Apple To Buy Manchester United? A Futuristic Buy (NASDAQ:AAPL)

A couple of days ago it was reported that Apple (NASDAQ:AAPL) may be in the race to acquire football club Manchester United (NYSE:MANU). I own an iPhone, I watch football matches when I can and at this moment while writing this report I have a livestream opened in one tab watching the World Cup match in Qatar between Belgium and Morocco. While I have followed Apple product developments for years and I have been raised with football, it is really hard to rhyme Apple with buying Manchester United. Maybe there is something we are missing.

Unrest at Manchester United

Right now seems to be a horrible moment to acquire Manchester United. Iconic footballer Cristiano Ronaldo recently left Manchester United. His time at the club can be described as unlucky with frequent clashes with coach Erik Ten Hag who successfully led Ajax to three consecutive titles in the Dutch competition. While taking players Antony and Lisandro Martinez with him to Manchester United, he has not been able to consistently improve performance of Manchester United and the animosity between Cristiano Ronaldo and Erik Ten Hag further added to the unrest while Manchester United occupies the 5th spot in the Premier League, just one spot higher than last season’s ending. The unrest climaxed with an interview from Ronaldo where he said he had no respect for the trainer and that the gap with the competition is bigger than expected.

Lack of success

The Glazer family took control of Manchester United in 2005, but big successes have remained absent. From a club such as Manchester United, winning the Premier League is a must along with success in the Champions League, the biggest and most prestigious football tournament for clubteams. Initially, there have been successes as Manchester United won the Premier League in three consecutive rows from 2007 until 2009 and after that in the season 2010-2011 and 2012-2013 with success in Europe with winning the Champions League in 2007-2008 and the Europa League in 2016-2017, but that is not enough for a club such as Manchester United. The club hasn’t won the Premier League since 2014 and successes in European competitions were booked years ago. So, for the sporting successes you don’t have to buy Manchester United.

Cristiano Ronaldo also slammed Manchester United stating that the training facilities had not changed since he left Manchester United for the first time more than a decade ago. Looking at financial performance, Manchester United is not quite successful either.

The company has seen its adjusted EBITDA decline since 2017, the year in which it won the Europa League. It’s commercial revenues seem to be hitting a peak at roughly £275 million and in the pandemic years 2020 to 2022, revenues declined and unsurprisingly earnings also declined. So, Manchester United is a story of no success on the pitch and no success in the books.

Apple… why?

So, the big question is why would Apple be interested in Manchester United. Maybe the question that should be asked first is: why would anyone want to own a football club? The reason for many wealthy owners is: prestige. I tend to write mostly about airlines and aerospace and for airlines there is the saying about how you can become a millionaire in the airline industry: “Start out as a billionaire”. The joke likely originates from Richard Branson who took over the airline we now know as Virgin Atlantic. A similar thing holds for football clubs. People with wealth don’t buy football clubs because it is easy money. Often times, it is the prestige element that convinces them to own a football club pumping in millions of dollars that often do not quite pay themselves back especially for large football clubs.

Right now, we are seeing that the owner of Inditex, which owns fashion chain Zara, is interested in acquiring Manchester United but Sir Jim Ratcliffe is also interested in acquiring Manchester United and former football player David Beckham is also said to be interested in Manchester United via a consortium. All three individuals have one thing in common, they have experience with owning a football club. Amancio Ortega from Inditex owns Deportivo La Coruña active in the third division in Spain, David Beckham owns Inter Miami active in the MLS together with the Mas brothers and Ares Management while Ratcliff owns OGC Nice active in the Ligue 1. None of these owners has any experience with owning a club such as Manchester United, but Ratcliffe’s plan of bringing OGC Nice to the European tournaments is running one season ahead of schedule. It is said that he normally eyeballs a three-year pay off for investment. With Manchester United likely costing around $7 billion that is unlikely to happen, but Ratcliffe has previously shown interest to acquire Chelsea after sanctions against Russia forced a change of ownership. Long story short, football clubs are often pet projects and more often than not they do fail to pay off their investment.

Apple is really the odd duckling in the group and one can wonder why they would be interested in Manchester United. Apple has an annual revenue of nearly $366 billion, so the business results that Manchester United shows is not at all interesting to them. The twelve-month trailing cash flow from operating activities is over $122 billion with $48.3 billion in cash so the tech giant can easily buy Manchester United, but one can wonder why they would even be interested in doing so.

