Liverpool FC – Moneyball in play off the field?

19 Nov

When Fenway Sports Group (FSG) acquired Liverpool FC in 2010 there was much enthusiasm from the fans that were aware of the owners’ history.  The owners successfully adopted the Moneyball strategy at their MLB franchise, the strategy was first introduced to sports fans worldwide by Michael Lewis’s eponymously named book and the consequent movie starring Brad Pitt. There has been a lot written about it since the 2010 takeover as it has been a particularly expensive experiment with minimal return on the field of play. The strategy employs an array of on-field statistics in order to identify undervalued assets (players). In its simplest form Moneyball advocates the timeless axiom in finance:  buy low and sell high.

Two years on and several ill-fated transfers later, Liverpool FC is clearly experiencing teething problems with the system. The system’s proponent and Director of Football Strategy, Damien Comoli is no longer at Liverpool FC. After this season’s transfer activity it seems these problems are far from being ironed out – Borini is a revelation. However, amongst all Liverpool’s on-field waywardness the cogs have been turning in the glass offices.

Liverpool secured the largest kit sponsorship deal for any Premier League club with US manufacturer Warrior. The deal is worth a reported £25million a year for 6 years. The clubs shirt sponsor Standard Chartered pays a reported £20million a year to embellish the chest of Jordan Henderson and his equally average Liverpool team mates. Chevrolet signed on to become the new car sponsor and Garuda of Indonesia has become the global official airline of Liverpool FC. The club also ramped up its efforts in the sports betting department by signing deals with both Paddy Power and 188Bet.

Liverpool’s endless drove of supporters around the world ensures it places within the top 10 clubs in terms of revenue earned according to Deloitte. It is the only club that holds a top 10 spot without playing in the prestigious (not so much after Chelsea won) Champions League. It seems Liverpool’s owners spotted an undervalued asset in the club itself. Commercial revenues are on the up and broadcasting revenues will increase significantly if Liverpool is able to qualify for the Champions League. Whilst the transfer policy will continue to vex even the most ardent supporters, at least the their finances are much healthier than their league position.

Author : Shiraaz Abdullah

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Red Bull – On the edge of the advertising Stratosphere

20 Oct

This week the world waited in anticipation for Felix Baumgartner to take a historical leap of faith. As he hurtled toward earth at an astonishing speed, most wished for his safety, the more macabre amongst us waited for something to go wrong. Regardless of whether you were supporting Team Felix or Team Gravity, we were all supporting Team Red Bull. Red Bull’s sponsorship of the Stratos Project secured prime advertising space that few companies could rival.

 

A few years ago a Red Bull logo on a spacesuit would seem incongruous; however on the 14th of October, it fitted right in. Red Bull has reached advertising Valhalla; it’s now more conspicuous when it is absent from almost anywhere or anything. Red Bull’s sponsorship of the Stratos Project did mark a new frontier for the company – Sponsoring scientific research. Red Bull’s normal advertising pursuits are aligned with sport and extreme sports in particular. High-octane adrenaline filled experiences whose participants are no stranger to the Grim Reaper’s Christmas mailing list. Felix’s jump may have seemed like just another extreme experience for a man well-versed in the extreme arts.  It may have provided on-lookers with a few fantastic minutes of viewing pleasure, but most importantly scientists would have been foaming at the proverbial gash for the data he would return with.

 

How long till we see Coca-Cola sponsor cancer research?

Gunned down: What’s happened to the Gunners?

12 Oct

At the time of writing, it’s been 7 years, 4 months and 20 days since Arsenal Football Club last won any form of silverware. It’s also been 8 seasons since ‘The Invincibles’, recently voted the best team ever in the history of the Premier League, went through a whole season unbeaten. Any club, let alone Arsenal, would do well to repeat such a feat again.

Since then, the success of the club, or lack thereof, has been a cause of frustration for millions of supporter’s worldwide.

