The BSkyB bid to buy Manchester United
steve greenfield & guy osborn
february 12 1999
A unique club
The news in early September 1998 took the football world by great
surprise: it was the proposed �623m (or $1 billion) deal for Rupert
Murdoch�s BSkyB to buy Manchester United Plc and take control of
Manchester United Football Club; among the most shocked were the dazed
devotees of the Red Devils.
Manchester United is a unique and peculiar sporting phenomenon,
going beyond the traditional notion of local support. While it does,
of course, have a very large group of devoted supporters from
Manchester, it also garners loyalty from all over the United Kingdom
and Ireland. And it has a tremendous fan base in other parts of the
world: the supporters� club in Scandinavia alone has some 32,000
members. This broad, uniquely strong attachment is fundamental to the
One reason for this emotional attachment is historical � the
Munich air disaster of February 1958. This crash resulted in the death
of eight of Man United�s talented "Busby Babes," the
nickname for the young side fashioned by the legendary manager Sir
Dominance on the pitch
The club�s popularity was reinforced when it became the first
English club to win the European Cup in 1968 at Wembley, beating
Benfica of Portugal 4-1. The lineup that evening included George Best
and (Sir) Bobby Charlton, two world-class footballers who were also
extremely popular, the former for his pop star image and the latter
for his internationally recognised sportsmanship.
The years after 1968 were ones of decline and included a season in
the second division, following relegation. But since 1990, the club
has dominated the domestic game under manager Alex Ferguson. Since the
formation of the Premier League in 1992, the club has won the title
four times out of six (finishing second on the other two occasions),
and has won the League and F.A. Cup double twice.
This has been achieved with a group of young players who have risen
up through the youth system, inevitably leading to comparisons with
the Busby Babes. Along the way, Ferguson has added international
players with flair, most notably Eric Cantona, whom he bought cheaply
from arch-rivals Leeds United. During his tenure with the club,
"King Eric" inspired United, and it was clear that fans,
club, and player were entirely at one with each other. Despite a
lengthy ban for kung-fu kicking an abusive opposition fan, the
relationship continued until Cantona announced his retirement from the
game in 1997 to pursue an acting career.
The nub of the deal
At the heart of the Murdoch deal are the broadcast rights that each
football club owns. At present the rules of the Premier League require
a "package sale" � that is, the rights to all Premier
League football games are sold together, most recently to BSkyB in a
five-year contract for some �670m, an agreement that expires in 2001.
This entitles BSkyB to show up to two live games per week,
generally Sunday afternoon and Monday night. The matches are available
primarily to subscribers to Sky Sports, though they can also be bought
through cable companies. The technical quality of the coverage is very
impressive and the influence of BSkyB has been extremely positive in
The problem for BSkyB is that the existing television contract with
the Premier League has been referred to the Office of Fair Trading
(OFT) for a determination as to whether the packaging of TV rights is
anti-competitive. If the ruling is against the contract � and the
hot money from competition lawyers is on this outcome � then the
contract will be considered unlawful and all TV rights will revert
back to the clubs themselves.
This has important consequences: BSkyB would then have to strike a
deal with each club for those rights, and the clubs could seek to
market their own rights or deal separately with other broadcasters.
Furthermore, the digitalization of TV makes it possible for clubs to
move into the broadcasting arena themselves � Manchester United has
recently started its own station, MUTV.
Premier League football has been the feather, if not the cap
itself, for BSkyB, and its loss would be an absolute disaster for the
company, despite its attempts to diversify coverage into other sports.
Here then one can see a strategy emerging, essentially a defensive
manuever to make sure that when the TV contract is either declared
unlawful or expires, BSkyB will have access to the most valuable of
those club rights � those belonging to Manchester United Plc.
This is why BSkyB wants to own Manchester United Football Club: to
protect and bolster the key sport that is the fulcrum of the
station�s attraction for the subscribers. Without Premier League
football and Manchester United, BSkyB would lose much of its appeal in
the consumer sports market.
