Rights-holders have looked closely at the successes of Manchester United’s selling of sector partnerships in different regions across the world. But what is the secret to that success, what are the strategies to selling and can it work for every organisation in sport?
Matt Cutler spoke to leading brains in the sponsorship industry about approaches to the strategy, highlights the challenges and opportunities and outlines exactly what will drive success for rights-holders in the coming years.
As businesses, Japanese social gaming company gloops, Thai motor cycle distributer A.P. Honda and Azeri telecoms operator Backcell don’t have much in common.
All operate in different sectors, are headquartered in different countries and speak entirely different languages. But there is one common thread that brings them all together, and it comes in the shape of football. All have official partnerships with English Premier League club Manchester United, enabling them to use their brand association to market their products. And all pay a handsome, multi-million dollar rights-fee to be able to do so.
United’s programme of securing regional and territorial partnerships began with the appointment of Richard Arnold as commercial director in 2007 and has since seen over 100 different deals being signed.
Now, numerous rights-holders – not just football clubs – have looked at United’s success and tried to replicate it. Liverpool, Manchester City, Barcelona and Real Madrid are all in the market snapping up deals while FIFA, world football’s governing body, has replaced its lower-tier national supporters category with a regional supporters category from the 2018 World Cup onwards.
Under the new model, FIFA will sell a total of 20 partnerships in the five pre-defined regions of north America, south America, Europe, MENA (the Middle East and north Africa), and Asia.“When I think back to my time at Manchester United, working with a fixed amount of inventory, what the club has done in the telecoms category and now financial services – going market by market and doing deals that aren’t ruled by a central pool of inventory – is ground-breaking,” former Manchester United commercial director Andy Anson told SportBusiness International. Anson was at United from 2004 to 2007 and, after stints running the ATP (Association of Tennis Professionals) in Europe and England’s bid to host the FIFA World Cup in 2018, is now CEO of sports retailer Kitbag.
“It sounds pretty simple, but at the time it was unique. United has an amazing commercial operation and is doing a great job of selling the brand,” Anson adds. “For United it’s a virtuous circle of companies wanting to be associated with its prestigious brand.”
Though agreeing that Manchester United has blazed a trail, Sean McAuliffe, who oversaw the international sponsorship strategy in his position as global head of business development at the English Football Association (FA), says the thinking behind the strategy is not new.
“It’s been made famous by Manchester United through its enormous appetite and success for putting deals in place, but granting a license to your intellectual property in a singular territory, and a singular category, and repeating that practice across multiple territories is 30 to 40 years old. It’s just United has re-engineered it in an incredible way,” he told SportBusiness International.
At the FA, one such deal McAuliffe signed was with Big Cola, the flagship brand of the multinational beverage company AJE, which is the England national team’s partner in several territories in Asia including India, Thailand, Indonesia and Malaysia. McAuliffe has now left the FA but remains in the industry, running specialist sports rights and marketing agency Sport Collective with Peter Daire, the former group head of sponsorship at the FA.
Increasing revenues is an obvious incentive for clubs who undertake such a sponsorship strategy, however there are other associated benefits.
“It’s about revenue, of course it is, but it’s also about building the brand around the world, which will mean you earn more revenue in the future. That’s the virtuous circle,” says McAuliffe.
“Revenues are a key driver, because rights-owners are cash-hungry, but it’s also about the brand fit; the degree to which the sponsors they are working with offer a beneficial reflection of the club brand,” adds Phil Carling, global managing director for football at sports marketing agency Octagon.
“The third thing, and one that’s becoming increasingly important, is the marketing spend that the sponsor will put behind its licenses and relationship with the intellectual property to further expose the club. Increasingly, the conversations [between rights-holders and sponsors] are around not only the rights-fee but what the marketing spend and activities will be. Clearly there is a massive benefit for a club if it has a partner that is amplifying and making the brand relevant within individual markets and territories.”
Revenues are key, but it's also about brand fit
Carling cites the example of Japanese tyre company Toyo, whose sponsorship deal signed with Italian club AC Milan earlier this year was brokered by Octagon. Toyo, whose two-year deal began this season, has more than 40 offices across the world and has created a large activation programme where each office is using its AC Milan rights to drive an integrated, internal employee programme.
