- Clubs will look to quickly increase the value and scope of their sponsorship inventory
- Globally-popular athletes are crucial to improve outreach in strategic target markets
- Engaging and meaningful content vital to keep fans once their favourite stars move on
Both aged 33 and the biggest stars of their respective sports, LeBron James and Cristiano Ronaldo each made big-money moves this summer to organizations – the LA Lakers and Juventus respectively – looking to leverage the athletes’ global popularity to increase their commercial fortunes.
As well as their incredible sporting prowess, LeBron and Ronaldo share a strong and extremely valuable personal brand. Put simply, they can move the needle like few other athletes on the planet.
“Stars like Cristiano Ronaldo and LeBron James are bigger than the club they play for and they become the driver,” says Misha Sher, vice-president of sport and entertainment for MediaCom Worldwide. “If you signed athletes before, you were buying someone who would make a difference on the pitch. But because of social media, these superstars bring with them an existing fanbase. You are now buying a global audience.”
Juventus’ share price jumped 11.19 per cent on rumours that Ronaldo was about to sign for the club and rose 25 per cent from the start of June to July 10, the day his signature was made official. It’s an outsized impact that outstrips even the next level of football superstars – Manchester United’s share price barely moved when Paul Pogba signed for a then world-record $116m in August 2016.
“The shift in United’s stock price could have gone up completely independent of Pogba, it was such a small change,” says sports lawyer Jake Cohen. “Investors getting excited by Pogba was negligible compared to Ronaldo’s effect on the Juventus stock price, which is really as high as it’s been.
“There are not many entities in the world that have the kind of power that Cristiano Ronaldo has – he transcends linguistic, national, geographic, ethnic, cultural, religious borders. He is arguably the most popular player in the most popular activity in the world. This is an extremely attractive proposition for sponsors.”
The on-field impact of a superstar is clear, but how can clubs best-utilise their commercial value?
Drive a hard bargain with existing partners
Commercial teams assign minimum values to every piece of sponsorship inventory at the club for financial and budgetary purposes. When there is a substantial event that affects the value of available assets – such as the arrival of a superstar athlete – this minimum asking price is raised substantially.
Paris St-Germain’s commercial dealings following the 2017 arrival of Brazilian forward Neymar – for €222m ($262m) – are highly instructive of the negotiation process between clubs and their existing partners following a top-level signing.
Late last year PSG reportedly renegotiated their kit-supplier deal with Nike, securing an increase from €25m a year until 2022 to €60m a year until 2027, including a €10m payment bonus if they were to win the Champions League.
They also attempted to secure an increase on their shirt-sponsorship deal with Emirates, albeit without success. The deal, signed in 2006, is worth €25-30m a year and ends in 2019. During negotiations, according to L’Equipe, PSG president Nasser Al-Khelaifi demanded €80m per year, an amount Emirates baulked at and refused to pay. PSG are in the process of looking for a replacement.
“There are all sorts of considerations from the sponsor’s side,” says Sher. “Although PSG have a big-name player and the value of being associated with them is increasing, the partner will look how that fits in with the rest of its portfolio.”
Clubs’ ability to extract more from existing partners is naturally subject to the quality of those relationships and the duration and terms of their contracts.
It is an issue Juventus face with their kit-supplier deal with adidas, which is worth £20m a year until 2022, coincidentally when Ronaldo’s deal at the club ends.
Following the huge spike in merchandise sales after Ronaldo’s arrival at the club – 520,000 jerseys sold within 24 hours – it is a deal that now appears undervalued for Juventus and very favourable for adidas.
Juventus are likely to try to agree better terms with adidas long before 2022.
If the partner is unwilling to renegotiate, one option for a club is to try and buy their way out of the deal.
“If there is an early-termination deal, maybe Juventus would want to end it and seek a more lucrative deal with Nike now they are guaranteed substantially more shirt sales,” says Cohen.
It’s a move Chelsea executed twice in recent years to great success. In 2005, they paid kit manufacturer Umbro £24.5m to end their deal – worth £50m over 10 years – five years early, and then secured a contract with adidas worth £100m over 10 years.
Then in 2016, having already renegotiated a new 10-year, £300m deal with adidas, Chelsea paid £40m to cancel it, and signed an even more lucrative deal with Nike, worth £900m over 15 years.
Clubs will also look to expand their inventory as much as possible, though this can be dependent on the rules of the leagues in which they play and the fine print of contracts with other partners.
When shirt-sleeve sponsors were introduced to the Premier League in 2017, Arsenal were not allowed to capitalise on this asset due to the terms of shirt-sponsorship deal with Fly Emirates, which had exclusivity over the whole shirt.
