Soccer on the NYSE?
Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I grew up in a soccer household. My dad is from Glasgow, so the ins and outs of football (as we know it anyway) is something I've lived with every day for a while now. Seeing publicly traded sports teams, however, is not something that is very common over here. Most teams are owned by eccentric billionaires or media empires. The Glazer family changed that with the IPO of Manchester United (NYSE: MANU) back in August. While the IPO was widely panned due to the limited control shareholders would have, and the large debt levels the club has; I believe we are coming to the point where these shares are attractive.
Teams are a very tricky thing to bet on as performance on the field has a very large impact on the financial gain of the company. There is TV revenue for Premier League teams, bonuses for cup competitions (FA Cup, Champions League, Europa League), ticket sales, jersey sales, and sponsorships (just to name a few). On the expense side, you have the team (salaries and cost of acquiring players) and the stadium.
Manchester United IPO'd after the conclusion of a rather dismal season (dismal only by their lofty standards) that is beneficial in that the expectations were set relatively low for this year. Manchester United were bounced out of the Champions League (a huge financial hit) and they failed to win the Barclay's Premier League, or any other title for that matter. Since going public they have signed a series of very lucrative sponsorship deals with General Motors and DHL which combined are worth nearly $100M a year in revenue.
Manchester United is also guaranteed to play in the knockout stages of the Champions League, which is a minimum $10M bonus for the year just in competition bonuses and TV coverage. This figure does not include Ticket Sales and merchandising. If they progress further, that number will get exponentially larger. Just as a frame of reference, when Manchester United lost in the 2011 Champions League final, the team earned over $60M just from that competition alone.
All Premier League Clubs, not just Manchester United, are benefiting from the globalization of the sport. The USA is the largest untapped market for Soccer and it is very quickly gaining ground. As viewership rises here in the States, the TV revenue clubs receive continues to rise. Credit Suisse has already upped its growth rate for international TV revenue to 15% per year.
Currently I only see 1 company covering Manchester United (Credit Suisse with a Buy), but I think as the name and company grow more will initiate coverage on the stock. Let’s not forget that Manchester United is the most valuable sports franchise in the world.
This is definitely not a stock for every portfolio, but I feel if you need a consumer discretionary (although it could be considered a staple elsewhere in the world) and a growth stock, this is a name worth diving into.
If you're like me and believe that soccer will continue to gain in popularity here in the US, I think the most direct media play on that is going to be News Corp (NASDAQ: NWS). The stock recently became far more attractive since it announced that it is splitting the publishing side of the business off into its own entity. Television and Cable revenues for News Corp are up 30% and 15% respectively. Fox Sports I believe is one of the key drivers for the increase in viewership. Fox has added to it's lone Fox Soccer Channel to meet the growing demand for English and European soccer matches. It's deals to cover the bulk of the Barclays Premier League and the UEFA Champions League put it in strong position to continue that growth. You could argue that ESPN, which is owned by Disney, is also benefiting from the popularity of soccer as it covers 1 EPL game a week and MLS games throughout the week, but I feel NWS is the more direct play post publishing spinoff.
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