“[Toyo] will spend as much as it has in the rights-fee in activation and bringing the sponsorship to life,” adds Carling. “That’s important for club – through the deal it will become more famous in markets that perhaps it didn’t have cut-through in before.”
Billy Hogan is chief commercial officer of English Premier League club Liverpool, a club that is active across the world signing sector deals, and he confirms that finding partners who will commit significant amounts of marketing spend is central to the strategy.
“Whenever we sign a partnership, activation and engagement with our fanbase is something we focus on – the ability for our fans to get closer to the club through promotions,” Hogan told SportBusiness International. “Opportunities to win prizes, meet and greets, tours and appearances – all of that is part and parcel of a partnership.”
Regional, sector partnerships are also being driven on the sponsor-side: brands who have a global footprint will look to sign high-level global deals, however major companies with a more local remit still want a slice of the pie but without having to cough up the cost of a global partnership.
“Most rights, certainly the biggest ticket items, have historically been sold on a global basis…cars, apparel, airlines maybe even beer,” says Carling. “But the reality is there are lots of large business sectors for whom global rights don’t make a lot of sense; they’d be paying for a lot of rights that are in some respects redundant to them because they can’t activate them. The key ones there are banking and telecoms.”
There are three key ingredients for a rights-owner to be successful in selling local-level sector sponsorships, and each needs to be in place for a rights-owner to be successful implementing the strategy.
“Firstly, and the most important, is having a consistent and powerful media platform to expose your brand. It sounds obvious, but there are a lot of people who think they can create a regional sales strategy but don’t have the profile in the areas they are looking at,” says Carling.
— Manchester United (@ManUtd) August 21, 2014
“Secondly, and connected to the media platform, is the creation and development of a local and regionalised fanbase. Again, there is only a small number of sports and properties that have been able to successfully evangelise their brand and their sport into different regions and create a global fanbase.
“The third element is having a significant sales structure and servicing capability within those different regions. It’s all very well getting on a plane, flying to Thailand and having a few meetings, possibly getting a deal done, but the people who have been doing it successfully have been creating teams in the regions they’ve targeted, including a dedicated servicing structure.”
Resource is critical, adds McAuliffe, who says that investment in a significant amount of personnel and international offices across the world was not an option during his time at the FA, given it is a not-for-profit organisation with a significant grassroots remit in the UK.
“You need the resources to get the product in front of people,” he adds. “We did a fair bit of work in Asia [at the FA] and always had to use third parties – the key success of Manchester United, in this instance, is resourcing. United has directly invested by setting up a Hong Kong office, a New York office and a London base. That’s a strong statement of intent for future investment. United was the first to do that and it’s where others are still playing catch up.”
To ensure that resource is in place, organisations need to tackle the question posed by most businesses: in-house or outsource? Carling says the answer always used to be using a specialist and local agency, but that has started to change – particularly after Manchester United opened offices in Hong Kong, New York and London, in addition to its Manchester headquarters.
“Quite a lot of clubs, certainly within football, created exclusive agency deals and they would have the rights to sell and take a commission on that basis,” he adds. “A lot of those deals were done on the basis of minimum guarantees, so if the property was big enough, these agencies would be bidding quite significant money to take on the rights. Lately, the model has changed – particularly with the premium properties – as they don’t want to work with agencies or third parties, so they’ve built their own sales structures.
“Going out-of-house and coming in-house tends to go in cycles…there’s evidence that the model United has created has been successful, but bear in mind there are 15 to 20 people in Hong Kong and a big servicing structure wherever you look with over 50 people working in that area. It’s very difficult for any other club to replicate that, particularly due to the investment required.”
The Premier League’s global popularity has seen it drive huge revenues from international broadcast rights, but that massive presence on TV across the world also gives its biggest clubs an almost international omnipresence and is a huge selling point when they enter sponsorship discussions. However, a club’s own media also plays an important role in maintaining an international presence.
“Historically, the biggest European clubs were the first to market in launching local-language websites,” adds McAuliffe, who oversaw the first non English-language website of the FA that was built primarily, he says, as a way of building a local fanbase. “In that situation you start off translating syndicated content but then you move to a business model where a majority of content is tailored or generated locally. You’re building the affinity.
