Manchester United's 20 Million Euro Loss to Real Madrid

Manchester United (NYSE: MANU  ) was eliminated from the Champions League round of 16 yesterday after their loss 2-1 to Real Madrid left them down 3-2 on aggregate.

While advancing in the Champions League is never certain, Manchester United was sitting pretty till a red card for Nani turned the tide. While we cannot know for sure how much money Manchester United missed out on by not advancing in the Champions League, with public data from UEFA we can estimate it fairly well.

The game
United took the lead in the second half from a Real Madrid own goal and looked likely to advance when a red card to Nani turned the tide. After the red, with 35 minutes to go in the game and a one-man advantage, Real Madrid scored two goals in quick succession to make it to the quarterfinals.

What it's worth
While we cannot know for sure how much revenue Manchester United missed out on by not advancing in the Champions League, we can estimate it fairly well.

In August, UEFA released its UEFA Champions League revenue distribution system for the 2012-2013 season. UEFA estimated that it would take in total gross commercial revenue of 1.34 billion euros from media rights and commercial contracts. For the first 530 million euros of revenue, 75% goes to the participating teams while 25% goes to UEFA to support European soccer. Revenue above 530 million euros is split 82%-18%. So roughly 910 million euros is distributed among the clubs participating.

That 910 million euros is then split into two categories:

  1. 500 million euros in fixed payments for participation and performance bonuses.
  2. 410 million euros in variable amounts based on the proportional value of each club's home association's television market.

Each of the 32 sides involved in the group stage collected a base fee of 8.6 million euros with performance bonuses of 1 million euros for each win and 500,000 euros for a draw in the group phase.

Manchester United won four games in the group phase and lost two, for a fee of 12.6 million euros. The teams competing in the round of 16 could expect a fee of 3.5 million euros.

The question remains, how much could Manchester United have made if it had gone further?

Round

Payment

Quarterfinals

3.9 million euros

Semis

4.9 million euros

Winner / Runner-up

10.5 million euros / 6.5 million euros

Total for winner

$19.3 million

Before Tuesday's match, Real Madrid Coach Jose Mourinho had said this game "looks like a final." Afterward, he said, "At 11 vs. 11, I doubt we could have won the match." While the ref's call was debatable, the game is long done and Manchester United lost.

Skipping the variable payments, we can easily estimate the opportunity cost of Manchester United losing yesterday's game at somewhere between 4 million euros and 20 million euros.

That's before the untold revenue from ticket sales, merchandise, food and beverages, increased squad value, and, of course, sponsorship bonuses from Manchester United's sponsor roster of AON, General Motors, and Nike.

If we take Mourinho's finals comment literally and assume whoever won this game would win the Champions League Final, it's easily a 20-plus-million-euro loss.

Foolish bottom line
While I find the business of football very interesting, I wouldn't touch Manchester United's stock with a 10-foot pole.

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