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Apr 1, 2009

Shirt sponsorship set for recession reality

While television money is set to increase for the Premier League's 20 clubs thanks to new deals beginning after next season, sponsorship revenues look set to tumble as the reality of the economic downturn impacts on the clubs' other key money-maker.

In February the Premier League pulled-off a coup, negotiating domestic television rights deals worth £1.706bn for three seasons from 2010, thereby defying the forecast of many broadcasting industry observers by increasing the value of the current deal.

However, while the strength of the Premier League's TV rights remains unaffected, that was a deal which exploited the collective value of the Premier League. But, as individual clubs are finding out as they look to replace their current shirt sponsors, alone they are not as valuable.

Up to a quarter of Premier League clubs are looking to arrange new sponsorship deals ahead of next season and will hope not to end up like West Bromwich Albion who have sported logo free shirts all season after failing to agree terms with a sponsor.

Aston Villa deserve credit for their approach to the current season during which they opted to sport the name of children's hospice Acorns, rather than seek a replacement for the £2m-a-year deal they previously enjoyed with an online gaming company.

Villa's situation is comparable to Barcelona's deal with Unicef, except that Barca had previously never carried a shirt sponsor in their entire history and, in fact, donate money to the United Nations Children's Fund as part of their deal.

But not every club can afford to be charitable, or indeed wishes to be.

It is unlikely that Manchester City will follow such examples when their £1m annual deal with travel agency Thomas Cook expires at the end of the season. Although wealthy, City's new owners are looking for a commercial rather than charitable arrangement; talks are believed to have been held with United Arab Emirates airline Etihad.

City could be one of the few clubs currently looking for a new deal that could actually buck the trend and see the value of their sponsorship increase by virtue of the increased exposure the club now enjoys, even if the extra coverage is not always positive.

In September, when travel company XL collapsed halfway through a three-year £7.5m deal leaving West Ham United with a gap in their accounts and on the front of their shirt, fans petitioned the club to follow in Barca and Villa's footsteps and use the opportunity to support the Bobby Moore Fund for Cancer Research UK.

As respectfully as possible, the club declined the opportunity and eventually agreed a cut-price £2.5m, 18-month deal with bookmaker SBObet - although the Bobby Moore Fund logo does now feature prominently on Hammers' youth team shirts.

Just as financial necessity forced West Ham to take a commercial deal, so it will impact on Hull City and Portsmouth. Pompey's deal with printing company OKI is coming to the end of its two-year, estimated £1.6m run and, although not confirmed, Hull are bracing for the expected departure of internet company Karoo.

But, as unfashionable clubs with few big name stars and the likelihood of a fight for survival next year, big money deals and high-profile sponsors are unlikely to see the Fratton Park or the KC Stadium clubs as exciting marketing opportunities, particularly in a recession.

Middlesbrough's plight is even more parlous, after all who would want to replace satellite navigation company Garmin when their deal expires at the end of the season? With Boro teetering on the brink of relegation, any company looking to promote its product could be forgiven for looking elsewhere.

Last week Wigan Athletic owner Dave Whelan decided not to seek a like-for-like £1m-a-year deal to replace stadium naming rights and shirts sponsor JJB, instead using the Latics' shirt and home ground to promote his new DW Sports and Fitness business.

However, it is unclear whether the decision was based purely on Whelan's business objectives or born out of necessity with no other viable alternatives.

On current form Newcastle United will struggle to attract new sponsors willing to spend £5m-a-season after the 2009-10 season when Northern Rock, a bank propped-up by the UK government, will have ended its controversial sponsorship.

Just as Newcastle could be said to be sponsored by UK taxpayers after the bank's financial bailout, so too can it be argued that Manchester United are effectively backed by the US taxpayers after the insurance giant AIG received billions in government support from across the pond.

The recession is as much of a concern when it comes to sponsorship at the top of the league where both Manchester United and Liverpool need to maintain high levels of income in order to help finance the debts incurred when they were taken over by their respective US owners.

But despite their global popularity and sporting success, United and Liverpool will struggle to match existing deals when they expire after next season.

United's British-record, four-year £56.5m deal and Liverpool's £10m-a-season deal with Carlsberg are central to their financial planning and while there are no shortage of companies keen to be associated with them, the reality is that record deals are unlikely even for the biggest of clubs.


The future ownership of Arsenal remains as uncertain as ever despite £42.5m-worth of club shares changing hands this week.

US billionaire Stan Kroenke's deal to increase his holding in the club to 20.5% may have made him the largest single shareholder on the Arsenal board, but it has only served to ramp up the tension in an increasingly tense stand-off with the club's other major shareholder.

In February, through his company Red and White Holdings, Russian billionaire Alisher Usmanov took his holding in Arsenal to just over 25%, making him the largest single shareholder and leading to speculation that he was preparing a takeover.

It now seems that Kroenke and the board, particularly Danny Fiszman from whom the US investor acquired his increased 8.1% holding, are trying to tempt Usmanov to show his hand.

But, as Kroenke and his boardroom allies are acutely aware, with reports suggesting that Usmanov's fortune has been slashed from £9.4bn to £3.2bn over the last 12 months, the Russian may not regard the current climate as the best time to launch a takeover.

Whether this cold war-esque power struggle develops into a full blown civil war looks set to depend on former board member Lady Nina Bracewell-Smith who, despite being ousted in December, retains a 15.9% stake (valued at over £80m) in the club.

After Kroenke's deal was announced, Arsenal chief executive, Ivan Gazidis, said: "We don't know what Lady Nina's intentions are with her shares; but certainly, if she were to say she was a seller of those shares, I'm sure there would be interest from among the current board."

The question is whether Bracewell-Smith is prepared to sell and, if so, to whom will she choose to deal? Will the argument that saw her leave the board play into Usmanov's hands, or will she stay loyal?

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