The sponsorship alliance between football and foreign exchange (forex) trading companies is becoming a permanent fixture. Owen Evans looks at why.
To get an idea of life partnering with an forex broker, look no further than a rather eventful 24 hours in January.
On the 16th of that month, Alpari UK sent reverberations around east London when it went into administration, sparked by the Swiss central bank abandoning its attempt to peg the Swiss franc against the euro. At the time, the forex broker’s brand was on the shirt of England Premier League side West Ham, having agreed a £9 million, three-year deal with the club in 2013.
As West Ham’s sponsorship team went into crisis management mode, fellow online forex trader, Israeli-founded Plus500, released a statement stating that it had just enjoyed another profitable day.
“The company is experiencing a profitable trading performance today and believes this is testament to the robustness of its risk management policies and processes that effectively managed the company’s exposure to the Swiss franc,” the statement read.
Opportunism maybe, but it would have been music to the ears of Spanish league champions Atlético Madrid, who had announced, just nine days earlier, a €1.5-million partnership with Plus500 to become its new back-of-the-shirt sponsor.
To add insult to injury for West Ham, Alpari’s Russia branch expanded its partnership with Russian football club Zenit Saint Petersburg just a week after its UK arm folded. The new deal, which will run until the end of the current Russian Premier League season, sees Alpari Russia upgraded from a regional to national club partner.
As the name suggests, forex trading is the buying and selling of currency on the foreign exchange market. It is a popular, in part, because it provides investors with the ability to make quick profits due to small changes in one country’s currency and, due to time differences, it can take place continuously because as one market closes, another opens.
Forex trading is a volatile industry, but one that is growing in prominence and seeing more tie-ups with sports properties across European football: since the start of 2015 alone, FX partnerships have been announced by Manchester United (Swissquote), Chelsea (CWM FX) and Manchester City (FXPRIMUS).
January was a bad month for many FX traders, not just Alpari UK, as a number of other brokers announced significant losses, the full extent of which we are yet to know. So should football clubs – and other rights-holders – think twice about partnering with companies working in the sector? Or was the West Ham situation with Alpari UK merely unfortunate?
“I think [West Ham’s experience] might lead to a change in payment plans for a start,” Joe Williams, director of Williams Harfield Sports Group, told SportBusiness International. Williams Harfield brokered Plus500’s deal with Atlético (see right).
“Clubs might look to front-load some of the contract, and that may change things. Naturally, [Alpari UK’s collapse] has been a talking point, and I’ve had a few clients mention it to me since it happened. However, it’s fair to say that it hasn’t affected many other people, and it seems to have been an Alpari UK issue only.
“On the same day [as Alpari UK went into administration], Plus500 reported a profit. That is just the way different companies are set up in this industry – it’s volatile. It is such a liquid market…you can lose a bit, but then you can really win on the other side.
“Alpari in Europe is still trading, so it was just unlucky that it got exposed in the UK. It’s vastly expanding market and any sports team looking to partner with it has to realise that it is a young and volatile sector.”
Friends with Benefits
After SportBusiness International spoke to Markets.com (Arsenal), IronFX (Barcelona) and Plus500 (Atlético) at the 2015 London Affiliates Conference last month, the issue of credibility was put forward as a chief reason for forex companies’ move into sport through sponsorship deals.
Aside from the improved brand recognition, social media presence was a key reason behind Markets.com’s decision to sign up with Arsenal in October last year, as it aims to exploit the club’s significant fan engagement, through digital platforms, across the world.
Building bridges in Asia is also another factor behind the continuing rise of forex partnerships in European football. IronFX said that exposure in the continent was one of the key reasons for paying Catalan giants Barcelona approximately €3 million for its one-year sponsorship deal.
Clubs might look to front-load some of the contract, and that may change things. Naturally, [Alpari UK’s collapse] has been a talking point, and I’ve had a few clients mention it to me since it happened
The slew of forex deals in the English top-flight, meanwhile, is no doubt testament to the audiences attracted by the Premier League in that region – targeting football fans in a way betting companies have achieved great success to date.
China is understood to be the most potentially lucrative market in Asia, with many existing forex companies understood to be setting up on the continent with websites exclusively in Mandarin.
“The best part for forex companies is that the traditional football fan demographic is similar to that of a trader: young males between the ages of 25-50,” says Williams. “They are speaking precisely to their target market.”
Some forex companies are already taking steps to activate their football partnerships by focusing on an Asian demographic, such as Trade Next. The Indian-owned forex broker – which signed a two-year deal with Premier League promotion-chasing Derby County last summer – activated its partnership by holding nationwide talent contest ‘Search For An Asian Star’, with Raj Vijayarajah eventually beating off 500 youngsters to win last November.
“Asia is not the incentive for every forex trader’s move into sports sponsorship, as not all of them operate in that market, such as Plus500, and you’ll find that quite a few of them do not operate in that part of the world. However, this could all be about to change,” says Williams.
“If you look at FX Primus, it operates in the Middle East and Asia, so that is probably why it went with Manchester City.”
Plus500 decided to use sports sponsorship to increase awareness because it provided an efficient, cost-effective form of marketing for a brand with a small number of staff, according to Williams. He also said Plus500 was looking to follow the example that the gaming sector has set through sports sponsorship and its wider marketing.
Under the terms of the one-year deal with Atlético Madrid, Plus500’s logo appears on the back of the team’s matchday shirts, underneath each player’s number, in all domestic competitions.
Plus500 also gets static in-stadium signage branding – including two logos on the top of each bench and one static board behind each goal – and the rights to use the Atlético name, logo and images in all marketing and communications.
According to Sports Sponsorship Insider, Plus500 is already in active discussions about “extending and expanding” its partnership for a number of seasons beyond the current deal. The brand’s enthusiasm is driven by a huge spike in traffic to its online platform in the days following the first game covered by its deal, a Copa del Rey match between Atlético and cross-city rivals Real Madrid