On one level it might be argued that the match between the leading
non-terrestrial broadcaster and premier football club is complementary
in that the club must be successful on the field in order to maintain
and promote the associated business interests. Football, or rather
exciting and meaningful football, is the key. Without footballing
success a vicious circle ensues � attendance may dwindle, support
for the club begins to drop, and the broadcasting rights decline in
value. Therefore, we might expect BSkyB resources to bolster those of
Manchester United, which might in a perfect world make Manchester
United supporters into BSkyB supporters.
However, there are a number of contentious elements to the deal.
The critics can be divided into three groups: (1) supporters who fear
that the history and tradition of the football club will be further
submerged beneath overriding commercial considerations; (2) those
concerned about the wider effects on football itself and the questions
of how a broadcaster and newspaper publisher can maintain independence
in the reporting of its own club; and (3) those who argue on a purely
business footing that the club�s shareholders have been sold short.
Supporters have started to organize against the bid. The key groups
are the Independent Manchester United Supporters Association (IMUSA)
and the Shareholders United Against Murdoch (SUAM).
The fans� wish list
An initial public meeting of IMUSA attracted over 1,000 supporters.
IMUSA issued a list of ten proposals for assurances to be met by any
organization seeking to take over Manchester United, asking that the
new parent company not interfere with the team; that ticket prices not
be increased unreasonably; that the domestic football structure remain
in place; that the fans be consulted on changes; and so on � in
other words, that the tradition of Manchester United be honored.
The supporters� campaign quickly built up a strong head of steam
and the main target switched to the Office of Fair Trading, whose role
was to advise the Department of Trade and Industry on whether the
offer should be referred to the Monopolies and Mergers Commission. The
OFT received over 350 submissions. The shareholders group also
contacted all individual shareholders urging them not to sell, and
sought to persuade the large institutional shareholders to reject the
bid. Fans were being urged to buy shares on the stock market in order
to give them a voice, for, surprisingly, shares could still be bought
at a price lower than the original BSkyB offer.
The fan pressure paid off and on October 29 the Office of Fair
Trading announced, to much fan rejoicing, that it was recommending to
the Department of Trade and Industry that the bid should be referred
to the Monopolies and Mergers Commission for consideration. The DTI
accordingly asked the MMC to investigate and report on the bid by
March 12, 2020.
The function of the MMC is to consider the possible effects of the
deal with respect to competition in the broadcasting market and wider
public interest matters. Members of the MMC carried out a site visit
to Old Trafford and bought tickets for the match against Leeds United.
It also sent out an "issues letter" to the main parties to
highlight those matters that have been initially identified. One
element is the likely effect on the "markets" of both BSkyB
and Manchester United.
The second question is the public interest issues in relation to
broadcasting, football generally, and specifically Manchester United.
For example: "Whether the merger would lead to an increase in
Manchester United's gate prices, or the prices of any of BSkyB's TV
channels or both." Furthermore the public interests issues are
broadly drawn: "Whether the merger and its consequentials would
lead to English football being run by people with no real interest in
the game itself."
The MMC has been receiving further submissions from fans opposed to
the bid and has also taken formal evidence. One of the supporters who
gave evidence described it as "very tough � two hours of
interrogation, essentially � but there was a genuine sense that they
were exploring the issues and getting as much detail and scenarios as
The Independent Television Commission wants the BSkyB bid to be
blocked, according to a report in the Financial Times. The
Mergers and Monopolies Commission could ignore the advice but it is
likely to take their views on the matter seriously.
Conflict of interest
The wider aspects of opposition to the deal center on the conflict
of interest that may emerge if a leading broadcaster of football owns
one of the teams. The question has been asked as to whether the
commentators could retain a critical objective approach to the club.
This extends to how the team might be covered by the newspapers within
Murdoch�s control, namely The Sun, The Times, The
News of the World, and the Sunday Times.