“Then there’s the second phase – playing matches, staging tournaments and going on tour. A key challenge of that is making sure you have your first team out playing, not your second team – local fans are very knowledgeable. But once that’s in place you can have those commercial conversations.”
In November 2013, Liverpool launched a Chinese-language website to add to its local-language website for Indonesia, launched earlier that year.
“We’ve spent a lot of time and investment on the digital side – local language Twitter feeds, Facebook pages and websites that allow us to engage more directly. It’s always about trying to understand who the fans are and how we can connect better with them,” adds Hogan.
Which sports organisations will be able to follow in the footsteps of Manchester United? Only a few, the experts believe, and it will require a significant amount of investment.
“There aren’t that many global sports brands that have the ability to transcend all national boundaries. Purely in football terms, in addition to Manchester United, there is Barcelona, Liverpool and Real Madrid to a degree,” says McAuliffe.
“As with anything, there are a number of factors and they all need to be satisfied. One doesn’t work on its own. You can channel all the money and resources into it but if you don’t have the brand equity, you aren’t going to be able to do it. And vice versa.”
“Only the biggest brands can,” adds Anson. “Real Madrid and Barcelona can, and other global sports brands outside of football like Ferrari, McLaren or the NBA (National Basketball Association).
Not many global sports brands that have the ability to transcend all
“What’s interesting is the next clubs down – a club like Manchester City that has ambitions to follow United’s lead. City clearly has the chance to grow and develop [in this area] but it’s not a fast path. You have to work really hard at it.”
“Football is ubiquitous and, perhaps with the exception of India, there isn’t a market these days where if football isn’t number one it’s top three – for other sports, where they have cut-through is much more patchy,” says Carling.
“With rights-owners like the NBA, for example, they are working hard to make their brand global but they’re a long way off it. However, they do play well in markets like China and the Mediterranean. So I think it can work, but it would be much more regional and territory-based in the markets they have media platforms and have developed significant fanbases, often because there has been a local hero – as is the case in China with the NBA [with Yao Ming].
“Within football, you wonder whether the other clubs quite have the pull United has and I’m quite interested to see if United has a few fallow years [on the pitch], whether it’s sustainable for them.”
The ChallengesHaving the resource is one major challenge for rights-owners undertaking this strategy, however many have also questioned whether slicing the inventory ever-more thinly dilutes the brand.
Could this be causing damage in the long-term, particularly when it comes to renewing deals? And to what extent do top-tier partners of a club or event feel the marketplace gets cluttered by other companies activating with similar rights?
“There’s always a ratio you have to balance,” says McAuliffe. “How elastic is that brand for it to keep on being stretched and stretched into different categories?
“Obviously there’ll be a contract where any rights-owner will do sufficient due diligence to make sure any new deal being put in place has clear water from any other. But then there is the moral dilemma – there may be contractual clear water, but is there clear water in terms of clutter?
“If you are a major rights property you’ll have global partners…and they’ll have the primary rights. Any rights that a club is selling, in principle, to a local partner is pretty small in comparison and invariably the activation those clubs are doing is contained in that local market. So in theory it can be managed quite well.
“But with regards to the question of diluting the equity – a lot comes down to perception and who is asking the question. You have a problem if other business partners are saying so, because they are the main revenue streams. Where I can see that happening the most is say if a football club had a tyre partner in one territory and a different tyre partner in a territory directly bordering it. Both have similar rights and will be doing similar activation – is that a recipe for a potential problem?”
Carling says we are in the first generation of these deals so it is difficult to answer, but for sponsors, having exclusivity is of utmost importance.
“We have done a number of surveys into this – asking the rights-buyers what the most important component in a sponsorship agreement is – and they say category exclusivity. So the more you slice and dice into regional deals, local deals and the rest of it, the more it eats into exclusivity,” he says. “And that’s not just in the category – how exclusive does it feel when there are 59 other partners in the commercial programme?
“The big question is one of renewal – will we be in a position where these deals continue to be signed up in quite the same way and volume? The jury’s out on that and I certainly wouldn’t call it one way or another, only to say exclusivity is the most important component in a sports rights deal.