To compound matters, many of their top players have jumped ship in recent years, citing lack of ambition on the part of the club as an excuse. Thus, many of the clubs critics have labelled it a ‘selling club’. Predictably, club officials have been quick to deny such accusations. In a time where Russian oligarchs and Sheikhs spend with reckless abandon, Arsenal, along with many other clubs, face the prospect of being left behind.

At the centre of all these concerns lies the ethos of the club, which has been built over recent years. Self-sustainability has become the primary objective of the football club ever since plans were made to move to the impressive Emirates Stadium over a decade ago.

Back then, it was clear that if the club was going to remain a force within the game, a move away from Highbury was a necessity. However, to do this, the club needed to develop a way to make the move feasible. And thus the era of ‘self-sustainability’ was born.

As a result, the club has had to sell many of its best players, while the likes of Chelsea and Manchester City have spent millions. The truth is, ever since Arsenal moved to the Emirates, they have been the only top English club to be net sellers in terms of transfers.

This has had a visible effect on performance on the pitch. At the beginning of this year, protests were staged by a section of fans fed up with poor results and a supposed lack of ambition in the transfer market. Added to this, Arsenal supporters are charged the highest season ticket prices in the league. One can therefore understand their obvious frustrations.

However there are reasons for supporters to be optimistic. Latest financial results released by the club show that the club is, at least financially, on a sound footing. Added to this is the soon to be implemented Financial Fair Play (FFP) regulations by UEFA, which aims to level the playing field and make football more sustainable. There are a few pressing concerns though. A Brief look at the results shows that the club is still highly dependent on revenue earned from player sales. Another concern is the lack of growth in commercial revenue. The club is way behind other English clubs in terms of shirt sponsorship and kit manufacturing deals. Their £5.5 million a season shirt deal with Emirates, is less than the £10 million a season deal that Manchester United receive from DHL to sponsor their training kit! In saying this, many key sponsorship deals for the club are soon going to be up for renewal, which could see a significant rise on existing deals. However, how much leeway the club is afforded in negotiations is debatable. Ultimately, football is results based business, and performance on the pitch largely determines performance off it.

In light of the economic turmoil that the world is currently experiencing, one could argue that the club has been one step ahead of the rest in terms being financially prudent. There is no doubt that the excessive spending currently seen in football is unsustainable. In this sense, the club is in prime position to benefit from FFP.

Few football fans around the world would argue with the statement that Arsenal play the most attractive brand of football in the Premier League. With a solid financial base, and FFP on the horizon, Arsenal fans hope that this attractive football translates into silverware sooner rather than later.

 

 

 

 

Should Alcohol Sponsorship be given the boot?

5 Oct

Alcohol misuse is a problem around the globe. And yet sporting teams and athletes continue to be sponsored by Alcohol companies. This is especially the case in South Africa where all 3 of our national sports teams are sponsored by Castle Lager who have a rich history of sponsoring teams in South Africa to the extent where Castle Lager is seen as the only beer for South African sports fans.

Tobacco advertising has been banned! So why does alcohol advertising still exist? Why are alcohol companies allowed to market their products to children? And why are sports unions and clubs allowed to have double standards where they allow alcohol sponsorship and at the same time ban and fine players for drinking alcohol?

Please comment and let us know your view on Alcohol sponsorship in sport.

Introduction to Sponsorship in Sport

5 Oct

“Playing sports not only imparts physical skills but it also contributes an abundance of life skills such as team building, leadership, challenge, triumph, failure, humanity, sportsmanship, fragility, belonging, and comradeship (Kahle & Riley, 2004).

In the modern era, almost everything is for sale. Multinational Companies are willing to invest large sums of money to be associated with sporting entities and the characteristics and values that these sporting entities possess.  In this day and age there aren’t many places a company won’t want to attach its logo to for the right price. Sponsorship is of great significance. Sponsorship aims at convincing viewers present at sporting events, or viewing the event via different forms of media that there is a connection between the sporting entity and the company sending out a message, to produce a higher level of exposure, brand awareness and brand equity. The intention of sponsorship is to transfer attributes and values of the sporting entity to the company which is sponsoring the sporting entity.

