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Matthew Glendinning | Making commercial sense of a Messi move

Matthew Glendinning, editor of SportBusiness Sponsorship, asks whether the hundreds of millions of euros required to lure wantaway superstar Lionel Messi from Barcelona can be justified from a commercial or brand equity point of view for the buying club.

Whether it’s the love of money or the love of football, the Lionel Messi transfer story has something for everyone.

According to some reports, City Football Group want Messi at Manchester City – with a move to the CFG-owned New York City lined up for the twilight years of his career – on a five-year contract worth £450m (€497m/$588m), and another £225m on the table in bonuses.

But how could City, or any club, possibly recoup that sort of investment? While the footballing side of any move for the 33-year-old-genius goes unquestioned, the commercial side requires scrutiny, particularly the notion that the acquisition of a superstar player like Messi can wash its face through commercial agreements.

The idea that Messi’s wages could be financed through the power of extra shirt sales has already been shot down by sponsorship experts like Tim Crow, who tweeted that the lucky club would have to sell 220,000 shirts per week to cover his pay.

Like any other aspect of a kit contract, the royalty percentage is negotiable and varies from contract to contract, but will typically be between 12 per cent and 17 per cent of wholesale price from manufacturer to third-party retailer. Moreover, some royalties only kick in after the minimum guarantee has been covered by the kit maker.

Clubs will also buy a substantial number of shirts from the kit maker for themselves for sale through their own outlets, both physical stores and online, where the profit margin is much higher. Even so, it still rare for a club to make more than 10 per cent on top of the upfront marketing and licensing fees.

More positively, outside his European home, Messi is hugely popular in Asia and the US, and would widen any club’s appeal in these markets. In the 2020 edition of the Mailman Group’s Red Card Report, Juventus star Ronaldo was the most popular player online in China, based on 2019 data, with PSG’s Neymar Jr. in second spot and Messi in third.

Juventus has gained three new Asian sponsors in its 16-brand top tier – Konami, Cygames and Linglong Tire – since Ronaldo came on board, and Messi could similarly drive greater spend by brands from the far east at City.

There is a limit to how far clubs can sweat their star assets, however. The player has to train, play and rest before he commits to appearance days for club sponsors – or his personal endorsement deals.

Cristiano Ronaldo, for example, is in demand by every sponsor at Juventus but can only be used in imagery with at least four other players from different categories at the club. If club sponsors wanted to use his image individually wearing the Juve shirt, they would need to speak with his agents – CAA or Polaris – and the money would bypass the club.

Perhaps brand equity rather than revenue is a better marker of value for superstar players. At Juventus, the impact on brand equity can be loosely attached to the club’s share price.

Before Ronaldo arrived in July 2018, Juve shares were worth €0.82 each. But they rose to €1.47 by September 2018 and peaked at €1.54 in April 2019. The impact of Covid-19 has dragged them back to €0.92, but the near doubling of the club’s worth in the nine months after Ronaldo joined is significant.

Some of this was driven by revenue growth. In the financial year covering the 2018-19 season, Juventus posted record revenues of €621.5m, an increase of €116.8m over the previous year, just the kind of extra money that City would need to pay for project Messi.

Yet the revenue growth line at Juventus stalled in the first half of the 2019-20 season – before the impact of Covid-19 struck – suggesting the increases in share value were as much a matter of perception as revenue generation.

Still, for City, with its coterie of former Barcelona executives – like chief executive Ferran Soriano and chief operating officer Omar Berrada – the acquisition will not be costed in conventional terms.

Like Barcelona under Soriano, where he drove the club’s globalisation, development of Asian and US markets, and positioning as a global brand with star players as global icons, City wants to be mes que un club – in this case an entertainment brand, one with global reach via CFG’s portfolio of clubs around the world. And the club is banking on 33-year-old Messi as the key to this transformation.

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