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Independent Manchester United Supporters Association

BSkyB's bid for Manchester United

Issues of wider public interest

28th September 1998

The Wider public interest case for a referral to the Monopolies and Merger Commission

1.

Why a reference is needed to address concerns in addition to those about competition

1.1

We understand that since 1979 the government has operated a policy when considering references of mergers to the Monopolies and Mergers Commission which has seen the issue of competition as the predominant matter to be considered by the Secretary of State in deciding whether or not to make a reference. Nonetheless, the Secretary of State retains a broad discretion to take into account matters of wider public interest . Indeed, we understand that references have continued to be made on other grounds where necessary; see Credit I.yonnais/Woodchester Cm 1404 (1991).

1.2

In our submission this is a case where it is appropriate that wider considerations should be taken into account in addition to any adverse effect on competition. This is very much a test case. It is clear that if this merger goes ahead it will be followed by the take-over of other football clubs by media/communications companies. Already, for instance, Carlton have been linked to Arsenal and it is reported that Tottenham are negotiating with ENIC who have strong links with Time-Warner.

1.3

Football has been dogged by weak leadership. This problem was specifically identified by the late Lord Justice Taylor in his report on the Hillsborough Stadium Disaster (Cmnd Paper 962 at paras 51-58). The Football Association is supposed to be the game's regulatory body. However, it has been powerless in the face of demands from the top clubs and, in reality, now largely acts as their spokesman. The directors and chairmen of individual clubs, especially the larger clubs, are more concerned with what is financially best for them rather than the wider interests and future of professional football.

1.4

We do not think it right that football should just stumble into what are potentially far-reaching changes without a full detailed investigation about their impact on supporters and the future of the game. We believe there are a number of matters of public interest which the Secretary of State should consider in deciding whether to make a reference in addition to matters of competition.

2.

Introduction and background

2.1

Football is not just another product like a soap-powder, car or washing machine. It is part of our national heritage and culture - the people's game. In the words of Lord Justice Taylor in the Hillsborough report at para 10), "Football is our national game. We gave it to the world." In 1990 it is estimated that half the population - 26 million people - watched England play West Germany in the World Cup semi-final.

2.2

Football clubs started off as local community organisations. Some clubs such as Everton, Aston Villa and Wolverhampton Wanderers originated from church teams. Others were old school teams, pub teams or works sides. Manchester United evolved from a team of railway workers from the carriage and wagon department of the Lancashire & Yorkshire Railway's engine shed at Newton Heath.

2.3

In was not long, however, before these community based clubs became limited liability companies. The impetus for this change was the rise of professional players and the desire to purchase or rent better football grounds. Clubs have traditionally had a precarious position in English law in relation to their ability to own property with unincorporated associations having no legal personality at all. Limited liability companies were the obvious answer.

2.4

The creation of limited liability companies brought with it the danger of commercial exploitation. To prevent this the FA imposed rules on football companies to protect and preserve their sporting natures. Directors were unpaid, dividends restricted and the grounds could not be sold off for profit. Some of these provisions remain in place today in the FA's Rule 34 (see Appendix 1). League football's communal character was maintained by redistributing money from gate receipts, sponsorship and television form the big clubs to the small.

2.5

The situation began to change in the early 1980's. In 1981 the FA allowed full-time directors to be paid and Martin Edwards almost immediately became chief executive at Old Trafford. The break-away of the Premier League, the ending of redistribution of wealth in football, the public grants to redevelop grounds in the wake of Hillsborough and the wealth provided through exclusive television contracts all combined to turn the major football clubs into lucrative investments.

2.6

The growing wealth in the top echelons of the game saw increasing numbers of businessmen involving themselves in football - not because of their support for their team - but for personal gain. They sought to turn football from being a sport into a business. The FA rules against profiteering in football were neatly side-stepped by the formation of holding companies - such as Manchester United plc.

2.7

This merger is a further significant development which could see the end of football as we now know it in England. It will mark the end of Manchester United as a independent entity. Up until now the football club has been a largely self contained operation. Even when it became a public limited company the football club remained the core of the business. This will not be the case once Manchester United plc become just one small part of News Corporation's global media empire.

2.8

We submit that this merger and others like will have the following detrimental effects on football supporters, football clubs and football generally.

3.

a) the views of supporters will be further marginalised

3.1

Football supporters are part of the lifeblood of the sport. Without the supporters to create the atmosphere the whole spectacle of professional football would be gravely diminished. Manchester United enjoy loyal and dedicated support from large numbers of supporters. This support has been maintained both in times of success and failure on the football field.

3.2

The wealth of football clubs generally is largely generated through supporters. They contribute through their payments at the turnstiles, purchase of souvenirs, replica strips etc. and through revenue generated by them watching the game on television.