Utilise athletes’ reach to attract global fans – and partners
Tapping into strategic target markets such as the United States and China becomes easier – and more lucrative – for clubs that have superstar athletes with global followings. It is often why they are signed in the first place.
When David Beckham was unveiled as a Real Madrid player in 2003, his press conference was held at 11am in order to fit in with Asian evening news broadcasts. Having returned from Asia for a personal promotional trip for his medical, Beckham quickly returned to the Far East – where he was hugely popular – for Real Madrid’s 18-day tour of the continent. It included exhibition matches in Beijing, Tokyo, Hong Kong and Bangkok, which netted early $10m in appearance fees alone.
Between the 2010-11 and 2013-14 seasons, Paris St-Germain made solid strides to become a more global brand after signing Zlatan Ibrahimović and an ageing Beckham, increasing their sponsorship revenue from $11m to more than $100m, and their matchday revenues rose from $24m to $100m.
In order take the next step and try to financially compete with the likes of Manchester United and Real Madrid, PSG’s owners decided to fund the 2017 purchase of Neymar, an athlete who, while not at the same level of stardom as Ronaldo and Lionel Messi, has global commercial value with 150 million social-media followers and – unlike the aforementioned players – plenty of time left in his career to increase it.
“The dimension of Neymar off the field is much bigger than any other player we could have signed,” Maxwell, the former PSG player-turned assistant sporting director, told ESPN in October 2017. “With his image, he can make the club so much stronger in the US and everywhere else.”
PSG have looked to capitalise on Neymar’s popularity in the Americas and the Far East. There have been early dividends.
In April 2018, PSG expanded their partnership with personal care brand Nivea Men to cover Brazil, Neymar’s home country. The two parties first teamed up in 2013 in a deal which only covered France. To help the club’s outreach in North and South America, PSG also opened a regional office in New York the following month.
In the Far East, where Neymar is hugely popular, the Brazilian’s arrival gave PSG the impetus to open a club office in Singapore in April 2018. Sébastien Wasels, the club’s Asia-Pacific director, said at the time: “With the growth the club has enjoyed in recent years, along with the arrival of our two superstars Neymar and [Kylian] Mbappé, we thought that now was a good time to do it, it was the right moment.”
The club also announced a “major multi-million euro” partnership with Asian sports marketing agency Desports, which will have exclusive management of PSG’s sponsorship rights in China and Hong Kong.
Capitalising with captivating content
In order to capitalise on the global reach of their superstar signings, clubs’ social media and content platforms are essential. What matters, though, is not only the number of new followers but their geographical distribution and demographic make-up.
“Every single major football club, or sports team for that matter, understands that the majority of their core audience live outside of the city where their team play and doesn’t get to see the team live. Most Manchester United fans do not live in Manchester, most Juventus fans don’t live in Turin,” says Sher.
“Juventus are probably going to sell out all their games but how do you get someone in Beijing or India to get them involved more in the football club? You engage with them on digital platforms.”
PSG, for example, wore jerseys with players’ names in Mandarin letters for the Chinese New Year in February 2018 and then promoted it on local social media platforms WeChat, Weibo and Maopai.
A number of clubs go much further, though, by creating regional-specific content offerings, such as US-dedicated social and digital channels (Bayern Munich) or US content producers (Manchester City), which can connect more directly with the market.
This regional content creates more meaningful engagement and relationships with fans that, in turn, drive the club and brand’s value in the market to prospective sponsors.
“Whenever you have a fanbase, you create a demand – a demand for merchandising products, for companies that want to be aligned with the sport,” Rudolf Vidal, Bayern Munich’s president of the Americas, told SportBusiness in March 2018.
Clubs have also begun producing their own behind-the-scenes docuseries in partnership with streaming services, such as All or Nothing: Manchester City on Amazon and First Team: Juventus on Netflix.
Manchester City’s deal with Amazon is believed to be worth £10m but its real value is in its global reach – fans from more than 200 countries and territories will be able to watch the series.
“There are going to be a lot more OTT deals,” says Sher. “Ten years ago this was not part of your growth strategy, now having a series on Netflix that offers content that people can engage with in real time is the future.
“For PSG, going to Netflix before Neymar is not the same proposition as with Neymar – now there is a lot more interest, now they can charge a lot more money, now that content can go out to a lot more places.
“Brazil may not be interested in PSG but they are interested in Neymar and they will watch just because of him. They will tune in and they will buy his shirt, not because they support PSG but because they are fans of his.”
Athletes’ time and commercial restraints
Shortly after Juventus signed Ronaldo this summer, the club went on a tour of the United States, which included three matches in the International Champions Cup and the MLS All-Star Game. It would have been the perfect opportunity to leverage Ronaldo’s arrival at the club in North America.
