May 11, 2021

Sports Legend

European clubs caught between a financial pit and sacred grounds

As European football clubs struggle to make up for lost revenue in the pandemic, an untapped source of revenue is stadium naming rights, but their exploitation may not be straightforward.

Many football fans have long opposed the sale of their history by clubs, and during the European Super League fiasco, supporters clearly expressed their hostility to the tradition of trading for cash.

In addition, some important sports sponsors, notably airlines, have also been hit hard by the Covid-19 restrictions.

“Many European sports clubs have long missed millions of stadiums by naming sponsorship fees each year,” said Bryn Anderson, sports economics analyst at audit firm KPMG. AFP.

Today, only 29 of the 98 clubs in the top divisions of England, Germany, Italy, Spain and France, the “big five” European leagues, play in named stadiums. On the other hand, in the National Football League, more than 80% of the stadiums bear the names of sponsors.

“Cash flow and liquidity issues can push sports clubs, even those who have been reluctant so far, to exploit stadium naming rights,” Anderson said.

The practice began with American baseball stadiums, first at Fenway Park in Boston when it opened in 1912, then at Wrigley Field in Chicago in 1926.

It has become acceptable in North America, although unlike European leagues, many sports there are still reluctant to put the names of sponsors on the front of their jerseys.

In Europe, one of England’s venerable cricket grounds became the Foster’s Oval in 1988 as part of a deal with the Australian brewer.

Premier League Bolton Wanderers sold the rights to its new stadium to Reebok in 1997, but subsequent name changes for the same arena that other sponsors, first Macron and then the University of Bolton, have taken over, show the dangers of these agreements.

The main obstacle is “respecting the identity of clubs” and supporters, said Enguerran de Cremiers, director at Kroll (Duff & Phelps).

Manchester United, for example, could make around 30.5 million euros (RM 1.4 billion) a year by naming a business name for their holy house in Old Trafford.

“It is impossible,” said de Cremiers. “You can’t imagine naming Old Trafford”, even though the club’s debt exploded last year and is around € 550 million (RM 27 billion).

United fans showed their fury at what they see as profit-oriented management when their protests forced Sunday’s game against Liverpool to be canceled.

The pandemic, which wiped out match revenues, halted the clubs’ long growth in revenues.

Deloittes, a financial advisory firm that publishes an annual football-rich list, calculated in January that the revenues of Europe’s top 20 clubs fell from 9.3 billion euros (45 billion RM) in 2018-19 to 8 , 2 (RM40 billion) for the following season, which began before the pandemic.

They estimated that this season’s revenue would be down € 2 billion (RM 9.9 billion) from the pre-Covid total.

Football clubs, an attractive investment just a few years ago, are losing their appeal.

In France, Bordeaux is on the brink of financial collapse after its owners, the American investment fund King Street, decided to bail out. Others might face similar issues.

The growth of football is costing many potential sponsors dearly, Anderson said.

“The increased globalization of gaming and the growing international appeal have changed the face of the type of brands involved at the highest level,” he said.

“The growing values ​​of sponsorship have increasingly limited the types of industries and businesses that can now afford this type of investment,” he said.

The fallout from the pandemic could make this limited pool of sponsors a weakness.

Anderson believes that “airlines, automakers, retailers, hotel groups and even travel brands will wonder if they can justify spending such large sums on football sponsorship.”

Crises such as a pandemic “can obviously cause companies to reassess their positions,” said William Miller, professor of sports management at the University of Wisconsin-Parkside.

The big winners of the pandemic, high-tech companies, could step in.

Symbolically, Chevrolet, Manchester United’s main sponsor, did not extend its annual contract of 70 million euros (34 billion RM).

TeamViewer, a German company that makes remote computer management software and which is largely unknown to the public, is taking over, but at a lower price of € 55 million (RM 2.7 billion) per season for five years.

“This deal probably wouldn’t have happened without the pandemic,” which has boosted TeamViewer’s business, Anderson said.

At the same time, sponsorship and naming rights are evolving, Miller said.

Businesses are looking for new ways to generate “significant customer and media impressions”.

He cited the “recent agreement between the Seattle Kraken ice hockey team and Amazon for the Climate Pledge Arena” which is set to reopen in time for the team’s National Hockey League debut in the fall.

It calls itself “the most progressive, responsible and sustainable arena in the world” and part of the goal is to improve Amazon’s image. – AFP