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CNBC Transcript: Interview with Richard Arnold, Managing Director of Manchester United

Following are excerpts from a CNBC interview with Geoff Cutmore and Richard Arnold, Managing Director of Manchester United.

GC: What do you think the current commercial opportunity is here in China because Manchester United has been in this part of the world for a long time. You have [inaudible] a lot of deals over recent years but how are things changing in your relationship with Chinese sponsors and potential Chinese partners?

RA: We have 110 million of our 659 million fans live here so it is a hugely important part of the world. We have been coming here since 1975 and always taken the opinion that it needs to be a long term view, that you build and you invest in the relationship and the partnership and that over the long term you will benefit from that. And I think that continues to be our view, there is a huge untapped opportunity, you have seen the guidance from the Chinese government in Directive 46 in terms of the opportunity they see in this market and for us, the fact that they have named football as a priority for them is very exciting, I think that's great for the game of football with us having such a big family of fans here it is good for us too.

GC: You said the opportunity is untapped. Is that a merchandising opportunity, is that a pay-per-view, is there some other way you see yourselves being able to generate increased revenues here?

RA: I think that you have to pause and think of 110 million people support Manchester United. That is almost twice the population of the U.K. support Manchester United. All of the traditional business revenues open to us are opened to us here. The approach needs to be more sensitive to local culture in terms of how that works, but also with the changes in how the government are approaching things, you know getting into partnership to develop football and getting into partnership to roll out, we have got a similar example with Hong Kong jockey club where we work with the local schools and develop football with the youth community I think it is also something we'd be very interested to take forward in the future.

GC: So the point is whilst it is important to have a proper commercial relationship, you've also got to do some of the soft sell and work with communities behind the scenes?

RA: I think that would characterize how we operate around the world. We are famous for touring and we are touring to China later this year but wherever we go you will find that we've sent a fairly significant group of coaches and we go to the local school and the most deprived areas and do work with the football community more generally and that is something that again through our sponsors we also make real in terms of the work that they do. Almost everyone runs what we call a soccer school where they will go into communities and do coaching work. So we see that as a very important part of the mix in building genuine and authentic partnerships.

GC: How far away do you think we are from a proper premier league game being played in China? Not just the sort of exhibition matches that you are going to be playing pre-season

RA: I haven't heard that discussed in recent years [inaudible], we love playing the games we play in the summer they are a huge important part of getting ready for the beginning of the season. You have many of the players there competing for a spot in almost every position and for them it is every bit as important as that first game because they are deciding who will be in for the beginning of the season.

GC: But is it something that you would like to see, I mean is there a bit of a blind spot in the U.K. at the moment to the opportunities that there are in this part of the world?

RA: You asked two questions there, the first is from my point of view I see difficulty with having premier league games in two-fold. Firstly, it is difficult to see which club would want to deprive its own home stadium fans of seeing the team and secondly, for a location such as China, it is a fair distance to travel and you need to work that into the playing situation so that the team are in good order when they play the previous and next game. So I think from that point of view, that is difficult. The other question associated with how we interact with fans and is the value of the [inaudible] appreciated.. I think almost every team understands the value of it. Fan base around the world I think we are in a hugely fortunate position because [inaudible] is just so big by virtue of the history and success of the work that has gone into that, so for us it is a very salient point because we have such a big fan base, over 300 million fans in Asia, it is an important part of the family of fans.

GC: The broadcasting deal was huge and there is going to be a lot of money coming into club pockets as a result of the new deal coming in in 2016 this year, obviously a three-year program. How do you view that commercial benefit that comes to you from a broadcasting deal with Sky and others against what opportunities you have commercially through co-branding and so forth in Asia?

RA: I think the first thing to look at is the fundamentals of the situation with regards to media rights. The games that we play are some of the most viewed television in any genre in the world. You have got two hours of live television on a billion homes around the world, we are about half the TV audience I think the premier league said the last time they quote it. So it's an important part of what we do and it is a massive exposure piece. That having been said, when you look at the fragmentation within the media environment, there is a reason that you know broadcasters compete for sport in our league in particular but you see similar trends with the NFL and other leagues. It is a must have piece of content.

