Manchester United Expands TV Deal to Boost Revenue, Awaits New CEO

English Premier League heavyweights Manchester United MANU Friday announced that their proprietary television channel has now expanded to an additional two countries. The news comes as CEO David Gill is set to step down at the end of the month after 16 years at the helm.

56 Territories

Manchester United's proprietary television channel, MUTV, will now broadcast in 56 territories around the world, the club said Friday. The for-pay television channel broadcasts Manchester United content all day and now will expand its reach into the football crazy nation of Norway as well as expand its reach amongst its Asian fan base in Asia.

Manchester United reached an agreement with SkyNet and TV2 Norway which will now bring the full MUTV package to the vast Norwegian football fan base. With some 23 million viewers tuning into a United game within the first 7 months of last season, SkyNet is confident MUTV will be popular in the football fanatical country.

Also announced was a new deal to bring content into Myanmar as well as an extension of the existing contract in Iceland to keep broadcasting the MUTV content in the island nation.

Manchester United Commercial Director, Richard Arnold, said, "Manchester United is fortunate enough to have 659 million followers around the globe and the creation of agreements, like the ones we have with SkyNet, TV2 and 365, allows us to bring them closer to the Club they love. The new agreements mean that MUTV now has 22 international broadcast partners, covering 56 territories worldwide including parts of Europe, Asia, Latin America and Africa. Through our partnerships, tens of millions of people now have access to MUTV content."

“The dedicated channel already creates some unique and distinctive content and, with the development of our network of broadcast partners, we are able to invest in this further. By teaming up with reputable media houses like SkyNet, TV2 and 365 we can ensure that this content is delivered in right way, reaching key audiences.”

Revenue Driver

Commercial revenues were the largest revenue segment for the club in the third quarter ended March 31. Commercial revenues, including revenue from MUTV and also from merchandising sales, accounted for almost 40 percent of revenue in the third quarter. The segment was also the fastest growing segment for the club, growing 31.9 percent from the third quarter of 2012 and 27.9 percent for the first three quarters of 2013.

Further, media revenue, the smallest sub-segment within commercial revenues, posted solid 13.7 percent growth in the third quarter. The new MUTV deals will keep the growth strong in this segment.

Analysts at Jefferies highlight the commercial segment as a key revenue and earnings driver going forwards and they are bullish on the future of the stock. "In the past six months, MANU has announced numerous commercial engagements, ranging from a deal with social gaming company gloops in Japan to a partnership with financial services firm INVEX in Mexico. The geographic breadth of these agreements speaks to the team's global reach and we believe there remains plenty of white space for further growth as MANU continues to monetize it's powerful brand."

"With MANU still in an early growth stage and with robust fundamentals, we find risk/reward compelling and reiterate our Buy rating and $23 price target."

New CEO

Back in February, the club also announced that CEO David Gill will be stepping down as of the end of the fiscal year on June 30. During Gill's tenure, the club has gone through an unprecedented period of success both on the pitch and also at the corporate level. He was appointed finance director in 1997 before taking over as CEO in 2000. In his time as CEO, the club have won seven premier league titles, one FA cup, one Champions League title, and three league cups.

On June 30, current Executive Vice Chairman Ed Woodward will take over as CEO. The loss of Gill alongside the retirement of legendary manager Sir Alex Ferguson means that the club have lost two of their key executives in the past four months. Now, with a new chief executive and a new manager on the pitch, it will be seen if the club can repeat the success of the previous era.

Nevertheless, Jefferies and other analysts are still bullish on the stock, with most who cover the stock having a buy or better rating on the stock. "We see MANU growing top line ~15% annually driven by the commercial segment and EBITDA growing ~25% as higher mix of sponsorship revenues boosts margins. We believe the team is still in the very early stages of monetizing MANU's significant opportunities to roll out new global and regional sponsorship deals and continues to build, and eventually monetize, its growing CRM database. Given theseimpressive growth rates and high visibility of recently announced commercial deals, we expect the commercial segment to continue driving strong growth for the company."

Shares of Manchester United closed down 1.6 percent Thursday at $15.95, much less than the broad market sell-off. Shares are also significantly off the 52-week high of $19.34 made in February.