A quick question for you: how much should you pay to put your logo on a footballer from one of the top ten teams globally? Yes, you can look at market comps, but just consider you can’t for a moment. What are you buying and what data supports this?
As we understand for large corporations, a significant portion of growth is global and global reach should be a priority for organizations. That said, how does sport sponsorship play into these efforts? How do changes in the global consumption of media possibly affect the present market in sponsorship?
Let’s begin with a rudimentary review on some of the recent Forbes data and simply run some comparisons on the NFL v. the Top 20 Money Football (Soccer) Teams.
Digging in to the Data
Let’s begin with a quick analysis of the NFL data. Forbes gave an analysis of the 2013 gross revenues and then posted a larger valuation calculation based on their own analysis. What is interesting is the consistency and high value on the multiple of gross revenue, which for the top 20 teams averages a 5.19x multiple on 2013 Gross Revenue over a high / low of (6.08 / 4.42), while the top 5 averages at 5.85x.
We can conjecture and debate on what causes these valuations to be large, but likely this is about the large consistent broadcast revenue licensing deals and the flat valuations across teams also indicative of the revenue sharing in the league so particular teams in good media markets aren’t too far ahead than others (i.e. Green Bay v. New York City).
The NFL’s top five teams on value are as follows in terms of gross revenue and multiple:
- Dallas Cowboys ($3.2B valuation / $100%m 2013 gross revenue / 5.71x multiple)
- New England Patriots ($2.6B / $428m / 6.07x)
- Washington Redskins ($2.4B / $395m / 6.08x)
- New York Giants ($2.1B / $353m / 5.95x)
- Houston Texans ($1.8B / $339m / 5.46x)
Ave Top 5 NFL franchise: $2.4B / $415m / 5.85x
Ave Top 20 NFL franchise: $1.6B / $322m / 5.19x
Now to contrast, let’s review the top 20 global football teams – the so called “money teams.” In this case we we see much more volatility, which accounts for the independence of each team, but also much lower valuations as a whole while the gross revenue is generally higher.
The Money Teams: Top Five
- Real Madrid ($3.4B / $675m / 5.1x)
- Barcelona ($3.2B / $627m / 5.1x)
- Manchester United ($2.8B / $551m / 5.1x)
- Bayern Munich ($1.85B / $561m / 3.3x)
- Arsenal ($1.3B / $370m / 3.6x)
Ave Top 5 Money Team franchise: $2.5B / $557m / 4.44x
Ave Top 20 Money Team franchise: $1.0B / $350m / 3.0x
What may be interesting in these basics is how little value the Money Team franchise gets for their conceivably larger audiences. Sponsors have proven, as in the case of GM’s sponsorship of Manchester United, that they are willing to pay significantly for the global reach of a top tier footall team (particularly in Asia since Chevy has pulled out of the EU). GM paid $559 million to reach 659m fans globally (as per an international survey by a research firm). With a global reach that is over twice the size of the United States, why isn’t Manchester United valued more than every NFL team, and why are the second tier “money teams” considered less valuable than their NFL counterparts?
Another question that should be addressed with the GM sponsorship – what did they actually pay for? Is the brand affinity equal across these global fans? Are the Asian fans also United loyalists or Premier League fans that might also be in market for any classic team (i.e. Barcelona, Madrid, Munich), or are they fair weather and might instead be supporting Premier League Champion Manchester City? How do they measure the adjusting swings in this audience and its affinity with the brand and the brands influence on their behavior? This is not to say GM overpaid – in fact they very well may have significantly underpaid – but using just the ‘global reach’ metric and TV rating projections, it is impossible to tell.
“What may be interesting in these basics is how little value the Money Team franchise gets for their conceivably larger audiences.”
At the end of the day, teams and leagues do not know their audiences as well as they could. In a broadcast world, you let the networks, advertisers, maybe some focus groups and surveys define your audience demographics and composition (recall they are so much more now than mere demographics). But as the 1:1 relationship of fans is growing well beyond the blast radius of the stadium, it must follow that the key to increased revenue, must come from a franchise building its membership/fanbase directly and at massive scale. Doing so can support the details and questions on the massive segments and nuances within a 200 or 500m person fan base.
As we conclude, this article isn’t about answers. We are just trying to throw up some questions, and we will be working toward the answers – even looking to have some guest posts on the subject – but let’s consider a quick review of some digital fan data points of some of these top teams.
Facebook Fans, (Mixing top 5 NFL and top 5 money) *data from August 2014
Ave Top 5 NFL: 3.8m
Ave Top 5 Money Team: 49.9m
- Real Madrid – 71.6m
- Barcelona – 73.4m
- Manchester United – 56.2m
- Byern Munich – 19.8m
- Arsenal – 28.2m
- Dallas Cowboys – 7.2m
- New England Patriots – 5.2m
- Washington Redskins – 1.6m
- New York Giants – 3.5m
- Houston Texans – 1.6m
If these are indicators of a digital audience, how might this also impact potential on valuations and revenue gains?
We are not saying that NFL franchises are over-valued – in fact the recent purchase of the Clippers for $2b would suggest that they are quite undervalued – but rather there might be a significant gap between the metrics we use to value these teams and their actual value (in terms of commercial and broadcasting potential).
“With Cristiano Ronaldo approaching 100m Facebook followers (more than any team in sports) – why does he only make $28m in endorsements?”
And beyond teams – what about individual athletes? With Cristiano Ronaldo approaching 100m Facebook followers (more than any team in sports) – why does he only make $28m in endorsements?
Right now we’re focusing on continuing to research and refine how to bring fan data to raise the value of fan databases, reach, and also to reduce risk to a sponsor in ensuring their brand is getting the highest value association with its partner – and with ways to measure impact over time.
These are the topics of utmost priority when looking to solution for sports marketing. There is too much money on the line to not have better answers.