The Runaway Train Of Football Club Ownership- Steven Falk

March 7, 2012

There is an old saying that the best way to make a small fortune out of a football club is to start with a large one. But in today’s world of unremitting pressure for instant success and an ever-escalating cost base, even a large fortune may not be enough.
Add to the mix UEFA’s Financial Fair Play rules which come into gradual effect from next season and we can begin to see some worrying trends developing for the ownership and operation of the EPL’s leading football clubs. In particular commercial sponsorship may be the area most affected.
It is generally recognised that leading clubs develop their revenues from three main area, namely:-
• Matchday – including ticketing, hospitality and catering
• Media – principally from TV
• Commercial – mainly from corporate sponsorship
For both the matchday and media categories, many leading clubs are now in a position where they are unable to increase revenues. Ticket and hospitality prices have been raised to a point where any further increase may prove counter-productive as fans and corporates are priced out of the market and any additional revenue is offset by churn.
Meanwhile, the collective model for negotiating media rights successfully operated on behalf of EPL clubs by the FAPL may now be reaching its zenith as competition to purchase rights internationally among TV companies declines.
This leaves sponsorship as the only category left with the capability to ratchet up club commercial revenues. However, in a difficult global financial environment and with corporates cutting back on discretionary marketing spend, many clubs are chasing a dwindling set of serious sponsors.
Club owners must discover innovative new ways to finance their operations. In some cases, this means leveraging and transferring existing alliances and relationships from the business to the sports arena to fill the revenue gap. Such deals may not be perceived as, or intended to deliver value equal to the property that is sponsored.
Real Madrid pioneered this approach with the inflated sale of their training base to the city authorities. Juventus followed with a record-breaking deal involving Gadaffi’s Statoil and Barcelona has accepted Qatar onto its shirt. The trend continues with Manchester City’s deal for stadium naming rights with Etihad, the state airline closely associated with the club’s owners.
It may be that the process of evolution by which the wealth of club owners is measured in billions rather than millions is set for further change. Very soon, club ownership will no longer be the sole prerogative of fabulously wealthy individuals. In this age of runaway costs, the time of corporate ownership and the sovereign wealth fund may be at hand.
Star Sports Marketing can help you to devise and implement an effective sponsorship strategy. Visit www.starsportsmarketing.com or email steven.falk@starsportsmarketing.co.uk for an informal and informed conversation

There is an old saying that the best way to make a small fortune out of a football club is to start with a large one. But, in today’s world of unremitting pressure for instant success and an ever-escalating cost base, even a large fortune may not be enough.

Add to the mix UEFA’s Financial Fair Play rules, which come into gradual effect from next season and we can begin to see some worrying trends developing for the ownership and operation of the EPL’s leading football clubs. In particular, commercial sponsorship may be the area most affected.

It is generally recognised that leading clubs develop their revenues from three main area, namely:-

• Matchday – including ticketing, hospitality and catering

• Media – principally from TV 

• Commercial – mainly from corporate sponsorship

For both the matchday and media categories, many leading clubs are now in a position where they are unable to increase revenues. Ticket and hospitality prices have been raised to a point where any further increase may prove counter-productive as fans and corporates are priced out of the market and any additional revenue is offset by churn. 

Meanwhile, the collective model for negotiating media rights successfully operated on behalf of EPL clubs by the FAPL may now be reaching its zenith as competition to purchase rights internationally among TV companies declines. This leaves sponsorship as the only category left with the capability to ratchet up club commercial revenues. However, in a difficult global financial environment and with corporates cutting back on discretionary marketing spend, many clubs are chasing a dwindling set of serious sponsors.

Club owners must discover innovative new ways to finance their operations. In some cases, this means leveraging and transferring existing alliances and relationships from the business to the sports arena to fill the revenue gap. Such deals may not be perceived as, or intended to deliver value equal to the property that is sponsored.

Real Madrid pioneered this approach with the inflated sale of their training base to the city authorities. Juventus followed with a record-breaking deal involving Gadaffi’s Statoil and Barcelona has accepted Qatar onto its shirt. The trend continues with Manchester City’s deal for stadium naming rights with Etihad, the state airline closely associated with the club’s owners. 

It may be that the process of evolution by which the wealth of club owners is measured in billions rather than millions is set for further change. Very soon, club ownership will no longer be the sole prerogative of fabulously wealthy individuals. In this age of runaway costs, the time of corporate ownership and the sovereign wealth fund may be at hand.

About Steven Falk:

A graduate in Psychology from Manchester University, Steven started his career in the motor industry before taking an MBA at Warwick University Business School. There followed commercial roles at Astra Zeneca, United Utilities, Great Universal Stores and MBNA Bank where he worked on a range of assignments in the UK, Eastern & Western Europe, North America and Asia.

From 2001 to 2009, Steven was Marketing Director at Manchester United Football Club. Steven served as a member of the Executive Committee of Manchester United and a board director of Manchester United Foundation, the club’s charitable trading arm. In January 2010, he launched Star Sports Marketing, a specialist sports marketing consultancy. 

Star Sports Marketing can help you to devise and implement an effective sponsorship strategy. Visit www.starsportsmarketing.com or email steven.falk@starsportsmarketing.co.uk for an informal and informed conversation.

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