A helicopter crash last October cost five men their lives. It also contributed to the collapse of one of the biggest team sponsorship deals in the history of UK football.
Chelsea vice-chairman Matthew Harding died with four others returning from Chelsea’s game with Bolton. In September, the London club had opened negotiations with Scottish Courage about the continuing sponsorship of the club by its licensed US brand Coors.
The estimated 3m deal had just entered its third year and both sides were keen to agree new terms. Last week, Scottish Courage withdrew from the talks and gave Chelsea permission to talk to other potential sponsors (MW February 7).
A statement from the company following last week’s story in Marketing Week says: “The decision not to renew the contract was reached in an amicable fashion and was shaped by a change in marketing strategy, rather than any financial disagreement.”
But sources close to the deal confirm the 6m to 7m price tag Chelsea attached to its three-year renewal was central to the deal’s collapse. They say Scottish Courage, which also sponsors Glasgow Rangers (McEwan’s) and Newcastle United (Newcastle Brown Ale), was initially not opposed to paying the increased money. But the brewer wanted more for its money.
Mark Gottlieb, managing director of the Progress agency, who brokered both the original, and the failed deal, says: “There was genuine disappointment on both sides that the deal did not go through. It broke down because of a lack of understanding of the sponsor’s needs.”
The Scottish Courage negotiators are also believed to have been angered by the favoured status apparently given, by Chelsea, to its 12m kit sponsor Umbro. Umbro’s return over six years can be measured in cash from replica shirts, brand awareness, and hospitality but Scottish Courage wanted as many marketing opportunities as possible to maximise its investment. Chelsea’s view was that if Umbro was paying such a large chunk of money up front it should get preferential treatment.
The Chelsea negotiators, led by managing director Colin Hutchison, went into the talks on the back of appointing Dutch coach Ruud Gullit and signing the Italian striker Gianluca Vialli. They wanted to exploit the commercial potential of the most exciting side Chelsea has had in 25 years and the stock market value which has tripled since flotation in April 1996 to 220m.
But the talks lost their impetus after Harding’s death – the two parties could not agree on what the club would give the brewer for the 100 per cent increase in spend. Harding, it is said, had a keener awareness of how to market the club’s glamorous name.
By the end of January, Scottish Courage decided that as it already had successful sponsorships running with Newcastle and Rangers, it was prepared to give up on Chelsea.
“Chelsea must have been in a strong position not to budge on price,” says one football analyst. “It must have other people lined up in the wings. “
Scottish Courage’s Newcastle sponsorship is seen as one of the best in the business. When the club signed England captain Alan Shearer for a world record 15m he appeared at the ground before thousands of fans beside a large inflatable Newcastle Brown Ale bottle. The picture was flashed around the world, cementing the close relationship between brand and club.
By contrast, when Chelsea signed the Italian internationals Vialli, Roberto Di Matteo and Gianfranco Zola there was no such strong brand representation. Scottish Courage’s marketing and trading team wanted guarantees that Chelsea would be alive to similar opportunities in the future and demanded an increased presence in terms of signage on the pitch and around the stadium.
But the fact that Chelsea felt confident enough to say no illustrates the changing relationship between sponsors and some of the clubs.
In the past three years two factors have tipped the balance in favour of the clubs. The first is the dramatic rise in the popularity and profitability of the national game. Attendances, seat prices, merchandising and the game’s image are all on the up.
The other element, and the more profound, is TV. Or to be more precise, the joint agreement between BSkyB and the BBC to more than double their payment for rights to Premier League football from 304m to 743m for the seasons 1997 to 2001. The BBC and ITV have had to increase bids massively to hold on to live coverage of the FA Cup and the Nationwide League respectively – but both failed and had to enter agreements with BSkyB.
The effect of TV was already obvious in the price of Carling’s sponsorship of the Premiership. The first four-year deal was 12m. The four-year extension agreed in December tripled to 36m.
The huge influx of TV money and greater exposure is convincing clubs that sponsors should be paying more for the space on players’ chests. For clubs in the top half of the Premiership, sponsorship accounts for less than ten per cent of their annual income, whereas TV brings in up to half the amount.
Manchester United, Arsenal and Blackburn have the most lucrative deals. But even then they net less than 2m each season. By contrast, Manchester United has an income of more than 20m per year from merchandising alone.
“Television is driving football, not sponsorship,” says Julian Brand, the man responsible for European account activities for IMG, the largest sports and entertainment sponsorship and management company in the world.
