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SBD Global/October 10, 2012/Marketing and SponsorshipPrint All
Premier League side Newcastle United’s announcement that it has agreed to a four-year sponsorship deal with loan company Wonga.com, unleashed "a wave of criticism," according to Chris Tighe of the FINANCIAL TIMES. The deal, rumored to be worth £20M ($32M) over four years would be "the biggest in the club’s history." It means Newcastle’s shirts for the '13-14 season will bear the name Wonga.com. The news provoked "an immediate response" from insolvency industry trade body R3, politicians and trade unions. Many fans also "expressed distaste." However, "the deal was sweetened" with news from Wonga.com that the club’s ground, renamed the Sports Direct arena by Owner Mike Ashley, "despite a storm of protest," will revert next week to its "much cherished original name," St. James’ Park (FINANCIAL TIMES, 10/9). The PA's Damian Spellman reported that Newcastle let its new sponsor reveal the name change to the stadium, ending "a controversial period in the club's recent history." Newcastle listened to the reaction of fans when news of a potential agreement emerged last weekend. A Wonga spokesperson said, "We listened over the last three days, and we saw what really matters to the fans. Football is an emotional sport, and it is obviously really important to them. We listened to what they wanted, and that is why we did it" (PA, 10/9).
PROFIT AT ANY PRICE: In London, Burrows & Caulkin reported that FA General Secretary Alex Horne reiterated the association's desire to prevent "inappropriate" companies becoming sponsors of football clubs. Horne: "If these companies are charging the wrong rates of interest then legislation should help us out. The leagues have clear rules about certain inappropriate advertising for children. We are talking to the leagues on Friday about it. If you consider it as in the category of things that are inappropriate for children like gambling and alcohol, it feels like it is in that category to me." Newcastle City Council Labour Leader Nick Forbes said, "I'm appalled and sickened that they would sign a deal with a legal loan shark...It's a sad indictment of the profit at any price culture at Newcastle United" (LONDON TIMES, 10/9). Also in London, James Callow reported R3 claims that the fact that the northeast has the highest rate of insolvency in England makes Wonga an "inappropriate choice of sponsor." R3 President Lee Manning believes the deal "has the capacity to do more harm than good." Manning: "Wonga has chosen to target a region that has comparatively high numbers of people experiencing financial difficulty" (GUARDIAN, 10/9). The London DAILY MAIL reported that Newcastle fan and True Faith fanzine Editor Michael Martin warned the proposed tie-up "would be bad for the club." He told the London Daily Mirror, "The people who run Newcastle, for the fans, have a social responsibility. I would love them to honestly answer one question: Would you, Mike Ashley, seriously recommend borrowing money from Wonga at those interest rates? If you can't answer yes then they shouldn't be our shirt sponsors." Labour MP for Wansbeck and Ashington FC Chair Ian Lavery said, "Newcastle United will be sponsored by the money of deprived people up and down the country. If Wonga gets this sponsorship through, I will not set foot in St. James' Park until it is off the shirts. To have those players running around on that turf endorsing Wonga is an absolute outrage" (DAILY MAIL, 10/9).
RELIGIOUS UNDERTONES: In London, Martin Hardy wrote the issue was "engulfed in fresh controversy" Tuesday night when the club's Muslim players "were warned that wearing the new shirts would infringe Sharia law." The edit from the Muslim Council of Britain will add to the pressure the club is facing over the deal. Four of the players who took the field against Manchester United on Sunday are practising Muslims – Demba Ba, Papiss Cissé, Cheick Tioté and Hatem Ben Arfa. Under Sharia law, a Muslim can not benefit from lending money or receiving money from someone (INDEPENDENT, 10/10).
THE BUSINESS OF FOOTBALL: In London, Luke Edwards opined, "Before we get on a high horse about Newcastle United’s new shirt sponsorship deal with Wonga, we should remember if football ever possessed a soul it sold it a long time ago. From rocketing ticket prices, to television control of the fixture list, to corporate sponsorship of all the major championships, to oil-rich sovereign states owning clubs, football has been on its knees praying to its cash god for decades." Edwards added that there are two "silver linings" to the Wonga deal. The first is that it will "bring in more money each season than the current deal with Virgin Money." The second is that the deal is for the shirt sponsorship only and "will not lead to the club’s home ground being known as the Wonga Arena, or my personal favourite, the Wonga Dome." Edwards concluded, "This is football as a business, not football as a sport. It is about revenue streams and balance sheets. It is cold, it is hard and it is ruthless. It isn’t guided by a moral compass, it is guided by the law of the jungle, the economics of success and failure" (TELEGRAPH, 10/9).
