaining football, and charging ticket prices that ordinary people can afford, all those interests will be ignored in favour of making bigger and bigger profits for Rupert Murdoch and his colleagues.

Amanda Smith: But isn't it possible that Murdoch will pour lots of money into the club and it'll be even more successful than it is now, both on and off the field? Surely that would be good news for Man. United supporters, if not for other teams in the competition?

Michael Crick: I think that's most unlikely that he will do that. Why should he do that? He doesn't buy Manchester United in order to pour money into it. If he was a Manchester United supporter one could understand him doing that. He has bought Manchester United in order to make money out of it, in order - I mean he's paying an enormous sum of money here, 625-million pounds; he's actually going to have to earn every year, more than 50-million pounds purely to pay the interest payments in order to fork out that kind of money in the first place. No, he's bought United to make money out of it. I can't see him investing yet more money into the team, and if he is going to invest more money in the team, why doesn't he say so?

Amanda Smith: Now what strategies are you using in your campaign?

Michael Crick: Well first of all the government is looking into this takeover, and into the whole question of whether it breaches competition rules in this country, and as to whether it's fair that the primary broadcaster of live footballer in Britain should also own the biggest football club. That investigation is going on now, and we've contributed evidence to that, and so have hundreds of other Manchester United shareholders and supporters. And that could drag on for several months.

At the same time we're also trying to persuade shareholders not to sell their shares to Mr Murdoch and B-Sky-B. There are 28,000 shareholders, about 27,800 of them are individuals, and we've written to all of them, and we will be approaching some of the bigger shareholders individually.

And over the next week or two we will be approaching the financial institutions who own shares. Although they're small in number, there's only about 100 or so financial institutions that own shares, they own 60% of the actual shares. And so they are obviously decisive in this. And we will be approaching them and pointing out to them that in fact although what Mr Murdoch is paying seems a large sum of money, we think that Manchester United is actually worth even more than that, and a lot more than that.

And the whole of football in this country at the moment is changing, as indeed is broadcasting. And the move towards digital television means that before long, you'll be able to have pay per view in this country, whereby individuals pay to watch individual games. The potential for that in terms of United, which is by far the most popular club, and is said to have at least 3-million supporters in this country, and many others all over the globe, I mean I think there are at least a dozen supporters' clubs in Australia, the potential for pay per view and the profits to be made from that, mean that, we think, Manchester United is worth a lot more than Rupert Murdoch is paying here, which is partly of course why he's buying it at this price. And we think that people should hold on to their shares because there are much bigger profits to be made later on. I think that is the kind of argument that may persuade the financial institutions not to sell out.

It's difficult at the moment because of course. The stock markets all over the globe are in a bit of a slump at the moment, and of course the financial institutions will be tempted to make a quick killing on selling their shares to B-Sky-B and Rupert Murdoch in order to offset losses that they've inevitably made on their stocks elsewhere.

Amanda Smith: There's also now talk of other bids coming in for Manchester United over the Murdoch bid, as well as for other of the big clubs in the premier league. Can you constantly keep what I guess you see as the 'wolf from the door', whoever that might be?

Michael Crick: Well I think it's inevitable that my club, Manchester United, will be transferred into different hands. Our hope is that the hands are hands that have got a lot more commitment to Manchester United and to Manchester, and preferably the main players should be Manchester United supporters. There are plenty of businessmen that support the club, who regularly go to games and travel all over the world watching the club, and our hope is that some form of group involving those kinds of people, can be got together.

But at the moment there's not much sign of that happening; there are all sorts of rumours going round. But I think probably Rupert Murdoch and B-Sky-B are just about the worst people to own Manchester United. I mean I don't even think Rupert Murdoch's even been to Old Trafford. The man that he's intending to put in to Manchester United to run the place, a chap called Mark Booth, clearly didn't know anything about the team, couldn't name one of the players when he was asked. These are not the people who have got the kind of passion for football, for Manchester United, and for Manchester, but we want to be running that club.

MANCHESTER UNITED SONG

Amanda Smith: Manchester United, or Manchester divided? And that was Michael Crick, from the group 'Shareholders United Against Murdoch', and Michael was speaking to me there from London.

Well if Rupert Murdoch does get to buy Manchester United, that will add to his North American sports teams; he owns the Los Angeles Dodgers baseball team, as well as stakes in the basketball teams, the LA Lakers and the New York Knicks. And just as a footnote to all this, The Financial Times from this Monday quotes Lachlan Murdoch as saying that News Corporation is looking at buying an Australian sports team. No indication of which team, or even which sport. But somehow, you wouldn't reckon it'd be a struggling netball club, would you?

Well that's The Sports Factor for this week. I'm Amanda Smith and I look forward to your company again next Friday.

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The Sports Factor can be heard on Radio National, 8.30am Fridays (Repeated Friday evenings at 8.30pm).