Hardy, Mullin and Sutton (2007, p. 315) defines the term sponsorship as ‘the  acquisition of rights to affiliate or directly associate with a product or event for the  purpose of deriving benefits related to that affiliation or association. The sponsor then uses this relationship to achieve its promotional objectives or to facilitate and support its broader marketing objectives’.

Therefore sponsorship is a business relationship and should be mutually beneficial to both the sponsored entity and the sponsor. If this relationship fails to benefit all the parties involved then one of the parties is not holding up its end of the deal. Or there isn’t a correct fit between the sponsor and the sporting entity concerned.

In South Africa, sponsors have taken up a more visible stance within the sports industry. While the 2010 World Cup Soccer event hosted in South Africa may have been the most significant sports event to rely comprehensively on sponsorship investment, it is far from the only one. South Africa has a rich sporting heritage and has hosted major events like the Cricket World Cup. The T20 Cricket World Cup, the Indian Premier League Cricket Tournament, The British and Irish Lions Rugby Tour, the 1995 Rugby World Cup and the Vodacom Super Rugby Competition are just a handful.

References

 

KAHLE, L. R., & RILEY, C. (2004). Sports Marketing and the Psychology of Marketing Communication. Hoboken, Lawrence Erlbaum Associates. http://public.eblib.com/EBLPublic/PublicView.do?ptiID=335512.

 

MULLIN, B. J., HARDY, S., & SUTTON, W. A. (2007). Sport marketing. Leeds, Human Kinetics

Lucky Underpants….?

4 Oct

Earlier this year Danish soccer star Nicklas Bendtner was fined $126 000 and banned for 1 competitive international football game for celebrating his goal at a Euro 2012 game by brandishing a sponsored underwear waistband.  Bendtner displayed the logo of Paddy Power which is a well known betting company. The striker confirmed after receiving the fine and ban that he had no idea that he was breaking any rules and that his Paddy Power undergarment was a lucky charm.  Nicklas would not have felt too hard done by as Paddy Power had agreed to pay the fine and I’m pretty sure he was being payed to wear the undergarment in the first place. What was all the fuss about?  UEFA has strict rules against any attempts of ambush or guerrilla marketing by an athlete or sports team and were left with no option but to punish him.

Winner and loser?

Winner:  I’ts likely Bendtner’s celebration was seen by millions of people from around the globe and represent a great bit of publicity for Paddy Power.

Loser: Uefa as the fine they slapped on Nicklas has been paid by Paddy Power.

Do you have any ideas for new cost effective ways to get publicity for a brand?

Stadium naming rights

3 Oct

Professional sports over the last 50 years have transformed from pastime to global mega brands. In the past professional athletes were forced to get a second job to supplement their primary income they received from being an athlete. Today sports stars are earning ridiculous 8 figure contracts which are enough to support their family and several more generations of their family for decades to come. But how do these sports franchises afford to pay these salaries and wages?  Multinationals and corporate giants invest heavily to be associated with certain sporting brands. Most people are used to seeing sponsors logos on team’s kits like Absa on the Springbok jersey or Mr Price on the Sharks jersey but a popular sponsorship deal currently is for a sporting property to sell the naming rights of their stadium or arena. It is not a new type of agreement but it is happening more frequently now as teams are running out of advertising space to sell. A local example which you may be aware of is the home of the Sharks rugby franchise in Durban. Initially it was known as Kings Park rugby stadium and has since changed to Absa Kings Park and now Mr Price Kings Park. It is not confined to the local arenas however as you can make your way around the globe and see stadiums and arenas named after big corporate companies.

Money vs Heritage/Tradition? Forbes magazine estimates that the naming rights for Manchester United stadium Old Trafford could be sold for up to 1 Billion US Dollars for a 25 year period.

You could call me anything you want for that type of money!