SIGN OF THE TIMES: Also in London, Thom Gibbs opined that "there was a time when Premier League football clubs were sponsored by innocent, sometimes cuddly things: classical music radio stations, companies that made radiators and in Portsmouth’s case an actual manufacturer of cuddly toys." Beginning next season, the word Wonga will be "plastered across Newcastle’s black and white stripes." It is "an ugly word, and an ugly company to be advertising." Newcastle United pursuing a sponsor that "so blatantly profits from the misery of not having enough money tells you plenty about the current state of football and the ownership of Mike Ashley." It would be "such an easy public relations win" for Ashley to make a stand against Wonga "by not allowing them to further legitimise their morally dubious businesses by appearing as shirt sponsors." It was "never a route the man that renamed St. James' Park after the website of his shinpad and tracksuit trousers emporium was going to take" (TELEGRAPH, 10/9).
ART OF THE DEAL: Also in London, George Caulkin opined the deal "was just business." While the hierarchy at Newcastle "acknowledge that their decisions can be contentious -- or 'off the wall,' as [Newcastle Managing Dir] Derek Llambias put it recently -- their argument has always been that they are taken for long-term gain." That they "have to compete with the big boys somehow and if Wonga or St. James’ brings them a new player or investment, then so be it." Changing the name back is "just business too, if only because it softens the Wonga deal." Caulkin continued, "Whatever the concerns of MPs and campaigners, Wonga also sponsors Blackpool and Hearts and does the same for a primetime television show on ITV; should Newcastle be judged any differently? And, really, aren’t most clubs complicit in some way? Aren’t they happy to take money from bookmakers and banks and investment companies?" He concluded, "If you want to improve and grow, it has to come from somewhere. If you want to buy new players -- and occasionally compromise on fees -- it has to come from somewhere. If you aren’t subsidised by a state or a willing sugar-daddy, then it has come come from somewhere. If you want to hold your nose and say that this isn’t for you any more, then I wouldn’t blame you. But it’s not personal. It’s business; business as usual. I don’t like it very much, but I get it" (LONDON TIMES, 10/9).
ManU and Liverpool have "the most-lucrative kit supplier deals in the Premier League this season," according to Harris & Miller of SPORTINGINTELLIGENCE. ManU and Liverpool earn a guaranteed £25.4M ($40.6M) and £25M ($40M), respectively from Nike and Warrior -- but still trail the sums earned by Spanish giants Real Madrid and Barcelona." Real’s deal with adidas, which lasts until '20, is worth a guaranteed £31M ($49M) per year, while Barcelona’s deal with Nike is worth £27M ($43M). These figures come from new research veteran analyst Peter Rohlmann and his team at the consulting bureau, PR Marketing (SPORTINGINTELLIGENCE, 10/8).
Top 10 Kit Supplier Deals In Europe By Annual Value* To Clubs
Club Supplier Start-Until Renewal Value/Year 1. Real Madrid adidas '98-20 '12 $49M 2. FC Barcelona Nike '98-18 '08 $43M 3. Manchester United Nike '02-15 - $41M 4. Liverpool FC Warrior '12-15 - $40M 5. Chelsea FC adidas '06-18 '11 $32M 6. Bayern Munich adidas '66-20 '12 $26M 7. Inter Milan Nike '98-19 '09 $24M 8. Manchester City Nike '13-19 - $19M 9. AC Milan adidas '98-17 '07 $19M 10. Juventus Nike '03-16 - $17M *Minimum guaranteed annual value regardless of sales.
Value Of Football-Related Income To Major Brands
Company Expected Income* In '12
adidas $2.1B 38% Nike $1.9B 36% Puma $441M 8% Umbro $221M 4% Others $766M
TOTAL $5.5B 100% *Wholesale income, not retail sales, which is much higher.
