A couple of weeks ago, Manchester United announced a new shirt deal with German firm TeamViewer in a five year deal worth £235 million (or £47 million per season).
That sounds impressive on first hearing and several analysts have praised United’s commercial team as the best in the business. That may well be the case but, as I’ll explain, it does appear that they’re in the wrong business.
First, some context – the TeamViewer deal replaces the largest shirt sponsorship in the sport’s history which saw the Chevrolet brand on the front of United’s shirt. That deal was worth £64 million per season and also included the sponsor as the official automotive partner (valued at approximately £10 million annually) so whilst the club may well recoup further revenue next season from re-selling that “asset”, this deal represents a significant drop from the previous deal agreed nearly a decade ago.
To those inside the sponsorship world, to achieve such a valuation for a shirt deal must sound impressive in a mid-COVID environment. For fans also, these are large numbers that are hard to comprehend when your own financial situation is far more deserving of your attention.
It’s therefore understandable that such an achievement is celebrated and admired in some circles – for example EFL clubs must look on in envy – if only they could earn millions from a shirt deal. Of course the downside of a club with the stature to command such a deal is paying the wages of the players that will wear it. It’s not a business model that can ever create significant value.
For as football clubs are starting to find out, lucrative sponsorship deals for placing a logo on literally any “asset” that a club could think of, belong in the past. In a digital era, why would brands use channels that are so impersonal, have inefficient targeting and absence of accountability in terms of reach and engagement. Sure, there will always be a company with a cheque to associate their brand with a football club but those days of high premiums are long gone.
Maybe clubs believe that broadcast revenue will continue to provide a platform for their financial future – but it’s over a decade since the peak in viewers through that medium and although there was an inevitable lag in the valuation of those packages, they have also seen a “down round” since the previous cycle.
These macro trends don’t bode well for those that are blinkered by pursuing a business model that has been outdated by the digital era – and the numbers illustrate that they’re barking up the wrong tree but just don’t want to see it. Maybe this pandemic will provide football with exactly what it needed in terms of a commercial model – a complete reset.