3.3

However, despite their importance, the views of football supporters have largely been ignored by those who run the game. This was expressly acknowledged by Lord Justice Taylor in the Hillsborough Report at para 53 where he stated:

"As for the clubs, in some instances it is legitimate to wonder whether the directors are genuinely interested in the welfare of their grass-roots supporters. Boardroom struggles for power, wheeler-dealing in the buying and selling of shares and indeed of whole clubs sometimes suggest that those involved are more interested in the personal financial benefits or social status of being a director than of directing the club in the interests of its supporter customers. In most commercial enterprises, including the entertainment industry, knowledge of the customer's needs, his tastes and his dislikes is essential information in deciding policy and planning. But, until recently, very few clubs consulted to any significant extent with the supporters or their organisations."

3.4

Manchester United are no different from most clubs. Martin Edwards has refused to meet the supporters organisations, including IMUSA, despite numerous requests. No supporters' representative sits on the board of either the football club or the public limited company. No attempt has been made to consult supporters about this proposed merger or obtain any guarantees on their behalf.

3.5

We submit that the supporters views and interests will be even further marginalised if Manchester United become simply one part of the News Corporation Empire. We also believe that this will be the case with supporters of other clubs who are taken over in this way.

4.

b) the exploitation of supporters

4.1

Just as football is not just another commodity so football supporters cannot be seen as ordinary consumers. By and large football supporters do not change brands depending on quality and price. Once you become committed you can never experience the same emotions for any other side. Only when watching your team will you feel the sense of anticipation prior to the match beginning, the elation when they score a goal and the despondency when they lose. Deep loyalty to clubs have often been built up in families over many generations.

4.2

A report produced by the City analysts UBS entitled UK Football plc: The winners take it all and cited by David Conn in his book entitled The Football Business, 1997, Mainstream Publishing says the following about football supporters:

"The football fan as a captive customer.
As a business, football enjoys a particularly valuable and often brand-loyal customer base: the fans. Many fans inherit their clubs from parents or friends or by dint of locality, and as such become captive customers (it is unlikely they will change their colours)."

4.3

A side-effect of this loyalty is that football fans are ripe for exploitation. Recent years have demonstrated that supporters will endure a great deal to continue to watch and be identified with their team. The disgraceful remarks of two of the directors of Newcastle United who were caught openly bragging about their exploitation of supporters has not dented fan loyalty to that club. Manchester United's support is stronger than ever despite increasing commercial exploitation of supporters including 14 new strips since 1992.

4.4

The main motivation of BSkyB in taking over Manchester United is not love of football. Should the Restrictive Practices Court rule against the ability of the FA Premier League to negotiate collectively BSkyB want to preserve their position by having control of the biggest club. They want an important seat at the table in any future collective negotiations including over a breakaway European super league. As Raymond Snoddy and Jason Nisse explained in a recent article on the merger (The Times 9.9.98),

"BSkyB's prime purpose in buying United is as an insurance policy to protect it's exclusive live football. In January, the Restrictive Practices Court will consider whether the Premier League is an illegal cartel that cannot collectively negotiate television rights. If the case were proven agreements between BSkyB, the BBC and the Premier League could be struck down and television companies would have to negotiate with individual clubs. The Manchester United deal subject to approval be shareholders and regulators would at least give BSkyB the right to televised games at Old Trafford. The insurance policy could also work in the longer term. The BSkyB Premier League television deal runs out in 2001 and after that a number of clubs may be tempted to use digital television to create their own football channels."

4.5

The interests of Manchester United supporters are of a secondary, if any, importance to BSkyB. We are concerned that this merger will lead to them facing even greater exploitation than is already the case. In particular,

 

4.5.1

watching football games at a stadium and on television are a partial substitute for each other. As a result of this merger BSkyB will obtain a monopoly over watching United home games in both mediums. All things being equal, the mere fact of common ownership of these partial substitutes could be expected to see prices rising both for match tickets and watching on television;

 

4.5.2

supporters will face still greater exploitation through the costs of kit replicas/souvenirs etc.;

 

4.5.3

team selection could be determined not for football reasons but to serve the commercial interests of News Corporation (see further paragraphs 5.3.1 (i) and 6.4.1 in relation to this);

 

4.5.4

kick-off times could be subject to further considerable disruption should News Corporation want to show live games in other parts of the world including south-east Asia where they have extensive television interests.

5.

c) The heritage and traditions of Manchester United

5.1

Manchester United are not just a business. Despite their success and international support they like other football clubs remain an integral part of their local community and the heritage of the country generally. Particularly, since Sir Matt Busby, Manchester United have become renowned the world over for their flair and tradition of attacking, entertaining football.

5.2

Football is a game of great drama and emotion which touches many peoples' lives. The tragedy of the Munich Air Disaster is indelibly written into history of the club and football generally. It is the dying wish of many supporters that their ashes are scattered on the 'sacred turf' at Old Trafford. As the United Review stated in back in 1937,

"'Manchester United' stands for something more than any person, any player, any supporter. It is the 'soul' of a sporting organisation which goes on season after season making history all the time."