A City analyst goes further: “Sponsorship is no longer the be-all and end-all of clubs’ revenue – they have other revenue streams now. And they no longer have to accept deals they might have taken as little as three years ago. Clubs are able to drive harder bargains. They can afford to be more choosy.”
Consequently when the sponsorship contracts come up for negotiation, clubs, at least those in a stronger position, will increasingly take the Chelsea view and seek to double the size of those deals.
One senior advertising agency source handling sponsorship says: “The top half of the Premiership is in a very strong position. Football is on almost every night of the week. The sponsors are being linked with the national game which is enjoying a fantastic revival. Sponsors are getting higher exposure and clubs want them to pay for it.”
Alternatively, one could say the clubs are exhibiting naked greed in a sport littered with sharp practice and opportunism.
Steve Curnow, the sponsorship and licensing manager of the Premier League, does not see the negotiation process between club and client in those terms.
“Football is a great product,” he says. “It has improved in quality in almost all areas. The commercial appeal of the game has also grown. The club and sponsor will have a perceived value of that club. It is up to those parties to sit down and negotiate a value.”
But there’s the rub. Everyone knows it should cost more to sponsor Liverpool than Wimbledon, but how much more? And what is the relative worth of Derby County or Leicester City?
Lowe Howard-Spink sponsorship director Sean Jefferson was at Bass when its sponsorship of the Premier League was first struck in 1992. He says: “There are no ratecards in this industry. The rate is what the market can bear to a large extent.”
IMG’s Brand adds: “The market will dictate what is bought and what isn’t. We sell the passion of sport. We play on that value and that glamour. How do you measure that?”
Not only is the price up for negotiation, but what you’ll get for your money. There are core ingredients: signage around the ground; executive boxes and corporate hospitality opportunities; between 50 and 200 tickets per game to give away either as prizes or to clients and suppliers; and association through replica shirts.
“All too often you see companies sink as much as 6m into a club and think that is enough,” says Charlie Beauchamp, account manager at sponsorship agency Alan Pascoe & Associates. “They fail to spend an extra five per cent on milking that relationship. What should be done is to look for opportunities to integrate that sponsorship into other areas of advertising and marketing.”
However, companies are already beginning to fight back to regain their influence. Interestingly, Beauchamp says that a number of companies are in talks with clubs, not only as potential sponsors but also to buy a stake in the business to establish long-term links.
The view is that they will be seen as an ally of the club rather than a partner to be exploited. This model already exists in many clubs in Europe.
“The thrust will be towards the continental club model,” says one observer. “There will be the business side and the football side, and people from each side will have very little to do with each other.”
General Motors, through its Opel brand, sponsors top teams in Italy, France and Germany. It is believed that it has also unsuccessfully approached Manchester United. Its UK operation Vauxhall does not sponsor any single team, although it does sponsor the non-league divisions. Huge brands such as Coca-Cola, and McDonald’s do not sponsor individual teams, but they are involved in football through branded competitions or stadiums.
“Some brands see themselves as such global players that getting involved with regional clubs does not fit in with their strategy,” says one analyst. “There are only a handful of teams in the world like Manchester United or Juventus that could be considered global brands.”
Another senior advertising executive who advises marketing directors on sponsorship adds: “Marketing directors of big brands have to decide which form of sponsorship will get them the most exposure. This is the key purpose of sponsorship, but at the same time it is tremendously difficult to estimate in advance.
“Big clubs can get knocked out of competitions just as easily as anybody else, so marketing directors often decide it is a safer option to sponsor an event, which at least guarantees a certain level of exposure.”
The doubling of sponsorship fees means this will become increasingly a game for big players. The top clubs will be able to demand, and get, high fees and good terms. The reverse will be true for the lower half of the league and the divisions below. Small clubs will talk to companies that dwarf them and may come out of negotiations feeling even smaller.
As Beauchamp says: “Increased sponsorship fees mean fewer companies will get involved. It is becoming a game for big companies or very wealthy individuals.”
So far the football bubble shows no signs of bursting. But as one sponsorship director says: “As recently as the early Eighties the game was in the doldrums. There was hooliganism, poor attendances, and filthy stadiums. That has all changed now. But I don’t know how long this high rate of growth can last. Nobody I talk to does either. The strategy on all sides is to make as much money as you can for as long as it lasts.”