There is two things that are only really valuable when they are live and watched - news and sports, and sports is something that suspends the genres it is regular and if you tie into kind of TV and media logic if you think of the work that goes into generating a soap opera the demographics is such that men don't tend to watch those, kids don't tend to watch those that much and you have to create a script that is interesting, two or three episodes a week whatever it is you are going to run. You look at football from a broadcaster's point-of-view, you have an amazing set of some of the most famous actors if you'd like in the world.

You have got a script that is never written, no one knows what is going to happen any game and that is part of its attraction and so from that point of view, the growth that you have seen and when you look back over the years, people have always said wow that is an amazing amount of money but when you are the most popular club and the most popular league and the most popular game in the world, it is not an enormous surprise and that has been very important to the growth that we have seen within the business. When you compare that to the other opportunities within our business

I think what you see is that you one-hand washes the other, that massive exposure say, the huge developing markets around the world in terms of the number of fans, the explosion of the numbers of people with television, fan numbers, broadcast numbers, that's really good for us from the overall broadcast point view and it's great for our family and friends.

GC: What do you think as we get to the sensitive subject, what do you think the connection is between the ability of the team to deliver results, beat other teams and you being able to sit down with a sponsor in Asia and sign a deal? How does what's going on in the field affect your ability to translate that into dollars or pounds ?

RA: Listen, we are 140 years old and we had amazing times with me being 10 years in the club. You know I have been to 3 championship league finals. We won a lot of primary league titles. We have amazing days and we have not so amazing days. Sundays were amazing, the Thursday before was pretty heart-wrenching and one of the things that is fantastic about both the sport and then our fans is uncertainty is what makes it fantastic

GC: When did you win or lose?

RA: When did we win or lose? And, no one likes losing, it's not something that the club sets out. I will come back to you, you have that translate to us economically. But the uncertainty, how much it matters to you, how much it hurts when you lose. It's as important as how fantastic when you win and I think that is something we have seen in the last 2 or 2 and a bit years, it has been tougher than some of the preceding years but what we have seen is an amazing group of fans.

The stadium is around with fantastic supporters, you see the same thing in terms of the TV audience and see the same thing on social media and they want it to be good as in every bit, as much as the team and the board want the group to be good. So, that's really encouraging. In terms of the economic effect, we are 140 years old with 660 million fans and most of the people we are dealing with are very sophisticated. They understand that there will be bumps along the road as we go through and they want to be part of that great story and don't see it as short-term. We tend not to have short term partners, they tend to be long term and they take a long term view and that has been very successful for them and very successful for us.

GC: Just picking up on that point, and not to lay over it that much and honestly, it has been a difficult couple of years in the European context, again it looks, Champions League you know, it's just not going to be there for Manchester United, does it have a big effect on European revenue for you?

RA: Well I don't accept that, we are still in it to get through and you know, we start out by intending to win the game as we play and no it doesn't translate into problems of the pitch, no one is planning on this being a long term experiment and we're committed to making sure we're playing the highest levels. You've seen that from the club and directors in terms of that success off the pitch, enabling us to have investment into the team and I'm really excited about the young players, I think the other thing that's come through this year is you know you seen the success of our academy system and the way it has worked and going back, you see the young players coming through. There's a whole army of people in tears, seeing score the first time and that's an important part of what are and we're all set for the future.

GC: Just on that point, players, you're not the kind that picks the team so I'm not going to ask you a question about the team but I am interested that's been a lot more talk recently about salaries, about ticket prices and here we are, talking about the business of sport, talking about opportunities in Asia and do you think we've got a point again where it's almost irrelevant what players are paid because they're not necessarily performing related to that higher pay. What is the correlation between salaries these days and commercial success?

RA: Listen you know the guys that play for us are some of the biggest names in the game, in what is the biggest TV show in the world and if you compare to film for example, for an ordinary man in the street, it could seem a lot of money and it is. but that being said, the club is working hard and respectful of its ticketing policies, we've frozen prices recently in the last 8 years, recently implemented discounts, we provide for the young, elderly and people with disability, the highest it's ever been in club history so when you look at it on balance, we've been very sensitive to the fans needs and economic environment in the background and that's something you know certainly it's our intention to continue that path, we'll work closely with the fan groups and that's something we want to carry on to make sure that there's a fair treatment for everyone involved