ManU and Real Madrid have "sold an average of 1.4 million official replica shirts globally each of the past five years -- more than any other clubs in the world," according to Harris & Miller of SPORTINGINTELLIGENCE. The commercial giants of English and Spanish football wear kits made by Nike and adidas, respectively. The sales numbers are from the '07-08 season to the '11-12 season. The figures are from new research by a int'l sports marketing consultancy, and were published in full by Sportingintelligence. Chelsea is the most significant "climber" since detailed market statistics were last published two years ago. Chelsea was adidas’ second-best selling jersey, tied with Liverpool and Bayern Munich two years ago. However, Chelsea is now alone in second place for adidas -- and fourth overall. There is a misconception that big clubs sell tens of millions of shirts a year, but "this is simply untrue." Only three clubs sell more than 1 million shirts a year (SPORTINGINTELLIGENCE, 10/8).
Best-Selling Club Football Shirts
Nike's Best-Selling Football Shirts
Adidas' Best-Selling Football Shirts
Manchester United 1.4 million
FC Barcelona 1.15 million
Chelsea FC 910,000 Arsenal FC
800,000 Bayern Munich 880,000 Juventus 480,000 Liverpool FC* 810,000 Inter Milan
350,000 *Liverpool has since switched away from adidas to Warrior.
Top swimming official Ronnie Wong Man-chiu is "confident of organising" a HK$95M ($12.3M) budget by Monday to enter a bid for the '16-18 world short-course championships, according to Chan Kim-wa of the SOUTH CHINA MORNING POST. Hong Kong Swimming Association Honorary Secretary Wong said that the association has been "talking to a number of potential title sponsors to pitch in a maximum of HK$30M ($3.9M)." Wong: "We are talking about a very large amount of money, but it is not impossible. If everything goes according to plan, we can announce some good news later this week." Wong said that the title sponsor is only "required to contribute one-third of the budget," so there would be other income "to guarantee the event would at least break even." Wong: "Half of the expenditure can be offset by ticket sales, ground advertisements, broadcasting rights and other support such as air fares, board an accommodation. We are also looking for government support with funding from the Mega Events Fund" (SCMP, 10/9).
Brasileiro club Santos "is close to renewing" its partnership with Pelé to continue using his image, according to Mauro Zafalon of MAQUINADOESPORTE.com.br. With the contract extension, Santos will continue to have the authorization "to use its most-famous idol" in official initiatives. The objective of the club is to establish a partnership that will allow the club to use Pelé's image past his lifetime. With this new agreement, Santos is looking to "expand its brand globally." A renewal of its partnership with the worldwide football legend would go a long way toward helping the club reach this goal (MAQUINADOESPORTE.com.br, 10/8).
Austrian energy drink producer Red Bull has "managed to establish its brand as an integral part of extreme sports and competitive sports marketing," according to WIRTSCHAFTSBLATT.at. Austrian extreme athlete Felix Baumgartner's "daredevil" jump from out of space "could turn this status into a mythos." Just recently, Red Bull generated headlines with its "Flugtag" (Flight Day), which attracted 100,000 people in Vienna. A total of 38 "brave teams" with their self-made aircrafts plunged down into the Danube river. Red Bull also sponsors the Dolomitenmann (Dolomites Man) race, which is billed "the world's toughest team relay race." More than 100 teams compete over 60km in the events of mountain run, paragliding, whitewater kayaking and mountain biking. The "crazy idea" celebrated its 25th anniversary in '12. Red Bull's marketing budget "seems endless." About "one-third of its revenue flows into its marketing department," which is used to finance, amongst others, big air shows such as the Red Bull Air Race Series and the Red Bull X-Fighters. Red Bull's F1 involvement dates back to '94, first as a sponsor of the Sauber team and by now with its own racing team -- Red Bull Racing. In addition, the company took over the Minardi F1 team in '05 and renamed it Scuderia Toro Rosso. Red Bull also wants to "give football wings." In '05, Red Bull co-Founder Dietrich Mateschitz took over the struggling football club Austria Salzburg. In '06, he took over the MLS New York/New Jersey MetroStars, and rebranded them as New York Red Bulls. The company "spends millions to produce its own stars." Red Bull "runs football academies" in Salzburg (Austria), Leipzig (Germany), Brazil and Ghana. The academies' output is so far "rather modest." The "once notorious prison of Alcatraz," located in the San Francisco Bay, hosts only one sporting event: the Red Bull King of the Rock. Only a few selected street ball players will get the chance to compete in the "most-spectacular one-on-one basketball tournament." According to a brand value study by market research institute Millward Brown "ranked Red Bull as the 80th most-valuable brand." In '11, its brand value was around $10B, which is an 8% increase in comparison to '10. One thing is for certain, "the energy drink giant does not want to hold back from any sport," regardless if it is skateboarding, base jumping, kite surfing, surfing, snowboarding, whitewater kayaking or mountain biking. Mateschitz "has a finger in the pie" in all sports. Red Bull has sponsorship contracts with more than 600 athletes worldwide" (WIRTSCHAFTSBLATT.at, 10/7).
