The latest available financial statements concerning the 2019/20 season demonstrate that while the ongoing pandemic caused major losses in top clubs’ matchday and broadcasting income, commercial revenues were the least impacted, with losses less dramatic than in matchday and broadcast sources, primarily due to many major deals having been signed pre pandemic. Actually, two of the Big5 football leagues even registered year-on-year growth in league-wide commercial revenues. The English Premier League managed to increase overall commercial income by almost EUR 200m to EUR 1.815bn, a 12% rate of growth in 2019/20, driven mainly by Everton’s 10-year stadium naming rights agreement for their new stadium at Liverpool’s Bramley-Moore Dock signed with Russian billionaire Alisher Usmanov, who already paid GBP 30m last year for the option of becoming the new ground's main sponsor. Modest growth (1%) in commercial revenues was registered for the German Bundesliga, mainly related to better performance by German clubs in UEFA club competitions. Aggregate commercial revenues in the Spanish LaLiga decreased slightly (-2.5%) in 2019/20, primarily due to more substantial declines for Barcelona (EUR -37m), whereas several LaLiga clubs recorded an increase in commercial income. In France, the cancellation of the 2019/20 season limited clubs’ ability to fulfil commercial agreements, consequently, Ligue 1 clubs recorded a 10.2% decline in aggregate commercial revenues. Italy’s Serie A clubs’ total commercial revenues fell by EUR 116m (-14.6%) to EUR 679m in 2019/20: almost half of this amount was represented by Inter Milan’s commercial revenue decrease of EUR 50m alone, due to several of their sponsorship deals with Asian companies close to the Suning owners expiring and not being renewed in that season.
As posited earlier, the commercial revenue impact of COVID-19 was limited in 2019/20 as most deals were contracted for the season. In order to get an indication of more recent commercial trends, we are examining new deals* which have been struck since the breakout of the pandemic from May 2020 on, in particular, the two most significant components of clubs’ commercial income: front jersey sponsorships and kit supplier deals.
Focusing on the Big5 leagues, there have been upwards of 40 new main shirt sponsorship deals struck since the onset of the pandemic in Europe. The average value of these deals appears to be constant, with less than a 1% average decrease compared to their latest pre-pandemic deals. A bigger impact might have been expected since main shirt sponsors obtain great value from TV broadcasts, and, with empty stadia, the value of such advertising was diluted. While the previous factor certainly pulls in the negative direction, at the same time, investors tend to see past the temporary blip, as maintaining existing relationships and growing new ones with clubs ensure that sponsors gain favourable deals in the future once the pandemic is in the rear view mirror. Overall, both deal value increases and decreases can be observed, influenced by a number of different factors, including on-pitch performance, player transfers, commercial sales performance of the clubs, the start date of negotiations (pre or post pandemic) and the type of relationship with interested brands. For example, one of the biggest winners are Inter Milan, who switched from their long-standing partnership with Pirelli to blockchain based fan-token platform socios.com, doubling income from this source. On the other hand, local city rivals AC Milan have extended their partnership with Emirates at discounted rates – the new deal being approximately 56% of the previous deal's value.
Unsurprisingly, the average length of shirt sponsorship agreements decreased from 2.6 to 1.8 years, as there was uncertainty regarding activation opportunities with the ongoing global pandemic. One-year deals were signed most typically, benefiting both the sponsor and the clubs: such sponsors are able to exploit what could be considered a bear market and get to experiment with a very engaged fan base, while the clubs attain financial relief and stability. Nevertheless, Manchester United's deal with TeamViewer, spanning five years in total, goes against the grain, showcasing the opportunity for certain brands to take advantage of a depressed sponsorship market and lock in a global brand with potentially some discount on pre-COVID prices.
Finally and in parallel, deal data confirm a considerable shift in the industry landscape when it comes to those involved in football sponsorships. As disparate nations crack down on betting-related sponsorship, such as in the case of La Liga, and proposals to do so in England as well, the door is ajar for new companies to stick their foot in. One such industry is the loosely regulated blockchain and crypto-related businesses led by socios.com. Beyond Inter Milan, other clubs embracing sponsors from such sectors include AS Roma (DigitalBits), Lazio (Binance), Atalanta (Plus500) or Sevilla (NAGA). In the meantime, some traditional major sponsor industries, especially those severely impacted by the current health crisis, are tending to take a step back – for example automotive giants Chevrolet leaving Manchester United, and Pirelli breaking from Inter Milan, while Qatar Airways has not renewed its sponsorship with AS Roma.
Different trends can be extrapolated also from the more than 30 new kit supplier deals contracted in the Big5 leagues since the beginning of the pandemic. While the average length of kit deals fell from 3.6 to 3.2 years (a smaller and more marginal change compared with main shirt sponsorships), the average estimated value of the deals increased by more than 10% across the Big 5 league clubs who entered into new or renewed arrangements. As the data also demonstrate, kit supplier contracts are generally longer term than main shirt sponsorship deals, as such are less impacted by short-term shocks like the momentary halt seen in the industry's growth. Watford FC's new agreement with Kelme before the 2020/21 season was the biggest relative increase, as the new deal was reportedly 2.4 times the previous one. Yet, not all deals were signed at significantly better terms: one such example are Sevilla, who reportedly extended their partnership with Nike at almost identical terms. Furthermore, several clubs experienced a decrease in kit sponsorship value, once again highlighting the importance of various factors defining the conditions of a new sponsorship deal.
In summary, growth in the value of main shirt sponsorship deals appears to have halted for the moment, while kit supplier deals appear to be impacted less by the pandemic. It is important to note, however, that in the relatively short timeframe since the emergence of the pandemic, only a minority of clubs had to look for new main shirt sponsors or kit supplier partners, limiting the ability to derive conclusions around longer-term commercial trends. Crucially though, deal length for both types of deals has shortened, showing increased caution from the side of the sponsors in locking down their funds for a longer investment horizon.
Overall, deal data currently available suggest that commercial revenues at football’s top end are likely to remain resilient in the current football season, despite the ongoing challenges. Nevertheless, the financial constraints of key commercial partners in sectors that are severely hit by the pandemic, including companies in the airline, automotive or retail industries, may force them to employ a more cautious approach to their sponsorship strategies and marketing expenditures. In the coming years, clubs and leagues will increasingly benefit from technology developments that offer new commercial revenue streams: Italy’s Serie, for example, has recently launched sponsorship categories for Video Assisted Refereeing and Goal Line Technology. Opportunities around digital fan engagement solutions, non-fungible tokens (NFTs, i.e. one-of-a-kind digital files which can carry any form of digital content), or digital technologies (such as TeamViewer) also provide additional commercial income sources to explore and capitalize on.
* The analysis covers clubs from the Big5 leagues who announced at least one new main shirt sponsor or kit supplier deal since May 2020. Data is sourced from the sports sponsorship database of our commercial data provider, GlobalData. Deal values and lengths used for the analysis are either actual values reported by reliable sources or GlobalData estimations.