For an answer, we have to look into Apple’s diversification. In 2019, Apple launched its streaming service Apple TV+ and while Apple has no experience owning a football club this is where a big answer to Apple’s potential lies. In June, Apple announced it would be streaming MLS games starting in 2023 for 10 years. This is where acquiring Manchester United could fit in: Expanding the Apple TV+ sport offering. MLS games will cost $99 per season and it is estimated that the company has 20 million to 40 million subscribers. The revenue potential for streaming games from Manchester United would be around $200 million to $400 million. That is of course assuming that everyone subscribes which will not be the case, but it serves as building block for Apple streaming services in Europe.

But Manchester United has something that other teams do not have. For years Manchester United was the most valuable football brand in the world, but absence of success in Europe and the Premier League cost them that number one spot as they are now surpassed by Real Madrid. So, if you want to have a strong brand, you need success. So, in some sense owning Manchester United is not interesting at all to Apple because the team does not perform well. However, being masters of brand value and strength Apple knows one thing and that is that Manchester United is extremely popular in Asia where there is a lot of potential for Apple TV+ streaming services. Manchester United was one of the first football clubs to strengthen its brand value in Asia and they continue doing that with training tours in Japan, Thailand and China. So, Manchester United can add appeal to Apple TV+ for people in Europe as well as Asia. Especially in Asia people feel strongly connected to brands especially Western brands, so that is where a lot of value can be unlocked.

So when it comes to streaming, there is some value in expanding the product offering but most value is likely based on expansion of the subscriber base in Europe and Asia using a strong sports brand.

Does it make sense to pay $7 billion to own Manchester United in order to expand? Hard to tell. Let’s say that acquiring Manchester United will help Apple expand the subscriber base by 20 million doubling from the lowest estimate for Apple TV+ subscribers, then we would have around 7 euros in monthly revenues or $7.25 per subscriber or $1.74 billion in annual base subscription revenues plus $2 billion for a total annualized revenue of $3.72 billion. Assuming no costs, which is unrealistic, this would mean that within 2 years the $7 billion that Manchester United would cost is earned back. Assuming 25% margins, it would take 8 years. I wouldn’t really consider acquiring Manchester United as an attractive deal solely for its potential to add to streaming revenues.

Is there something else that could make Manchester United attractive? One would think that some sort of Manchester United flavored Apple gadgets would do it, but I don’t see Apple as the brand that would be opting to go that way as they benefit more from separated brands each with their own strengths. I also don’t believe they are extremely interested in buying Manchester United to have a prominent placing on the shirt. Where I do see opportunities are with healthcare and fitness and embedding smart systems and health monitor in a closed loop with smart homes.

These days a lot of tech is involved in the highest branches of sport and Apple could be interested in applying that to the top sport level. There are talks about Apple funding a new stadium and Cristiano Ronaldo did mention that the Carlington training complex is obsolete. Tech infusion from Apple could create a sport tech complex and stadium where healthcare and fitness monitoring could be built into smart home or smart complex. That is the kind of integration that seems futuristic, but might be highly interesting. This new approach to top sport could be valuable to Manchester United but even more so to Apple, which could derive smart home fitness solutions, new consumer fitness devices and potentially set up something that would look a lot like smart training centers that could be applied in gyms but also in healthcare, medical rehabilitation and physiotherapy. It is extremely farfetched, but in some sort of healthcare oriented route with seamless smart integration with the surrounding is what I think could for Apple provide most value.

Conclusion: An odd buy for Apple with futuristic opportunities

If you look at the combination of Apple and Manchester United, it sounds like something that never will work, but maybe it is more like chocolate and mint… some people like it, some people don’t see the point of it and despise it. To me, Apple acquiring Manchester United is something that has a high degree of uncertainty of success, but I could see value in acquiring Manchester United for its brand value to expand the streaming services in Europe and Asia and increase the product offering of the streaming services. Furthermore, data in top sport and data insights in fitness has become increasingly more important over the years and, while it might sound somewhat far-fetched, Apple could be using a new stadium and training complex infused with technology and smart integration to test and develop a healthcare smart home/surrounding integration as well as new software and products.

If Apple is not interested in either developing its streaming services or strengthening its healthcare and fitness products and services, they better do what Cristiano Ronaldo did, and that is to leave Manchester United for what it is… an underperforming sports team.