AFCB’s resident football economist Aaron Gordon looks at Arsenal’s unfavourable shirt sponsorship deal…
There hasn’t been much of anything to speak of in terms of sponsorships and Arsenal over the past 5 years. Before the 2005/2006 season, Arsenal and Emirates agreed to a shirt sponsorship deal for a record 90 million pounds (using today’s conversion it would be 102.5 million Euros). The deal extends through 2014, which is considered quite a long-term deal for a shirt sponsorship, because of the rapid upward trend in price. Arsenal saw security in the long-term deal at a time where financial security was at a premium.
However, concerns about the rapid inflation of shirt sponsorships were justified in retrospect. Now a quick glance around the EPL will find Arsenal well below the other big-revenue clubs in terms of shirt sponsorship revenue. Here are the top 8 shirt sponsorship deals in the EPL going into the current season (all figures in millions of Euros annually):
Manchester United-Aon Corp.-22.75
Manchester City-Etihad Airlines-8.5
Liverpool and Manchester United got brand new deals this off-season, contributing to their significant jump over Chelsea’s deal with Samsung. (Standard Chartered must be absolutely livid with the results Liverpool has handed thus far, and are probably employing a small army of lawyers to try and leverage the new ownership transfer as a way to back of out of the sponsorship.) However, it doesn’t take a Wenger (perhaps more of a Redknapp?) to see that Arsenal’s exposure and international following are not in line with their sponsorship revenue.
In fact, the Arsenal deal is so favorable to the sponsor that the head of corporate communications at Emirates has confirmed Arsenal’s shirt sponsorship is worth more than the company is currently paying. Meanwhile, Arsenal and Emirates are “in negotiations” for an extension to the 2014 deal. This report has been linked to the news that Emirates might not renew their naming rights to the stadium when the agreement expires in 2021.
The thought process may be that Arsenal will be seeking to recoup some of the “lost” revenue in their next shirt sponsorship which might make it “cost-prohibitive” for Emirates to renew the sponsorship. It is quite clear Arsenal’s board is not pleased with the fall in corporate revenue (4 million pounds, year to year) despite record profits. The majority of the corporate sponsorship lag behind Manchester United, Liverpool and Chelsea is due to this favorable shirt sponsorship deal. (The big rivals have commercial revenues of 70 million, 68 million, and 53 million respectively.)
To be perfectly honest, Arsenal will get a fair market deal for their next sponsorship and this will be a lost point in a few years’ time. Because of Arsenal’s record profits and fiscal responsibility, missing out on commercial revenue is not as significant as it would be for other clubs. But, there are two areas in which shirt sponsors have an impact: merchandise sales and shirt aesthetics. Quite obviously, if a team changes sponsors, they experience a rise in merchandise sales, since supporters desire the most up-to-date kits. Also, since sponsors are putting their name on the product, they often request (or demand, depending on the situation) input in the aesthetics of the jersey.
It also raises an interesting point about stadium naming rights. It is largely acknowledged the first naming rights to a stadium are the most important, and often the only one that matters. When stadiums change corporate sponsors, they are often still referred to by their original name. Do you think this will happen with Emirates? Will it always be Emirates, or will fans adjust to a new name, since it is just a corporate name anyways, and holds no character with the club?
Have your say on Aaron’s article by leaving a comment.