Why brands are the future of football
Juventus’ controversial re-design of the club emblem this week annoyed many football traditionalists inside and outside of Italy. But the decision to go for a bold rebrand of the “Old Lady” was not taken lightly. James Horncastle’s insightful article for The Independent outlined how the rather brave effort at re-branding fits into the Italian giant’s over-all strategy of staying ahead of the curve of the competition and anticipate trends.
Juventus going more mainstream, more lifestyle, “more pop,” as club chairman Andrea Agnelli put it, amounts to an indirect admission that the importance of sporting success is diminishing. The Bianconeri might still insist that “winning is everything here” (Agnelli) but in strict financial terms, winning is becoming less mandatory. A club’s real value nowadays lies in its brand. And, more narrowly, in the appeal of “the shirt”. Which explains why Juve have taken such a bold step to make both their brand and their shirt future-proof, more appealing to Millenials.
UEFA’s Club Licensing Benchmarking Report 2015 shows how the growth in commercial and sponsorship at the elite clubs has dramatically outperformed both smaller sides and other revenue streams:
The top 15 clubs in this analysis have added a remarkable €1,514m in sponsorship and commercial revenues in the last six years (148% increase), compared with the €453m added by the rest of Europe’s 700 or so top-division clubs (17% increase).
By contrast, revenue growth from all other sources, including TV, revenue from UEFA, gate receipts and other income, has grown at a similar rate for the top 15 clubs (45%) and the rest of Europe’s 700 or so top-division clubs (37%).
TV revenue (from domestic leagues and European competitions) continues to be the single most important revenue stream (34% of all income on average), but sponsorship is already the second biggest, making up an average of 24 per cent. What these aggregate figures for 2014-15 don’t tell you is that for a small number of super-clubs, the combined value of the two types of shirt sponsoring (main sponsor and manufacturer) alone will soon either be the single biggest source of cash or a very narrow second.
Barcelona, for example, can look forward to annual payments of €175m from Nike and new sponsors Rakuten before a single ball is kicked next season. Real Madrid will be on a similar figure (adidas and Emirates), Manchester United are not far behind (€160; adidas and Chevrolet).
As the most marketable German club, Bayern Munich can expect a minimum of €100m per season (adidas and Telekom). Juventus will only make €37m plus bonus payments from their two shirt deals with adidas and Fiat, slightly less than AC Milan (€40m; adidas and Emirates) but that still puts them significantly ahead of most domestic rivals, two of which - Lazio and AS Roma - have not even been able to attract a shirt sponsor.
In the Premier League, where TV income is shared equitably and gate receipts for the top clubs are also converging, sponsorship income is diverging. Arsenal, a mainstay in the Champions League for the last 20 years, receive a paltry €72m for their deals with Puma and Emirates, which include stadium naming rights. Further down the table, outside the top six, combined shirt sponsorship deals struggle to hit double figures.
The situation is mirrored in the other top leagues. As the elite clubs set new records with every new deal, all others get left behind. The trend feeds itself since manufacturers concentrate on a few sides, ferociously compete for the handful of super-brands and at the same time bring inflationary pressure on themselves by supporting more than one super club.
The ability to sell your shirt(s), the appeal of the brand and the club as a proposition that exists almost independently of sporting endeavours will separate winners and losers of football’s rapid commercialisation to an even greater extent in the future; especially if the seemingly unstoppable rise in broadcasting revenue stops one day.
When all other important sections of income are maxed out, when all stadium tickets are sold and TV companies get pushed to the very limit of profitability, the strength of the brand will come even more into its own. It will be the most powerful, renewable resource, immune to the threat of technology, infinitely adaptable to forever-changing consumer behaviour. As the one of the smartest kids, Juventus didn’t just foresee that development - they have put their shirt on it.