Business of Soccer’s Top Stories of 2014

2014 was an exciting year for Business of Soccer in terms of analysis, reports, and news. Below, we break down our biggest stories of the year:

 

How Do Soccer Clubs Make Money?

Manchester CityHow do soccer clubs make money? A very simple question that many fans of the game often wonder and postulate but seldom fully understand. Most first answers to this question would be matchday sales, but there are those with a deeper understanding of the industry that know that this is not quite the full story.

Deloitte’s Football Money League provides an in-depth business synopsis of the top 20 clubs in the world. The report buckets all streams of revenue into 3 main segments: Matchday Revenue (gate receipts), Broadcasting Revenue (domestic and international), and Commercial Revenue (sponsorship and merchandise). Deloitte breaks the revenue stream down for each of the top 20 clubs into these 3 categories, creating a very interesting comparison of how the richest clubs in the world rake in the cash.

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FIFA World Cup Financial Impact to Brazil Economy

Adidas FIFAThere are many opinions, reports, and methods of thought circling the soccer industry regarding the financial impact of the 2014 FIFA World Cup on the host country, Brazil.

Some hope hosting the World Cup will help lift Brazil out of economic slowdown, but the associated economic activity ultimately pales before the country’s $2.2 trillion economy, the usual levels of investment spending and the annual revenues of most companies. The 32-day event will provide short-lived sales increases that are unlikely to materially affect earnings and disruptions associated with traffic, crowding and lost work days will take a toll on business.

– Barbara Mattos, Moody’s Vice President–Senior Analyst

The spectrum ranges from mild or no impact, sharing the opinions of Ms. Mattos, all the way to $13.6 Billion in 2014 alone, as predicted by Brazil’s tourism Minister, Vinicius Lages.

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Manchester United, Kit Sponsorship, and Financial Fair Play

SEC F-1 Reg Stmt Manchester UnitedManchester United have announced that they are in talks with multiple kit suppliers for a new sponsorship deal to replace their current deal with Nike, which ends after the 2014-15 season. The club has been in talks with Nike since this summer but terms for a new deal have not yet been reached, and United are making sure they shop all available options. One would think that Nike will eventually come with a proposal that meets the dollar figure United are seeking; if they do not, they would no longer supply gear to any of the biggest 4 clubs in the most popular league in the world.

At this point, Nike really needs to ask themselves if they want to find out if they will still remain competitive in this space should they lose out to another competitor, presumably either Adidas or PUMA. After having just been nudged out of a 20-year relationship with Arsenal by PUMA for the largest kit sponsorship deal in Premier League history (reportedly), the loss of one of the most globally recognized clubs would be a serious blow for Nike.

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How Much More Do Professional Footballers Make Than The ‘Average Joe’?

TransfersEver since most of us were little kids all we ever wanted to be was a professional soccer player (or some other pro athlete), along with the occasional firefighter, or police officer. But at some point or another in any kid’s life who grew up playing soccer, the dream of playing for a professional team in MLS or abroad was a very real thought that spurred them on. At least early on, the dream never consisted of a financial component, and was centered more around the chance to play at the top level, to be viewed as the very best, and to one day lift the FIFA World Cup trophy. Kids have big goals and high expectations, but they do not want to become professional footballers for the money – at least not at first. They dream those dreams because they love playing the game.

Of course, most that carried those dreams around with them as kids never get to live them when they are adults. If they are lucky, they got to go to college and earned a degree and end up working in their field of study, climbing the corporate ladder like a train of lemmings. For the fortunate few however, their playing days continued. They get to go to work every day and live their childhood dream. And now they get paid for it. But just how much do they make, and how does that compare to the average joe?

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The Rise of Men in Blazers: A Case Study in Authentic Positioning

Men in BlazersOnce limited to a faithful collective of podcast fans in the United States, Michael Davies and Roger Bennett—better known as “Men in Blazers”—rose to mainstream status overnight thanks to ESPN, and perhaps more poignantly, a clever positioning strategy.

The crossover from digital to broadcast media is a pipedream for many YouTube and Podcast hosts, but the tightly-branded Bennett and Davies have captured Millennials with their casual banter and creative vocabulary. A subset devoted to authenticity and story-telling according to a recent Iconoculture study, twenty and thirty-somethings in the US have responded well to the cultural context Bennett and Davies provide to build affinity for the sport, rather than the average sideline report.

Men in Blazers seeks to spawn an American “soccer culture” with tabloid-esque commentary on the World Cup’s protagonists, and cupcake taste-tests to predict match results. They carved a unique niche within ESPN’s whopping 290 hours of original programming, generating buzz that brought the English duo mainstream spotlights from CBS News to The Hollywood Reporter.

