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The Economics Behind Football Sponsorships

UberEats, Budweiser, Nike, and others… On any given weekend, the names splashed over the shirts of million-dollar footballers curving balls into the top corner.

In this quick article I’ll go into how big business keeps the football world spinning — Let me know if you enjoy these sort of articles, Ive previously looked at the economics of F1 and it seemed to do quite well!

Cash is king

Last season, the Premier League earned £1.51 billion in sponsorship money, up from £1.09 billion in 2015/16. Broadcast revenue, or the money TV stations pay for distribution rights, was the Premier League’s largest source of income, accounting for £4 billion in total. While networks like as Sky and BT charge for access, they are able to spend so much for rights because the majority of their money is also generated by sponsorships and advertising. Matchday income accounted for only 6.1 percent of total revenue.

The 20cm by 10cm area on the front of Premier League jerseys is among the most costly real estate in the globe. Companies ranging from boilermakers to bookmakers are spending millions of dollars for their brand to be spread internationally over the course of the 38-week season.

The names on jerseys have obviously evolved throughout time. While it is clear that tobacco corporations have exited sports sponsorship, a more globalised game has brought in more worldwide sponsors.

The Middle East spends the most money on sponsorship. £172m pounds are spent annually over 6 jersey deals, led by its three largest airlines (Etihad, Emirates, and Qatar). Sponsorship of the English Premier League is more expensive in the United States, Japan, and Germany than in the United Kingdom. Crypto casinos, Malaysian tourism, computer software…no it’s longer just local plumbers scribbling their name and phone number on their town’s equipment.

Does it Work?

Is it effective? It very certainly can. While not the Premier League, consider this example, which features Messi, Ronaldo, and all of football’s best names wearing a 4th division shirt. Burger King opted to sponsor Stevenage FC, a side whose most notable accomplishment was a fifth-round FA Cup elimination. But it was more than simply a shirt sponsorship; the #StevenageChallange was formed, bringing Stevenage national and worldwide attention. Every FIFA gamer who posted their best goals while wearing the team’s shirt was eligible to win Burger King food rewards. The campaign received 1.2 billion social media impressions, and the club quickly sold out of shirts. For the record, previous to the campaign, they could barely get 3,000 people to a game.

Nike Vs Adidas

The millions of walking, talking billboards produced each season are one of the less-discussed benefits of jersey sponsorship. Fans like wearing their jerseys throughout town, and the visibility sponsors receive extends beyond the television. Companies like as Nike and Adidas gain as well. In truth, jersey makers make far more money from sales than clubs. According to data, Nike and Adidas pay £700 million across the top 15 worldwide football divisions for jersey rights to 38% of the teams. The Premier League receives around £285 million of this total. While this may appear to be a large sum, jersey makers pay teams a relatively little fee each shirt sold (typically less than 10%), with the great majority of the cash going directly into their own wallets. And with stars like Ronaldo and Messi causing website meltdowns around the world as fans rush to get their hands on the latest CR7 or LM30 (the former’s latest Manchester United jersey revenue topped £32.5M in the 12 hours following its release), we’re sure officials at the Three Stripes and Swoosh headquarters are more than satisfied with their investment.

Where Does it Go?

So, now that sponsorship is a high-stakes game, where does it go? Player salary, somewhat predictably.

Because Manchester United is a publicly traded firm, we can examine the exact breakdown of revenues and costs. The Red Devils spent £249.5 million on player wages in 2020, distributed among a team of about 40 players. The club collected £182.7 million in sponsorship earnings the same year.

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tomrobertson

tomrobertson

Interested in finance, data and business. Writing a mix of research and opinion!

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