The other major issue is the consequent role of BSkyB in any
negotiations for the Premier League rights, given that Manchester
United would be enthusiastic for the rights to be sold to BSkyB. Dr.
Adam Brown, a leading critic of the offer, has argued that it will
increase the unhealthy influence of broadcasters at the expense of
fans and the game itself:
This campaign is about the takeover of Manchester United, but
it is also about the future of football. If Murdoch is allowed to
take over Manchester United then it will open the door to similar
TV driven takeovers and harm the game as a whole. The priorities
for the game will be determined by television companies and,
whilst the Premier League and FA may have proved that they are
more interested in TV money than protecting the game, such deals
would rule out forever any chance of keeping football as the top
The relationship between sport and television has altered
enormously since the introduction of satellite and cable television.
Many sports that were freely available on terrestrial television have
been lured by increased sums onto subscription services. The explosion
of live televised football has led to serious concerns about the whole
relationship with critics arguing that the tail (television) is
wagging the dog (sport) and that the armchair fan is taking precedence
over the match-going spectators. What may be particularly galling for
fans of other clubs, particularly notorious rivals such as Liverpool
and Leeds, is that a subscription to BSkyB could be seen to be
financially supporting a club that they loathe.
A bad deal?
The final criticism of the deal has emerged from investment
analysts who argue that the offer of �623m for the Plc seriously
undervalues the company. While it is greater that the stock market
value (approx. �400m), this doesn�t take into account the worth of
the company once the broadcasting rights become available to the club,
as opposed to being packaged with the rest of the Premier League.
Tom Rubython, writing in the October 1998 issue of Business Age,
has suggested that the rights could be worth as much as �500m on
their own, given the potential changes in the market through
digitalization. If this figure is right, then Rubython argues that the
shareholders have been sold short:
If Manchester United had sold the TV rights outright for �500m
it could have paid a dividend equivalent to the then �400 million
market value of the club, put �100 million in the bank and the
shareholders would still have owned the club, which shorn of its
TV rights would probably still be worth some �300 million.
This line of criticism may assume greater significance if
shareholders decide not to sell to BSkyB in the hope of a better offer
Where the deal stands
Of course, the major problem for opponents of the deal is that
Manchester United is a Public Limited Company and legally open to
takeovers of this type. The route to the Stock Exchange has been taken
by a few of the leading clubs in order to raise capital, though the
majority of clubs remain in private hands. It is perhaps surprising
that this is the first such move for one of the major clubs, but the
major financial institutions still see football as a relatively high
risk business, although it may be true that Manchester United are an
But Premier League football in the 1990s has radically changed from
the apparently doomed game of the late 1970s and 1980s. Football at
the highest level has emerged from a hooligan-blighted,
disaster-ridden plague to the brightest, richest sport on the block.
The BSkyB bid makes it clear that football may well be about to move
onto a different, and, for many of the fans, unhappy financial plane.
Since the news of the proposed takeover emerged other major Premier
league clubs have been linked with other media groups, and if the
eventual outcome is in favor of BskyB, it is likely to be only the
first of such mergers.
The whole issue is clouded with political concerns. Most recently
the government-appointed Football Task Force indicated that it
considered that the TV deal between the Premier League and BSkyB was
of benefit to the game as a whole. The general assumption, noted
above, was that this contract would have to be unpicked, but if it was
permitted to stand the whole outlook might change again. Everything
will rest on the determinations of both the television contract and
the MMC report on the takeover that is not due until the end of March.
It remains to be seen whether or not fan power can reclaim some of
the more worthy elements in the relationship between clubs and
supporters. The organization and efforts of the United fans opposed to
the deal has been extremely impressive and very persuasive. It has
been extended beyond just fans of the club towards all football
supporters. At the very least the effect may be to galvanize fans
towards a common cause, the protection of an important part of their
national sporting heritage.