5.3

We are concerned that once Manchester United loses its independence and becomes part of the Murdoch empire then all this will be jeopardised. In particular,

 

5.3.1

the interests of Manchester United could be sacrificed to the overall commercial interests of News Corporation. Thus,

  1. News Corporation attaches great importance to increasing their penetration of the Asian market. One strategy they might adopt to achieve this goal would be to ensure that United's first team includes popular Asian players. Indeed, already there have been press reports that representatives of BSkyB have been making enquiries about Hidetoshi Nakata, the Asian footballer of the year;

  2. players could be sold to suit the interests of News Corporations' global empire despite the adverse effect this might have on the club. In 1990 Rupert Murdoch's empire came near to global bankruptcy forcing them to sell off large numbers of assets;

  3. there is currently no legal obligation for United to negotiate with more than one supplier in relation to broadcasting rights and it is unlikely there will be any arms length negotiations with BSkyB who will be the effective monopoly broadcaster of United's games. Consequently, it is questionable whether United will receive full value for these rights;

  4. it is likely that United will have any choice but to be supplied by BSkyB with hardware etc. and, consequently, it is again doubtful whether they will receive full value for these products;

  5. If a European Super League comes to fruition it may be in United's best interests to join but would BSkyB permit this if they did not have the television broadcasting rights.

 

5.3.2

that at some stage in the future the ground could be moved to another part of England or even another country as has happened with other sporting acquisitions by News Corporation;

 

5.3.3

the distinctive identity of the football team, including the red and white strip, could be threatened if they conflict with News Corporation's commercial interests.

6.

d). The impact of this merger on football generally

6.1

It is our submission that this merger warrants closer investigation by the monopolies and mergers commission not just because of its impact on Manchester United but because of its wider implications for football generally. As stated in paragraph 1.2 this is a test case.

6.2

Our concerns about the future of football are not fanciful. In Australia, Rugby League was thrown into turmoil by the intervention of Rupert Murdoch through his cable TV company, Foxtel. In 1994 attendances were at an all time high and the sport dominated the television ratings. Foxtel wanted TV rights to attract subscribers to the company but they were contracted to a rival company. Foxtel, therefore, decided to try and establish a rival 'super league' by tempting more than 200 players to defect with huge salaries and cash bonuses. The game was deeply damaged with poor TV ratings and attendances becoming the norm in both leagues; see Hiltzik, The Los Angeles Times, 25.8.97.

6.3

In Mexico, two media conglomerates own four of the 18 first division clubs, all of whom are linked to one of the two broadcasters that transmit every league and cup game. These teams regularly swap players. They organise competitions and play a part in arranging kick-off times. They determine who will represent Mexico in international competitions. This is not based on winning domestic trophies but viewing figures; see Downie & Twain, The Guardian 12.9.98 at p29.

6.4

We submit that matters of concern in relation to football include:

 

6.4.1

the impact on football of the major clubs becoming the property of media corporations in terms of competition between clubs. Sky Sports Managing Director, Vic Wakeling, has been reported as saying, "What we don't want to happen in English Football is perhaps what's happened in Scottish Football. To take one example where Rangers won 9 titles in row." (Piccadilly Radio 12.9.98). The commercial interests of BSkyB in having a close competitive league with different teams winning are not the same as Manchester United who should want to win all the time.

 

6.4.2

the impact on kick-off times to suit the schedules of media companies. The advent of clubs being owned by television stations could see football becoming almost continuous as they seek to avoid other big matches which might damage viewing figures. Already live televised football can be seen virtually every night of the week;

 

6.4.3

the impact of the development of a few super clubs on smaller teams and the lower league. Hopes of smaller teams rising to the top are already increasingly remote. They will become non-existent, particularly, if a European super league is established with no automatic promotion or relegation. This could harm much of the romance of football.

 

6.4.4

undoubtedly, this merger will bring forward to likelihood of a European super-league. However, there has been no consultation as to whether this is what football supporters want or whether it will be good for the game generally;

 

6.4.5

the impact of this and other mergers on football finances. None of the money which will be paid by BSkyB will go to benefit the football club. Instead, it will go to the directors and shareholders with Martin Edwards, alone, gaining a reputed 80 million in addition to the 33 million he has already obtained from previous sale of shares;

 

6.4.6

FA rules currently prevent anyone owning more than 1 club. However, now football is becoming big business this rule may constitute an illegal restraint of trade and be unenforceable. If so, BSkyB could buy further clubs raising serious questions of conflict of interest and about the running of the game generally.

7.

Conclusion

7.1

In our submission all these matters warrant full and independent consideration by the monopolies and mergers commission as part of their investigation into this merger given the importance of football within our society.

The Independent Manchester United Supporters Association

 


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