Manchester City’s Etihad deal wildly over-estimates the club’s true worth

In agreeing the deal, City were tying up shirt sponsorship as well as the renaming of the club’s stadium – the Etihad Stadium – worth approximately £10 million a year.

This will go some way towards cutting the club’s huge debts, which unchecked would see the club fall foul of the UEFA fair play regulations.

Which is why it has caused much uproar among some of the foremost defenders of financial fair play. Arsene Wenger has been one of the more vocal, saying “it looks to me that Platini is very strongly determined on this. He is not stupid. He knows that some clubs will try to get around that and I believe they are studying behind closed doors, how they can really strongly check it.”

Wenger is supported by Liverpool, whose owner John Henry said that “Mr Wenger says boldly what everyone else thinks.”
In this case, what he is saying, is that Manchester City have artificially increased their income by getting friends (and family) to sponsor their shirts, build a village around the stadium and rename the stadium in their honour for huge sums of money, at a rate far above what the market would usually fetch.

Is he right? Well, for a point of comparison, Arsenal take approximately £4-5 million a year from their deal with Emirates; and they both have a better history of success, and are more recognised and known globally than City. But Arsenal are known to have done a bad deal with the sale of their stadium naming rights.

Bayern Munich, the German giants, are a good reference point, having taken £5 million a year for the naming rights to their Allianz Arena. Are Manchester City’s stadium naming rights worth twice as much as a club with far more history and success, not to mention recognisable brand and players?

To be rather blunt – not a chance in a year of Christmases.

But City still have a chance to evade censure from UEFA, as they may only be penalised the difference between the real value and the gained value from the deal. So if City take £10 million from naming rights each year, and the real value is closer to £3 million, then the club may be docked £7 million each year in their records. With UEFA allowing losses of £40 million over the first three years of the system, which starts this season, City could only make £19 million more of losses.

All of which means that whether City get away with this or not comes down to whether UEFA decide that Manchester City’s stadium naming rights have been wildly exaggerated. And if so, how much they believe they are over the real value.

It is a crucial test for UEFA. This is a club who are seeking to compete by finding a clever way around the rules; without close friends with billions of pounds, there is little chance that a team like Manchester City could hope for a deal as lucrative as this, one which makes Liverpool and Arsenal, more illustrious names, seem poor by comparison. Their shirt sponsorship deal puts them on a par with Liverpool and their rivals Manchester United. United were recently named the most valuable sports club in the world by Forbes. If City’s shirt sponsorship is worth as much as United’s, then the Pope most probably isn’t a catholic.

UEFA have a big test on their hands with City’s flounting of their rules; will they successfully hold them to account? Or will the fair play initiative die a premature death?