“If you look at FIFA, there are certain criteria they’ve set up for the companies they are going to talk to – they need headquarters and at least 51 per cent of their business in the region they want to buy into. That’s quite strict, and I guess it’s to prevent larger companies buying into the FIFA programme cheaply, but it is also to protect the exclusivities of the people paying the higher prices.”
Emperor’s New Clothes?
Creating enough inventory for partners to be able to use for sponsorship activation and to justify the rights-fee is also another challenge, says McAuliffe, who again reflects on his experiences at the FA.
“You need to have the depth of inventory, particularly if you are going to have a multi-partner strategy, and you have to make sure you have enough content,” he says. “At the FA one of the things we came up against was not enough content through a lack of frequency of England games, 10 a year, compared to the week-in week-out games a football club has.”
“A lot of the [regional] deals that have been concluded don’t include [matchday] signage, as that is normally retained for higher-level sponsors,” adds Carling. “What we are talking about is the rights to the marks of the club together with the use of imagery in specific media.
“In my old-style school of thinking that’s really a licensing deal, and licensing deals are as old as sport. It’s quite easy to sell the rights to use your marks and if you are taking it from stock photography, it’s not a question of getting the players together in a photoshoot so they’re very easy deals to do.
“It’s a question of differentiating old-style licensing deals from this new generation of deals that seem to be a sort of licensing deals on steroids…it might just be the Emperor’s New Clothes in a way.”
Though many major sports organisations are still at the start of their journey selling regional sector deals, one new technology could act as a game-changer in their ability to succeed in selling significant numbers of high-value deals: dynamic digital billboard advertising.
By replacing existing stadium perimeter boards with specially-manufactured billboards that can be replaced with digitally-generated graphics on the broadcast feed, the advertising seen in live action can be different in different countries.
The technology has been talked about in the sports industry since the 1990s – ahead of the 1998 FIFA World Cup it was discussed as a solution to France’s ‘Loi Evin’ preventing beer brand Budweiser from advertising around the event despite its FIFA partner status – but industry insiders believe the technology is now good enough for mainstream take up and will dramatically increase the amount of inventory that can be offered to sponsors across the world.
UK-based company Supponor is the best-known provider of such technology (see 'Game-Changer?' below), and a club source told SportBusiness International that tests are taking place this season with the English Premier League. Two teams have offered to test it, one of which is champions Manchester City. Supponor would not comment on any tie-up with the Premier League.
“The technology offers the opportunity for rights-owners to display branding for as many different sponsors as there are broadcasters,” says Carling. “That opens the door to a completely new world in terms of brand exposure, because if the Premier League is being broadcast to 208 countries, you could have 208 different brands being exposed in the broadcast itself. That will be the next paradigm leap in the whole regionalisation and territorialisation of the rights inventory, certainly around football.”
Using digital perimeter board advertising to offer partners more inventory going forward is a huge step-change and “is probably why it is the most important development in this marketplace” says Carling.
“That solves the conundrum [of limited inventory],” he adds. “Currently, you have 95 minutes or so of advertising for high-level club sponsors and league sponsors that gets taken up very quickly. That does then raise the issue of what the rights will be for sponsors buying in at a higher level – they’ll be expecting significant times on the perimeter and that has to still be delivered globally. That will dictate how thinly rights-owners can slice the inventory.
“There must be a finite point where you can’t do any more deals when you are including signage in the inventory. If it’s just selling the intellectual property, though, providing you haven’t sold that category at a high level, you can still do 208 deals if there are 208 countries where that brand is relevant.”
Supponor was founded by Finnish physics teacher Erkki Rantalainen around the turn of the century, and the DBRLive technology he created – first called the Virtual Advertising System – spent around a decade in research and development.
In April 2011, DBRLive was used for the first time in a major sports event when England played Ghana in a friendly at Wembley, with virtual adverts sold and broadcast into Africa.
Having just entered its third season working in Spanish football’s top-tier La Liga – where DBRLive operates in Barcelona and Real Madrid games – Supponor will announce another partnership with a major European football league this month. And after more than a decade of talk about the potential of virtual advertising for the sports industry, Charlie Marshall, Supponor’s chief strategy and business development officer, says the company has “come of age”.
