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COMMENT

09/22/2011
Just as Barcelona outshone Man Utd at Wembley in May, so the Catalans appeared to repeat the success with their €32 million sponsorship deal with Qatar Foundation, trumping the Man Utd / AON deal by some €10 million. But a look at the sport industry headlines over the past few months shows that Man Utd have been picking up sponsorship deals left, right and centre.

Most noticeable was the training kit deal with DHL, which some reports suggest could be up to €10 million per year. Most recently, Malaysian snack food company, Mamee Double-Decker Berhad has agreed an endorsement deal for its Mister Potato chip (crisp) and its Mamee noodle brands.

However it’s the deals with telecoms companies that have not only been more lucrative but, crucially, suggest a strategy, which should really make the football and sponsorship industries sit up and listen.

In recent months the club has signed Vietnamese telecommunications company, Beeline and STC in Saudi Arabia. What is most noticeable about these deal is that the club already has telecom sponsorship agreements with Airtel for parts of Asia and  Central Africa, Viva in Bahrain, TM in Malaysia, TRI in Indonesia, Globocom in several West African states, PCCW in Hong Kong and MTN for various southern African countries.  Clearly the club believes that it can find a telecommunications partner in virtually every country where there is an interest in the club, which includes pretty much all of Asia, Africa and the Middle East.

The strategy is a far cry from the traditional sponsorship model adopted by football clubs, which says that you can have a primary shirt sponsor, a kit supplier and a limited number of other partners which each have category exclusivity.

Rarely, if ever, has a rights holder managed to recruit so many sponsors from a single sector and this has helped Man Utd to increase total sponsorship revenue (excluding the NIKE deal) to a figure above €50 million per year.

The beauty of the strategy is that it flies in the face of the recent moves by major rights holders to reduce sponsorship clutter by consolidating the number of deals to a limited number of high value partnerships. The theory goes that each partner receives higher levels of brand exposure and activation rights such as hospitality, player appearances etc. in return for a bigger rights fee. The rights holder, on the other hand, has a much cleaner commercial environment which enhances its brand and in return it receives higher sponsorship fees.

Where Man Utd have struck a rich seam is that the telecom rights are all contained within national boundaries. Thus the Beeline, Airtel, STC, Viva etc. deals are never viewed by a sports fan in, for example, Hong Kong where PCCW has telecom sector rights. The brands are given extensive rights within their own country, but have no international rights except for slots on electronic perimeter boards at Old Trafford (depending on the particulars of individual contracts). There is, therefore, very little in the way of sponsorship clutter in any country. Indeed the only clutter is on the Man Utd website sponsor page and in its contracts filing cabinet.

So is this a model that could be adopted by more clubs and is there yet more room for expansion?

The answer to both questions is almost certainly ‘yes’. Manchester United does, of course, benefit from having a massive global fan base – but then so too do Liverpool, Real Madrid, Barcelona, Inter Milan, AC Milan, Juventus, Chelsea, Arsenal and, before long, Manchester City. All could follow this model to some degree. It would also be a relevant model for top NFL and NBA teams in certain territories but outside of soccer, it would be difficult because of the reduced levels of international interest and passion.

Have Manchester United finished harvesting international deals? Almost certainly not. The fact that the club has completed a deal with a snack food company in Malaysia suggests that there is room for more deals in FMCG (fast moving consumer goods) and other sectors across those markets where the club enjoys support. There is no reason to suggest that the club cannot, for example, do deals in such sectors as banking (depending on the limitations imposed by the AON contract), leisure and alcohol (again depending on the limitations of its contracts with Singha, Smirnoff and Concha y Toro) sectors to name but a few.

Indeed a major question will need to be asked about whether it is more lucrative to have a single global sponsor in a given industry category instead of a series of local deals. The argument here is that it is difficult to see how a club can raise more than €1-4million from global secondary deals, no matter how big the club (the DHL deal is an exception here and comes with a big bundle of rights).

If, however, the club can achieve deals in a single industry sector worth €300k+ in, for example, 15 countries, that’s €4.5m and the chances are that deals in several territories would be higher. Spread across a series of industry sectors – arguably up to five in each territory – it is possible to foresee the scope to generate income well above the €60 million mark from such local deals.

There are some problems with the model. First, how accepting will the primary club sponsor be of such a large number of deals around the world? This could be seen as diluting the impact of its rights. A counter argument would say that it could actually help the primary sponsor. On every Airtel or Mr Potato Chip promotion, there is likely to be an image of a club shirt with the AON brand splashed across it. So long as AON is seen as the primary brand associated with the club, the large number of deals could be beneficial and, as already discussed, there is no local clutter.

Will the club simply be seen as being over-commercialised? Manchester United has, to a large extent already crossed that barrier and survived. In its home territory, where fans tend to be more cynical of commercialisation, there will probably be little or no awareness of most deals. In Asia and Africa, there is much greater acceptance of a European club having local partners.

Arguably, the biggest problem is that it requires expertise and resources to develop and manage such extensive and geographically scattered partnerships. Manchester United has a London office with more than 40 staff to work these international partnerships. The club also plans to float on the Singapore stock exchange, which will give it even more of a commercial presence in Asia.

A few years ago it was famously said that despite having tens of millions of fans in Asia, Man Utd earned only about 2% of its revenues from outside the UK. That percentage is rapidly changing and the rest of the football world needs to take notice.  

 

Related content:

Why the Glazers won't sell

Globalisation and sports branding: the case of Manchester United

 

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