The Portugal forward went to China instead, however, for his 2018 CR7 tour with Nike, which had been organised months earlier. “When you work with athletes, events they do are planned months, even years in advance. With someone like Ronaldo, it’s not just to the day but to the hour to get into the diary,” says Sher.
Clubs who participate in the International Champions Cup are given reduced appearance fees if certain star players do not take part. “If those players don’t feature then the club doesn’t benefit commercially. It’s in everyone’s interest that they’re all on the same page,” Sher adds.
In club promotional work, athletes must appear in groups so as not to give the impression they are giving personal endorsements to particular brands. Different countries have different rules on how many players can be used in advertising. In England it’s three and Italy five.
More specifically, commercial partners cannot insist on using certain players in activations. Players are put into different categories based on their place in the squad and, based on the value of the partnership, the club will make available a mix of certain players. “There’ll be category A, B and C in terms of commercial and Ronaldo will be in category A with [the] top stars,” Matthew O’Donohoe, Ronaldo’s commercial agent at Creative Artists Agency Sports, tells us.
“They have to be careful how much they use any one player. Ronaldo will certainly be in demand by all club sponsors but there’ll be a limit to how much the club can roll him out, you can’t overuse one player,” O’Donohoe adds.
“It’s the same with the other top footballers at other clubs, you won’t see them on every poster – there has to be balance across the squad.”
To get around such commercial restraints, club partners will try to strike individual deals with athletes. International forex broker Exness, for example, was able to do this when it signed commercial deals with both Ronaldo and Real Madrid in August 2017. “Wherever those natural synergies exist between both sides I am sure they will be explored,” says Sher.
When clubs and athletes have conflicting sponsors, such as Ronaldo (Nike) and both Real Madrid and Juventus (adidas), both parties usually work together to find a common ground.
“This challenges every one of our athletes at their different clubs,” O’Donohoe says. “We always find a middle ground where it never has any negative impact on club partners and equally the club’s use of the player will be respectful of us as personal partners.”
Maintaining momentum when superstars move on
While superstars create commercial value for clubs, there is a danger they can create a sense of dependency. Even Real Madrid lost 1m followers on Twitter when Ronaldo moved to Juventus. It is vital, therefore, that clubs make sure they put building blocks in place to push on when the star moves on or retires.
With a stadium capacity of just 30,000 – catered to a local population of just 120,000 – Bayer Leverkusen has aggressively courted foreign fans to improve its commercial reach.
The club kickstarted its overseas marketing push with the signing of South Korean forward Son Heung-min in 2013. It began with a successful tour of South Korea in 2014 but the club failed to leverage his spell at the club and convert Son supporters into fans of the club. Following the player’s move to Tottenham Hotspur in 2015, Bayer Leverkusen had no registered, official fan groups in South Korea.
The club vowed not to make the same mistake when they purchased Mexico star Javier Hernández, also in 2015. The official news of Hernandez’s transfer on Bayer Leverkusen’s Twitter feed was retweeted more than 15,000 times and got 50,000 likes on the Facebook page – both club records.
The team used Hernandez’s popularity in the United States and Mexico to launch both Spanish and English Twitter accounts, plus a Spanish-language version of the official website. The club also utilised trips to Florida for winter training to develop relations with US broadcaster Fox Sports.
“When I started my job as managing director…I clearly defined our objectives for the years to come,” Bayer 04 Leverkusen chief executive Michael Schade told the Orlando Sentinel in January 2017. “One central goal was the internationalization of the club with a special focus on North America.
“Using the massive Chicharito-effect and launching our social media platforms in English and Spanish over the past year were big steps for us as a traditionally German-focused club.”
During Hernandez’s first year at the club, over 1.5m new fans joined the club’s social media platforms, making them the third fastest growing football club in Europe. On Instagram alone, they saw a growth figure of around 390 per cent whilst Twitter grew by 188 per cent and Facebook by 81 per cent.
While 80,000 fans left Leverkusen’s social media accounts in the month Hernandez left, the vast majority stayed.
“We know Chicharito won’t always be there,” Jochen Rotthaus, Leverkusen’s director of marketing and communications told Vice in 2016. “Everyone leaves. Therefore we must make sure our club brand is so established that the people say ‘Chicharito plays for Bayer 04, but when Chicharito isn’t there anymore, I still love Chicharito, but my new love is Bayer 04′.”
“It’s difficult to keep these fans but it’s easier today to really engage with fans in such a way that really builds loyalty and affinity over time,” says Sher.
“Going forward, the clubs’ ability to understand data will help build fan loyalty surrounding merchandise, membership and content – all those things that make people feel connected not just to a club but a community.
“If you make people feel part of something that’s bigger than just one player, that they experience things with the club that they can’t experience elsewhere – that’s the key.”