“We’ve had a piecemeal period where the product has been brought to market and put in front of rights-holders, and now we’re entering long-term agreements, becoming part of the fabric of sports broadcasting and top-tier sports properties,” he told SportBusiness International. “The promise of this has been around for a while, but now we’ve come of age.”
What used to be a humble perimeter board has become a hugely important marketing channel
Marshall agrees that a rights-holder’s ability to tailor its billboard advertising to different markets could be central to the inventory make-up of sponsorship deals going forward.
“The prize commercial asset a rights-holder, in particular a football club, has in its armoury to offer a brand is in-game messaging and positioning,” he adds. “As sport has reached more of a global audience, what used to be a humble perimeter board has become a hugely important marketing channel to offer sponsors and brands.
“Global, however, isn’t one audience, it’s lots of pockets of audiences around the world grouped together around the same experience. Each pocket has its own characteristics, and that’s been a spark for these regional partnerships – but the perimeter board is the one prize asset that hasn’t been unlocked. That’s because, before Supponor, there hasn’t been a categorical solution enabling perimeter boards to be targeted at different regions simultaneously.”
The link between a club’s ability to sell localised perimeter advertising and a strategy of selling local, sector sponsorships can be illustrated with Supponor’s relationship with Chinese electronics retailer Suning. Last season, Supponor sold Suning perimeter board advertising at Barcelona matches, and the brand saw so much potential in the fanbase it reached that this summer it signed a two-year sponsorship directly with Barcelona to become the Catalan giants’ first ever Chinese sponsor.
Case Study: Liverpool
Billy Hogan is Chief Commercial Officer of English Premier League club Liverpool. He previously served as Managing Director for Fenway Sports Management (FSM), the agency established in 2004 as the sales and marketing arm of Major League Baseball franchise the Boston Red Sox. Fenway Sports Group (FSG) is the parent company of both Liverpool and FSM.
Liverpool has recently signed a number of sector partnerships around the world, including with south-east Asian retailer Courts Asia (August), Russian online trading company InstaForex (July), Scandinavian online gaming website ComeOn! (July) and UK insurance provider PruHealth (June).
Why have you undertaken a strategy to sell regional sector sponsorships?
We’re a global club and the reality is global partnerships are difficult for a lot of smaller brands to activate. Some of the big sponsorship categories like airline or beer are an easier proposition to activate globally, but if you take a category like mobile – where companies don’t necessarily bridge from country to country – it makes more sense to do regional deals. That’s the reality of the marketplace.
In certain situations it’s also more beneficial to the club from a commercial standpoint as we can generate more revenue by working with several partners within one category.
Does this strategy require an investment in people?
We certainly have done that – the team has significantly grown both at Liverpool and sister company FSM, which helps out on our north American-based Liverpool partnerships. We have spent a lot of time building the infrastructure and headcount and we’ll continue to add to it as we grow.
Is it a competitive marketplace for selling these types of deals?
It is quite competitive, when you consider the truly global properties that are out there – and that means there are organisations like FIFA and the Olympics in addition to major European football clubs. But we feel well-positioned: Liverpool is one of the world’s most historic clubs and we have almost 600 million fans around the world. We’re working with a great supporter base and it’s a unique opportunity for a partner to come on board with Liverpool. And we are having a lot of success.
Also, one of the USPs of FSG and Liverpool is that though the properties all operate independently, when a Liverpool salesperson sits in a meeting there is also the opportunity to talk about a partnership with the [Boston] Red Sox, LeBron [James] or Roush Fenway Racing.
Many rights-holders are looking at this sales strategy. What advice would you give them?
The property [being sold] needs relevance. There are certain sports and certain properties that don’t have a presence in certain markets so it’s pretty difficult to partner with people in those markets if that is the case. You have to ask what reach the property has.
The world is a massive marketplace and you can spend a lot of time in markets without a great return, so you want to be efficient in the way you operate. It’s the same for us – identifying the key markets where there are opportunities and putting together a strategy to realise that opportunity.