Football sponsors pay for prominence in world’s most watched sport

Discussion in 'European Football' started by lfc.8, Jun 3, 2016.

  1. lfc.8

    lfc.8 Well-Known Member

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    Rapid rise in cost of kit and advertising deals

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    Barcelona are preparing to renegotiate their shirt sponsorship in a deal which could be one of the biggest yet

    When surprise champions Leicester City lifted the Premier League trophy this month, there were plenty of unlikely winners. Manager Claudio Ranieri’s previous job had ended when his Greek national side lost to the lowly Faroe Islands, while Jamie Vardy, the league’s top goalscorer, only made the jump from amateur football in 2012.

    Two corporate partners also had good reason to celebrate — Leicester’s kit maker Puma and its shirt sponsor King Power. Both are likely to have struck bargain basement rights deals with the Midlands club, only to ride an unimaginable wave of media coverage as the minnows conquered all.

    Their unexpected good fortune comes at a time when the cost of kit and sponsorship deals has been rising rapidly, as the audience for Premier League and other European football games has ballooned.

    Manchester United set the tone when it switched from Nike to Adidas kits in 2013, in a deal worth around £75m a year. Barcelona did even better. By extending its Nike supply deal last month, the club more than doubled its annual revenue from kit to more than €150m a year.

    Other teams have raced to catch up. Chelsea paid to end its deal with Adidas six years early so it could seek more money elsewhere. Last month, it agreed a contract with Nike worth more than double its previous arrangement.

    “I think shirt deals were undervalued for a long time,” says Carsten Thode, chief strategy officer at Synergy Sponsorship. “But in the past three years, the value of these deals has escalated quickly.”

    Kit deal costs have risen as viewing figures have soared and clubs’ clout on social media has grown. The top 32 teams in Europe have a combined Twitter following of almost 600m, according to KPMG, while Nike, Adidas and Puma, the top three sportswear makers, can only muster a combined 67m.

    Meanwhile challenger brands such as Under Armour and New Balance have pushed up the competition for kit deals, as they use football sponsorship as a way to build relationships with new retailers and expand their distribution networks.

    Mega-deals involving kit supply remain the preserve of a select handful of clubs with global cachet. Arsenal’s deal with Puma, at €40m-€50m a year, is more than double that of north London rival Tottenham, despite them finishing second and third in the league respectively.

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    Although Man Utd and Real Madrid can command large fees thanks to their global fan base, a typical lower half of the table Premier League team might give their shirt manufacturing rights away for nothing and simply take a slice of the profits from shirts sold to supporters.

    But all teams are benefiting from the broader growth in sponsorship, such as the branding across the belly of a shirt, as a new breed of advertisers looks to secure prime real estate in the world’s most watched sport.

    Total shirt sponsorship fees earned by clubs in Europe’s top six divisions have more than doubled since 2010 to €830m last year, according to data from sports consultancy Repucom. Revenue increased 45 per cent in the past two years alone.

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    England’s Premier League takes the largest chunk of that, roughly the same as the German Bundesliga, Spain’s La Liga, and Italy’s Serie A combined. That increased commercial income, combined with the fast-rising prices of TV rights, has helped push many UK clubs into profit, attracting investor from across the world, notably the US.

    Those in rights management say that football’s pull as a live spectator sport with a broad and dedicated worldwide following has given it a special place in international marketing.

    “If you look at the advertising world, audiences are becoming more fragmented and diversified, so to reach a mass audience is increasingly difficult”, says Christopher Satterthwaite, chief executive of Chime Communications, which includes La Liga among its clients. “Football attracts more eyeballs than anything that’s ever existed.”

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    Manchester United's Wayne Rooney appears in a promotional campaign for superhero blockbuster 'Deadpool'

    The globalisation of fans is translating into quirkier commercial deals too. Man Utd, for example, now has its own “official Indonesian sports drink partner”, and recently helped promote superhero films including X-Men and Deadpool as part of a partnership with 20th Century Fox.

    Overseas companies now account for more than 80 per cent of all the sponsorship fees brought in by Premier League clubs, says Repucom, often from brands with little or no presence in the UK. Those willing to pay the most, says Mr Thode, are companies who treat the “shirt as billboard”, and sponsorship as a “global brand awareness play”.

    Liverpool’s main sponsor Standard Chartered, though a UK-listed bank, has no branches in the county, while King Power is a Thailand-based retail chain — part of Leicester City owner Vichai Srivaddhanaprabha’s business empire. Next season at least six clubs, including newly-promoted Burnley, will feature Chinese characters on their shirts.

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    But as the rewards of sponsorship rise, so do the expectations. The fee paid by Adidas to Man Utd will drop 30 per cent if the team fails to qualify for the Champions League for more than two years in a row, putting new manager José Mourinho on a tight deadline. Analysts say such performance clauses are becoming increasingly commonplace.

    “The brands we work with are getting far more demanding of their sponsorships,” says Glenn Lovett, chief strategy officer at Repucom. “It’s being driven by brands — particularly when they spend a lot of money — demanding a return, and wanting to know what that return might be.”

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