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Manchester United, Adidas Suit Up Together in Record Deal

Photo courtesy of Manchester United.On Monday Manchester United released a statement on its Investor Relations site stating that the club had reached an agreement with sporting goods manufacturer Adidas “for a global technical sponsorship and dual branded licensing deal for a minimum guarantee of GBP 750 million, subject to certain adjustments, beginning with the 2015/2016 campaign.”

The deal comes after months of negotiations and talks with multiple suppliers, including Nike, and represents a massive step change in the landscape of kit sponsorships in the soccer industry. The previous most expensive kit deal in world football rested with Real Madrid, another Adidas sponsored club, at approximately $49 million per year. The £750 million over 10 years mentioned in the news release translates to roughly $128.1 million per season, 2.6 times the value of the Real Madrid deal on an annual basis. Below is a look at the top 10 club kit sponsorships after Manchester United’s new deal with Adidas is accounted for.

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MLS Releases 2014 Roster Rules, Salaries and Budget Both Increase

mls new logoThe 2014 MLS season is finally underway. Teams and players have put in the work in the off-season, and made changes that they hope will propel them to the top of the league come December. MLS has also made some changes – to its roster rules.

The most notable of these changes came in the area of salaries and budgets, at least in the set of rules that are posted on mlssoccer.com that are made available to the public. For the 2014 season, clubs have a new salary cap of $3.1 million, which is up from the 2013 cap of $2.95 million by 5.1%. This means that without accounting for variance in individual player salaries, the league is investing on average $155,000 per player, versus $147,500 in 2013, assuming every team claims the 20 available “Salary Budget Players”. Clubs may elect not to fill the full 20 roster spots and can choose to field an 18 man squad but will be penalized should they not meet this requirement: “a minimum salary budget charge will be imputed against a team’s salary budget for each unfilled senior roster slot below 18.”

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Ambush Marketers Win Big During FIFA World Cup

fifaworldcuptrophySuccessful marketing and advertising is, among other things, driven by creativity. The general public has become more aware and savvy of marketing strategies than they were in the early days of mass media advertisements. This new public awareness has caused companies to adapt and innovate. For the 2014 FIFA World Cup, some companies such as Adidas, Sony, and Budweiser have taken a direct approach in advertising. These three corporations (along with five others) have become FIFA’s official partners, paying close to $100 million to be an exclusive sponsor. Official sponsors are legally allowed to use trademarked aspects of the FIFA World Cup on their products, such as the Official Emblem, the FIFA World Cup Trophy, and/or the Official Mascot.

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Barclays Premier League Clubs Split $2.6 Billion in Television Revenue

BPL LogoThe 22nd season of the Barclays Premier League (BPL) ended with several surprises. Manchester City claimed their second title in three years while their cross-town rivals, Manchester United, fell to a shocking seventh place. Liverpool FC fought for a well-deserved second place finish after finishing seventh in 2013.

The excitement of the 2013/14 season seems to have paid off in the television revenue as well. The twenty top-flight teams will share $2.6 billion (£1.5 billion) in total television revenue. According to the BPL’s official website, 50% of the total revenue from UK broadcasting is divided evenly among all teams, 25% of revenue is “merit based” depending on how each club finished in the standing, with the final 25% of the revenue is given based on facility fees for the number of times a club was featured in a UK broadcast.

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Adidas vs. Nike: A Global Power Struggle Hinged on the World Cup

adidas_is_all_inWe examine the two biggest brands in soccer, Adidas and Nike, within the digital realm and how it will impact their presence going into the World Cup in Brazil. Adidas is a top-tier “FIFA Partner”, which means that they partner with the world’s soccer governing body all year-round, regardless of whether or not it is a World Cup year or not. According to a recent article from Analytic Partners, FIFA anticipates that it will generate $1.4 billion in sponsorship revenue from twenty-two different companies from the 2014 World Cup. Of that $1.4 billion, it is estimated that the six FIFA Partner status companies will contribute $783 million, or 56% of the total. Assuming equal contributions to this total from each of the six official FIFA Partners, the 2014 World Cup will cost Adidas about $130.5 million in FIFA sponsorship alone.

Both Nike and Adidas have an impressive digital presence, and both have been leading the soccer industry with regard to viral campaign marketing. The two brands are constantly vying for the coveted top spot, which Adidas has held for some time. But how do they stack up against each other on the top social media platforms?

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Reporting on the business side of the world's game.