As we near the end of the European Football Season we thought it would be interesting to review some risks and opportunities that arose for English teams and their sponsors throughout the season.
Qualification for the Champions League brings a financial windfall and this was clearly visible in Tottenham’s interim results to December 31st 2010, which showed an increase of almost 50% in revenues to £80m. In total, the club posted a profit of £4.2million compared to the £6m loss they made during the same period in 2009. Merchandise sales rose 22% and Sponsorship and Hospitality revenues were up 26%. The majority of these increases can be directly attributed to Spurs Champions League status.
In March, Tottenham announced a new sponsorship with US apparel manufacturer Under Armour. Their high profile participation in the Champions League was a factor in clinching that deal - reportedly worth £10m a year. Tottenham’s CL participation was also a factor in their innovative second shirt sponsorship deal with Investec.
Autonomy, who appear on Spurs shirts for League games pay a reported £10m per year. Investec apparently secured the rights for £5m just for the cup competitions - which includes the Champions League. While the cup sponsorship carries with it more risk in terms of results and consequently less exposure if the team loses early, Spurs run to the quarter final this year meant that Investec received a great deal of worldwide exposure. They perhaps got the better deal this year but with Tottenham not qualifying for next season’s Champions League, Investec will be relying on the FA Cup and League Cup for exposure. That exposure will be a fraction of last year’s unless they can win the FA Cup.
Incidentally, Investec are considering a £15m a year deal with Tottenham once Autonomy’s deal ends in 2012
Manchester City will replace Tottenham as the fourth English representative in next season’s Champions League. This was the minimum requirement for a team that has spent over £300m on players in less than 3 years. And now that they can offer players the prospect of playing in Europe, they’ll likely be able to buy whoever they want!
On a side note, City are also set to earn a considerable sum (at least in most club’s eyes) if Cardiff get promoted to the Premier League. The loan deal for Craig Bellamy included a clause whereby City are returned the £1.5m in wages paid to the player if Cardiff are promoted. These types of performance-related deals are becoming more prevalent and rightly so. A team’s income is directly related to its performance on the field so why shouldn’t a player’s remuneration be similarly correlated?
Meanwhile, West Ham look set to be relegated from the Premier League and the owners say it will cost them £40m to keep the club alive if and when that happens. Last September, the Hammers were approximately 18% chance to be relegated so that £40m could have been bought for £7.2M. Clubs need to have a longer-term outlook and consider the financial options available to them. Some English clubs are taking huge financial risks to stay in the Premier League and it all comes apart when they fail.
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