04 Sep Samuel Okoronkwo On Increasing Commercial Revenues for Football Clubs
THE BEAUTIFUL & LUCRATIVE GAME
Football is not just the ‘beautiful game’, it can also be a lucrative one at the upper echelons of the sport. With Sky and BT Sport investing significant sums in the acquisition of broadcasting rights for top tournaments, such as the Premier League and the UEFA Champions League, it is easy to think that broadcasting is now the main source of many a clubs income. Although this is true for some clubs, match day income and commercial revenue completes the income structure of football clubs. Match day income is self explanatory. From ticket sales to the ill-fated prawn sandwiches, everything sold on match day generates income for clubs.
Commercial income includes retail, merchandising and mainly income generated from third party non-footballing brands that desire to associate themselves with football. It is the clubs commercial directors in tandem with a sound legal team that can cement this ever increasing stream of commercial income for clubs.
Commercial revenue increases continue to underpin the growth in recent years for many top clubs. According to Deloitte’s Money League analysis of the top 20 earning clubs in Europe, commercial revenues for the 2013/14 season accounted for 44% (1.90bn Euros) of (4.30bn Euros) total revenue. 10 years ago this proportion was circa 30% which confirms that commercial revenue has become as important as, if not more important than, broadcasting and match-day revenue.
A more detailed look at the figures according to Samuel Okoronkwo, however shows that much of this positive commercial performance is mainly the preserve of the larger clubs. In England for example, in the 2013/14 season, 80% of the commercial revenues generated by all the clubs were generated by the top six Premier League clubs (Arsenal, Chelsea, Manchester United, Manchester City, Liverpool and Tottenham Hotspur). So while Manchester United will generate £185 million in commercial revenues a quarter of the Premier League clubs will generate less than £10 million.
ROOM FOR IMPROVEMENT
Regardless of size, every club in the Premier League has a substantial capacity to significantly increase commercial revenue. Clearly those clubs most likely to challenge for trophies will have a greater capacity to increase commercial revenue than those most likely to be relegated, but that does not deprive the smaller clubs of their ability to generate significant income through commercial sources.
THE POWER OF FANDOM
The fan base is the lifeblood of every football club, not just because they are the ones that turn up religiously wherever and whenever possible to support their club, but they are also more likely to purchase the club’s branded products. They remain the secret of clubs success in generating commercial revenue.
Most commercial brands have customers that they struggle to convert into loyal fans. Football clubs on the other hand have passionate fans that could readily be converted into customers, provided they are well harnessed. Therefore, Premier League clubs in particular have a strong platform on which to build a range of commercial programs given that football is one of the world’s most popular sports, engaging society across all ages, genders and ethnicities.
Understanding, segmenting and growing the fan base both locally, nationally and internationally to create an interactive community has significant commercial value. This will enable the club to devise a clear commercial strategy on the basis of which to sell more of its own branded goods and services as well the creation of partnership programs which can enable commercial sponsors and partners to take advantage of a football club’s goodwill.
The formation of commercial contracts are key to the development of this revenue stream for clubs. Commercial brands from all parts of the world are keen to be associated with the Premier League due to its popularity and it is noteworthy than in 2014/15 season 50% of the shirt sponsors were from Asia. So the smaller clubs should also extend their commercial reach to every part of the world where the Premier League has become compulsive viewing.
Various commercial revenue generating strategies have are in use including, but not limited to:
a whole host of digital platforms
stadium naming rights
training ground naming rights
facility/key component design and branding
merchandising of goods and services
start/end of season matches
a nations player in the squad
A comprehensive business plan for maximising a club’s commercial revenue will necessarily include some, all or even more strategies than those identified above. What is more significant is that the club properly understands and develops the value of its own brand which will facilitate the attraction of suitable commercial partners.
The revenue that the club will ultimately be able to earn and the dynamism of the arrangements that it is able to settle with its commercial partners, will depend upon the negotiating skills of its commercial and legal teams. The success or otherwise of these commercial deals depend heavily on how well they have been drafted on behalf of the clubs. Commercial brands and the bigger clubs have specialist counsel advising on these commercial deals as a matter of course. Smaller clubs wishing to increase their commercial revenues regardless of size ought properly to be following suit.
Samuel Okoronkwo is a practicing Barrister specialising in Sports Law and Profession Football, and can be contacted at firstname.lastname@example.org