Crossing into the box

If Sky does not play ball, Man United might start its own TV channel. Patrick Tooher reports
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The Independent Online
WHEN Manchester United's Eric Cantona volleyed home the winner in last Monday night's top-of-the-table clash at Newcastle United, it was not just the spirits of the club's Old Trafford faithful that were sent soaring.

Cantona's strike not only took his team to within a point of the top slot, prompting bookmakers to install Manchester United as the new title favourites. It also sent shares in the publicly quoted company to a new all-time high of 284p - a rise of more than 40 per cent this year alone.

The improved prospect of a lucrative Uefa Champions' League campaign next season was the most obvious reason for a renewed buying interest. But what really intrigued investors were stories that Manchester United is looking into the possibility of establishing its own television channel. Such a move could lead to a dramatic re-rating of the company's shares, given the City's current love affair with anything media.

The speculation forced the club to take the unusual step of announcing it had "no firm plans" to establish its own TV station before adding that if the big broadcasters were by-passed: "The money potential is tremendous but there could be potential difficulties."

At the moment, TV rights to matches are negotiated collectively by all 20 Premier League clubs with satellite broadcaster BSkyB. Under the terms of their pounds 305m, five-year deal, revenues are divided on a more or less equitable basis. While the pounds 2.9m Manchester United received last season was the biggest in the Premier League, it paled into insignificance compared with the pounds 23m generated last year from merchandising activities such as the sale of replica kits, videos and other branded goods.

With the BSkyB deal due to expire at the end of next season it is hardly surprising that Manchester United has been busy investigating ways of maximising income from television.

A year ago the club began a feasibility study into exploiting its strong name by setting up its own dedicated TV channel. It concluded that the costs associated with going on to satellite would be too expensive, but teaming up with one or more cable operators to offer exclusive access to live home games was a definite starter. In particular, the survey found that the club had more than 2 million fans - and therefore potential subscribers - in the UK alone, who would also provide a ready-made market for off-the-field marketing such as direct mailing to boost sales of club products.

During the summer close season, when fans and fund managers alike were fretting over the sale of three of its best players - Mark Hughes, Paul Ince and Andrei Kanchelskis, United reportedly made a preliminary inquiry to the Independent Television Commission, the commercial broadcasting regulator.

Plans to go it alone received fresh impetus when the Office of Fair Trading said it was looking into the possibility that the Premier League's deal with BSkyB could be judged a cartel.

"United could do nothing on their own under the existing contract with BSkyB. Other clubs would block them," says a source close to the television negotiations. "The chance of MU-TV happening is very small."

But the club could earn even more by sticking with the Premier League but televising games on a pay-per-view basis.

For example, it is estimated that last Monday's thriller could have generated pounds 30m alone in TV revenues - more than 10 times the amount either club earned from TV fees in the entire 1994/95 season. The forecast assumes 3 million armchair viewers would be prepared to pay just less than pounds 10 a go - not unreasonable given that the price of the cheapest ticket for the Newcastle game was pounds 13.

How all that money would be distributed under a pay-per-view system is unclear but, as we report on page 3, the top clubs will be feasting from a much bigger television cake next time round.

And if the clubs fail to agree a formula, Manchester United is ideally placed to take part in another sure-fire money-spinner - an extended European Champions League.

Whatever the outcome, television seems destined to become Manchester United's most significant income stream over the next few years "It's a goldmine," says Richard Kurt, who run the club's independent supporters' association.

As for investors, so long suspicious of quoted clubs, they are only now coming to terms with the strength of Manchester United's unique franchise.