POSITIVE NUMBERS: ORF.at reported that Red Bull "increased its profit by 40% to €311M ($386.5M)" in '11. The company "sold about 4.5 million cans worldwide." Red Bull, which employs more than 8,000 people in 164 countries, "spends a third of its revenue of more than €4B ($5.1B) on marketing." For Mateschitz, who holds a 49% stake in the company, those numbers translate "into a received profit distribution of €75M ($96.6M)" (ORF.at, 10/9).
Former England cricketer Ebony Rainford-Brent believes that "sexing up women's sport is key to attracting new female spectators and participants," according to the BBC. Rainford-Brent told BBC Sport that "more needs to be done to attract people to women's sport." She said, "You want women to be attracted to the sport, but sex sells. Some of the biggest barriers for young girls playing sport is the image and being sweaty or a bit masculine, so if you can make the sport more attractive for females to play then you will attract more girls in. Rainford-Brent has also "praised the impact of the World Twenty20 in increasing the profile of women's cricket." Rainford-Brent said, "The decision of the ICC to put the women's T20 alongside the men's event is fantastic because the girls are getting the same sort of coverage in the semis and the final playing before the men" (BBC, 10/8).
Chinese sportswear brand Li-Ning will announce Wednesday morning in China that it has "officially signed" NBA Miami Heat guard Dwyane Wade. Wade said, "This is a great opportunity for me. I can either choose to stick to the status quo or be a trailblazer." It is certainly Li-Ning's "greatest effort to break through" in the basketball business, both in China and the U.S. In the past, Chinese shoe brands like Li-Ning, Anta and Peak have "gained a reputation" of signing NBA players at the end of their careers. But the Wade move is a "departure from the strategy." The exact financial terms of the deal are not known, "but it's a multimillion dollar agreement and will last until Wade retires and into his early retirement." Wade's Agent Henry Thomas said that Wade will also get "significant" equity in the company, something that he would not be able to get with Nike or adidas. Li-Ning Vice GM of Basketball Brian Cupps said that the brand "will first unveil a Wade shoe, with an apparel collection to follow." Cupps said that the immediate sales opportunity is "greater in China, where Wade and the brand are already known, versus in the U.S., where brand awareness is the first goal of the partnership" (ESPN, 10/9).
Real Madrid extended its partnership with healthcare company Sanitas for three more season. The two organizations have been working together since '08 (Real Madrid). ... The Ivorian Football Federation (FIF) has reached a sponsorship agreement with supermarket chain PROSUMA-Sococé. At the press conference where the announcement was made, PROSUMA-Sococé delivered a CFA Franc 50M ($98,000) check to the FIF (STARAFRICA.com, 10/9). ... Bundesliga club Hannover 96 extended its partnership with health insurance company AOK Niedersachsen until '16. The deal includes, in addition to AOK's support of the club's youth academy and football school, ad space on rotating boards inside the AWD-Arena (Hannover 96). ... Bundesliga club Greuther Fürth signed a kit deal with Danish sportswear company hummel. The four-year deal is valid for all leagues and starts with the '13-14 season (Greuther Fürth). ... Olympique de Lyon has reached a sponsorship deal for their women's football team with insurance company April. The deal is for three years and €1.5M ($1.9M) (BFMTV.com, 10/9). ... Australian Football League Hawthorn Hawks joined forces with Australia’s second largest DSL Internet service provider iiNet. The three-year deal will see iiNet feature prominently on the back of the Hawks’ jersey and on the new '13 range of Hawks’ apparel (Hawthorn FC).