Is it the best of times or worst of times for apparel in sports sponsorship?
It is rare that you can link the English author Charles Dickens with sports sponsorship. However, a recent end to a jersey sponsorship deal for one of the English Premiere League’s most hallowed clubs demonstrates how it could be the best of times and the worst of times for apparel partnerships in sports.
Throughout the sporting world, jersey sponsorships will or already have driven significant incremental revenue growth. NBA teams are going to sell sponsorship logos on their uniforms starting in the 2017-18 season. Under Armour signed a record $86 million deal with the University of California, Berkeley for the next ten years.
At the same time, large jersey sponsorship deals are more frequently coming under scrutiny. A famous recent example entails a senior executive at General Motors reportedly being fired from his job for “not properly vetting and reporting the financial details about Chevrolet’s sponsorship of Manchester United.” The sponsorship’s most prominent feature was having a Chevrolet logo on the front of the English Premiere League team’s jersey.
Adidas currently sits at an interesting intersection of sports sponsorship. It recently paid $750 million to be the Official Kit (jersey) Supplier of Manchester United. At the same time, the company yesterday announced that it was ending its sponsorship of English Premier League team Chelsea six years early after paying a reported $300 million for the deal in 2013.
Why would adidas pay $350 million more to sponsor Manchester United than Chelsea? Adidas primarily focuses on selling apparel to customers for a number of sports throughout the world. Chelsea claims to have close to 400 million global fans across the world. Manchester United has almost that number of fans in Asia alone with 110 million in China and 659 million globally. A relationship with Manchester United enables adidas to reach more customers in more of its target markets that will more likely facilitate incremental revenue growth for the company.
This is a salient example of a larger trend happening in the industry. Companies are more frequently making decisions based on weighing economic and financial factors than ever before when making sponsorship decisions. In the past, teams could rely on their on-field narratives to generate interest from corporate sponsors.
Adidas’ actions with Chelsea and Manchester United, however, show that there is a problem with relying on just the emotional connection with fans to generate dollars for jersey sponsorship. While Manchester United is arguably the most successful team in Premier League history, Chelsea is usually considered second by having won 17 major championships since 1997. In fact, Manchester United was having one of its least successful on-field runs in recent history when it signed its new adidas deal. Even though Chelsea struggled during the 2015-16 season, the team won the Premiere League last season – after its most recent deal with adidas was signed.
Ending its deal with Chelsea early and signing a larger deal with Manchester United makes the most sense for adidas using an economic lens. Manchester United will likely enable adidas to reach more of its customers and sell more products, particularly in the Asian market.
Adidas is not alone in transitioning to a more economically-oriented type of decision making process when it comes to sports sponsorship. Corporate partners of all sizes need to understand the economic value of sponsoring a sports organization. Teams, leagues, athletes, and events need to present a demonstrable ROI to their partners or risk losing corporate sponsors. The sports properties that can effectively show and communicate value based on economic metrics will have the best of times presenting a compelling economic story and retaining corporate partners.
Adam is the CEO and Founder of the sports sponsorship and analytics firm Block Six Analytics. He is also lecturer for Northwestern University's Masters of Sports Administration. In addition, he is the co-author of The Sports Strategist: Developing Leaders For A High-Performance Industry. His work has been featured in publications including Forbes, Comcast SportsNet Chicago The Washington Post, The Chicago Tribune, and Oxford University Press.