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With Moyes out, stocks rise for Manchester United

Manchester United's manager David Moyes


Following a legend is never easy in business or sports. Just ask Tim Cook, who was selected by iconic Steve Jobs to replace him at the helm of Apple. His specialty was not the creation and marketing of sexy high-tech devices but managing the supply line.

Despite some unflattering comparisons with his predecessor, Mr. Cook has at least managed to maintain a winning record and keep investors relatively content. That was not the case for David Moyes, who has been fired from his job as manager of Manchester United, the world's best-known soccer brand, after a mere 10 months on the job.

After the news of Mr. Moyes's ouster, the publicly traded club's stock price jumped to its highest level since the revelation last year that legendary manager Alex Ferguson was retiring after a remarkable 26-year run, during which he crafted an unparallelled record of success on and off the pitch.

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Mr. Moyes had been hand-picked by fellow Scot Sir Alex as his successor, but he lacked the latter's early record of success and lost the support of the club's controlling shareholders, the Florida-based Glazer family, during a dreadful year that saw the celebrated squad slide to its worst-ever showing in the Premier League.

His sacking still must have been painful for the Glazers, who also own the underperforming Tampa Bay Buccaneers of the National Football League. They had handed him a six-year contract with a hefty annual salary of £4-million ($7.4-million), in the hope he could duplicate Sir Alex's magic and keep the gravy train on track while they stayed in the background counting their fat profits.

Instead, they face a costly buyout and the prospect of somewhat narrowed revenue streams stemming from the club's surprisingly poor performance.

The onus now is on the Glazers to restore the team's on-field lustre, starting with a new manager with a proven track record at the sport's highest level and some heavy spending on new players. Dutch national team manager Louis van Gaal, who has managed such powerful sides as Barcelona, Bayern Munich and Ajax, is regarded as the heavy favourite for the post. Sir Alex is apparently being left out of the loop this time.

"The Glazers have thus far been asked to only enhance the club's financial prospects with commercial tie-ups, safe in the knowledge that the on-field stuff ran itself [under Sir Alex's skilled command]," said Dave Boyle, a soccer writer and researcher based in London. "They essentially flunked the biggest call they had to make since they bought the club in 2005. Now the price they pay is that there are no easy or cheap options."

With only a few games remaining in this season of discontent, Manchester sits at a dismal seventh, well outside the top-four placing needed to qualify for next year's Champions League, its first miss in nearly 20 years. This is more than a matter of prestige. The lucrative European club tournament garnered nearly €36-million ($54.8-million) in prize money for Man U last year, as well as filling all of the nearly 76,000 seats with rabid, gear-buying fans for each home game at the club's Old Trafford stadium.

Gross revenue this year and next may not be affected much by the on-field decline, because of several recent marketing scores. These include new tie-ins in Asia and a record annual haul of £53-million from a seven-year shirt sponsorship deal with Chevrolet that kicks in next season, regardless of the club's absence from the high-profile Champions League.

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"They're a marketing juggernaut," said Marc Ganis, president of SportsCorp Ltd., a sports industry consulting firm based in Chicago. "But they will have lost revenues from lack of participation in certain of the tournaments. This highlights just how important Alex Ferguson has been."

Still, unlike, say, such perennial also-rans as the Toronto Maple Leafs and Chicago Cubs, which keep raking in big dollars regardless of their performance, Man U is more in the mould of the New York Yankees. It needs to get back to the highest level soon if it wants the big money to keep pouring in.

"One year is a blip," said Mr. Ganis, who knows the Glazers well. "Three years could start tarnishing the brand."

In the meantime, though, Man U is changing right before the watchful eyes of its diehard fan base.

"A big sports club can get by without success for years, but I'm not sure a club like United, with its business plan, can," Mr. Boyle said. "Sports clubs can profit-maximize or glory-maximize. There's a sweet spot where you can do both, which is where United have been. But that's partly because of a unique circumstance – 26 years of a manager with an astonishing aura meant he could transform base metal into gold, player-wise.

"From here on in, United are like other clubs. It's like Apple losing Steve Jobs. The machine keeps running, but they've joined the ranks of everyone else."

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About the Author
Senior Economics Writer and Global Markets Columnist

Brian Milner is a senior economics writer and global markets columnist. In a long career at The Globe and Mail, he has covered diverse business beats, including international trade, the automotive industry, media, debt markets, banking and the business side of sports. More


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