Manchester United (NYSE:MANU) has done a fantastic job of diversifying its revenue streams away from ticket sales and broadcasting contracts to give the club a step up on the competition. This money allows the club to invest in better players and challenge for a top place in the Premier League every season. Still, the single most important factor for Manchester United remains the performance of the team, specifically, that the club stays in the Premier League. Read on to learn how Manchester United's on-field performance affects the club's finances.

Source: Manchester United.

Since the Glazer family took over Manchester United at the end of 2005, the club has made sponsorship money and retail sales a much larger percentage of its business.

Source: Manchester United.

Commercial revenue grew 24% during the 2013-2014 season to £189.3, making that segment 43.7% of total revenue. Commercial revenue share is projected to grow to over 50% this season as broadcasting revenue drops and Chevrolet takes over as kit sponsor for £44 ($70) million a year. This deal is fantastic for the club as it features no provisions for if the team's performance suffers.

Commercial revenue will also certainly grow next season (2015/2016) as the Adidas deal to license and sell the club's retail goods worldwide starts at a whopping £75 million a year, up from the current deal with Nike that has averaged £36 million annually the past three years.

Manchester United can secure these great sponsorship contracts because of the club's history as one of the top clubs in the Premier League and Europe.

Source: Manchester United.

After a seventh-place finish in the 2013/2014 Premier League Manchester United is out of European competition for the year. This low finish directly affects revenue in two ways. First, the current Nike contract and the upcoming Adidas contract both get reduced if the team does not play in the Europewide Champions League. For instance, this year the Nike contract's minimum guaranteed revenue is reduced by £2.5 million (about 10%) as the club is not participating in European competition. The Adidas contract would be reduced by 30% a year if the team is not in the Champions League for two consecutive seasons, which based on the contract could only first take effect in the 2016-2017 season. In the worst-case scenario, the Adidas contract is halved if the team is relegated.

The huge opportunity in broadcasting
Team performance also affects revenue through TV money. Sports is one of the few televised entertainments that people watch live. This makes sports programming more valuable each year. The current deal for broadcasting rights for the Premier League is £5 billion over three years from last season to next season, and is only expected to rise.

The most important thing is that Manchester United stays in the Premier League, as the broadcasting revenue clubs get in the Football League Championship is a fraction of the money available to Premier League teams. Not including variable payments, each club in the Premier League gets £52 million per season from TV broadcasting.

Within the Premier League, clubs' share of TV money depends on how they finish, as well as how many games are shown live on British television. Each place in the Premier league is worth £1.236 million, with the top finisher getting £24.7 million in merit payments and the last place finisher receiving £1.236 million. For each game shown live teams get £780,000. Manchester United's massive fan base is a competitive advantage here as broadcasters want to reach the largest audience possible and thus show a disproportionate number of Manchester United games live.

The real area that clubs can get an advantage is by playing in European competition. As with the Premier League, the value of Champions League to broadcasters continues to rise. The current value of the Union of European Football Associations TV distribution rights is €1.34 billion a year, with €900 million of that going to the Champions League, €200 million to the Europa league, and UEFA keeping the rest. The average English club earned €37 million from participating in the Champions League last year. As Manchester United did not qualify, the club gets no money for playing in European competition this year, so broadcasting revenue is expected to decline by 30% year over year to roughly £100 million.

With the number of people watching soccer continuing to grow, especially in the U.S., the clubs that will benefit most from the increased viewership are those with the strongest performance on and off the field. There's a virtuous cycle as the clubs with the best off-field performance can invest in better players, enabling the club to perform well on the field, and bringing in a disproportionate number of new fans as more people follow the sport.

As long as Manchester United can resume its winning ways, the club's off-field financial performance should reward shareholders for years to come.