Last week, FC Barcelona (“Barça”) announced plans to sell the naming rights to its stadium for the 2020-21 season. In the world of sports sponsorship, this is big news in and of itself; the Camp Nou is the highest capacity stadium in Europe and Barça have further plans for expansion. However, the announcement came with a twist. In accordance with the club’s charitable foundation, Barça plan to donate a significant portion of the proceeds to charities and projects that are set up to combat Covid-19.
Barça will not have been short of suitors for the rights, in any event. Nevertheless, the announcement is likely to add an extra incentive to prospective bidders who will be looking to associate themselves with the initiative (which may or may not include Mike Tyson’s cannabis company).
Following the 2020-21 season, Barça will reportedly revert to a longer-term naming rights arrangement for commercial gain in the typical sense. These plans are reminiscent of Barça’s first shirt sponsorship deal in 2006 when it partnered with Unicef, as part of a unique arrangement where Barça donated money to Unicef, before it committed to high-paying commercial sponsors in subsequent years. The Japanese e-commerce company Rakuten is Barça’s current shirt and main global sponsor, reportedly paying Barça €55 million per year until 30 June 2021 (with the option of a one-year extension).
Barça’s announcement brings into focus the subject of stadium naming rights, more generally. Contrary to the title of this article, there is already a growing trend in this area, with a number of Premier League (“PL”) and English Football League (“EFL”) clubs selling the naming rights to their stadiums to boost commercial revenues. Tottenham Hotspur’s pursuit of a naming rights deal for its new stadium is widely known. Similarly, Everton will be seeking a naming rights sponsor for its new stadium on Liverpool’s Bramley-Moore Dock (scheduled for construction in 2023), having already agreed a £30 million deal with USM Holdings for a naming rights ‘option’.
However, readers may recall the findings by financial advisors Duff & Phelps in May 2019 that PL clubs’ are “not utilising naming rights revenue to their full potential”. A substantial number of clubs maintain ownership of their stadiums yet operate without a stadium sponsor.
A pandemic trigger?
The loss of match-day revenue for clubs during this pandemic period, both now and in the future if games are played ‘behind closed doors’ (as now widely expected), combined with the ongoing possibility of a partial rebate to broadcasters for the 2019/20 season, means clubs will be minded to explore alternative sources of revenue.
The short-term reality is that numerous clubs will be focused on financial solvency and survival, particularly in the EFL. To this end:
- Clubs continue to rely on English football’s governing bodies to provide ongoing guidance and propose additional methods of financial support. In particular, there have been suggestions in the media that the PL should submit funds (or possibly redistribute a greater portion of its broadcast revenue) further down the football pyramid. For example, if the 2019/20 season does not restart and there is a decision not to relegate any PL clubs as a result, one proposal is that next season’s first-year ‘parachute payments’ (that would have been payable to three relegated PL clubs) could instead be distributed to all EFL clubs. Nevertheless, this is an area of complexity with several permutations depending on the outcome of the 2019/20 season – not least, the question of whether this season’s cancellation would, in fact, result in rebates to broadcasters.
- Clubs with desirable players might be able to generate revenue and much-needed cash flow from player sales, albeit only once the landscape for a ‘return to play’ becomes clearer.
Fundamentally, however, more clubs will be searching for commercial solutions that will sustain them over the long-term. Accordingly, certain clubs might be more likely to consider naming rights models for their stadiums or other tangible assets, including clubs that were reluctant to do so prior to the pandemic.
Finding the angle
In the first instance, clubs will be mindful of possibly not being able to play matches in their own stadiums during the initial stages of a return to play. The use of ‘approved’ neutral stadia continues to be an important topic of discussion (including at the Premier League’s latest meeting on Friday 1st May). As with everything else Covid-19 related, clubs will be hoping for clarity on this point sooner rather than later.
Looking further ahead, clubs and companies will be operating in unfavourable economic conditions. This could mean that clubs are prepared to lower their price expectations in order to secure deals. Equally, prospective sponsors might not be so fixated on securing long-term relationships if cost-effective football club partnerships can be activated in a way that deliver immediate brand exposure, to compensate for losses in revenue during a fallow ‘lockdown’ period. Considering both positions, there may be some alternative strategic thinking. For example:
- Clubs might consider deals with existing sponsors for additional naming rights inventory, in return for an uplift to the overall remuneration package.
- Clubs might consider directly addressing their match-day operating expenses by entering into deals with organisations that will alleviate those expenses as part of the sponsorship arrangement; for example, with accommodation providers or travel companies.
- Rather than interpreting the absence of supporters in football stadia as a barrier to sponsorship, if/when games are played behind closed doors, clubs will be anticipating that usual match-going fans (and many more) will be watching on television, depending on the revised broadcasting arrangements. Therefore, clubs and prospective sponsors might seek to address the issue directly by maximising perimeter advertising with detailed brand messaging, perhaps with an added focus on promoting the relevant sponsor’s commitment to Corporate Social Responsibility initiatives.
- On a bigger scale, well-supported clubs might be more willing to commit to ‘fly-on-the-wall’ documentaries that would tie in with some naming rights inventory (incidentally, readers may have noted the reports linking Amazon to the naming rights for Tottenham Hotspur’s new stadium).
Whichever the angle, clubs will be motivated to find it – even if that angle might not be quite as charitable as Barça’s.
Barcelona’s stadium will have a formal name for the first time in its 63-year existence after the club announced plans to sell next season’s rights and hand the proceeds to charitable activities and the fight against coronavirus.