Arsenal’s Future Commercial Strateegy

On field, Arsčne Wenger will be anxiously awaiting the return of our players from international duty today. Jack Wilshere was an unused substitute in England’s 0-0 draw at Wembley last night. My beloved Wales completed a horrible week with two losses, 1-0 at home to Bulgaria last Friday night in Cardiff and a 4-1 belting by Switzerland in Basel last night, a side which managed one goal in three games the World Cup in South Africa this past summer. Oh dear.
If it’s any comfort Italy is going through a similar crisis to the home nations. Their under-21 side has failed to qualify to the European Under 21 Championships, being eliminated by Belarus in Minsk yesterday. Don Vito Mannone had a complete nightmare, being at fault for all three Belarus goals. For the first he came steaming out of his goal towards the corner flag, leaving him completely stranded. He’s hardly done himself any favours, especially after his recent gobbing off about his place in the pecking order.
I’ve championed Mannone’s case since his run in the first team last season. Too many more performances like last night and he can’t expect to see first team action for us any time soon.
Off the field it would appear that the club is making shapes at improving our commercial income. There’s an interesting piece on the website of the magazine SportsPro with quotes from Emirates head of corporate communications Boutros Boutros (his parents were obviously not feeling inspired when it came to naming their son).
Madison Square Garden (MSG) owns three of the teams that play in the arena, ice hockey’s New York Rangers of the National Hockey League, and the men’s and women’s basketball teams the New York Knicks of the National Basketball Association and the New York Liberty of the Women’s National Basketball Association. MSG’s ownership of all three sides, which play an aggregate minimum of 99 home regular season games each season, without considering play-off matches. Gives them a powerful hand to play with sponsors and other commercial partners. MSG also hosts 8-10 St John’s University National Collegiate Athletic Association (NCAA) home basketball games a season. St John’s is a powerhouse in college basketball in the USA, which is a big deal both at the gate and on television. The venue also hosts major boxing matches and many concerts.
At Arsenal, the most home games we could play if we went all the way in all competitions and got drawn at home in every round of the domestic cups (or had replays when drawn away in the FA Cup from rounds three to six) would be 34, plus occasional international friendlies, the odd event in another sport (the Grove is part of the Rugby Football Union’s successful bid for the 2015 Rugby Union World Cup) and concerts.
That said, the NHL, NBA and WNBA do not permit advertising on the playing kit as in football. Nor has MSG sold naming rights to the arena. A wise move. Experience tells us that naming rights work with new stadia and arenas but are deeply resented when applied to established grounds. The Emirates naming rights has worked at the Grove. It would never have worked at Highbury. Nor would it work at Old Trafford or Anfield. If it were possible then it would have been done at both those clubs. Hicks Gillett (this morning blessedly stamped on by the High Court) and the Glazer family would have done it if were commercially feasible. They have no interest in the game, only money.
Despite the lack of naming rights and jersey logos, MSG has signed a deal with merchant bank JP Morgan as “marquee” partner for US$300 million (£189.3 million) over ten years. No doubt some of that fee will be in “in kind” services rather than cash but it all counts in covering costs. MSG has also signed up Delta Airlines, Coca-Cola and the mega Brazilian-Belgian transnational brewer Anheuser-Busch InBev (via its Budweiser Beer brand).
Our principle commercial partners at the moment are the American transnational sportswear and shoe company Nike and Emirates Airlines, the state owned carrier of Dubai, one of the United Arab Emirates in the Persian Gulf. The kit sponsorship deal with Nike expires in 2014. The jersey logo sponsorship deal with Emirates expires in 2014. The stadium naming rights deal, again with Emirates, in 2021. We’ve had around £130 million of the minimum £178 million due under all three deals already. All three were heavily front-loaded to provide cash to pay construction bills for the new ground.
I think MSG is on to something with its new commercial approach. MSG shares a number of features with the Emirates Stadium. Neither has received nor will receive any public subsidy. This distinguishes MSG in North America where the construction and maintenance of most stadia and arenas receive a lot of support and subsidy from the public purse. Strange, especially in the USA, the home of laissez-faire free enterprise I know but that’s how it is generally over there.
I’ve been thinking that perhaps the answer is some form of ascending auction for our principle commercial sponsorship rights. The end of the current stadium naming rights deal is a long way off – eleven years. It may be possible to use the end of the jersey sponsorship deal to “lever” a top of the line offer for its extension, at least a big option payment to buy first refusal matching any other offer received when it’s time to renew.
I don’t know what detailed restrictions there might be on the timescale to go to market on the current deals in the fine print of the existing contracts, but subject to that, we might be able to manoeuvre ourselves into a better and more lucrative place. Commercial ascending auctions were used with great success to sell off licences and wavebands for the then newly emerging third generation digital mobile services by the UK Government ten years ago.
An ascending auction works exactly the same way that a conventional auction does, except all the bidders aren’t in one room at one time. Bids are received by a trusted third party. There is a deadline by which final bids can be received. Each bidder can access the current level of bid, but not necessarily who has made it. When the deadline arrives, the highest bidder is the winner. There is usually a minimum starting bid. Often bidders have to be pre-qualified in order to be eligible to make bids. This allows the company or organisation soliciting bids to prevent partners it wouldn’t want to work with from bidding and assure itself that all bidders would be acceptable.
I also think we should model out the economics of not having a sponsor’s logo on the jersey. This has been a big hit in the partnership between Racing Club and its sponsor the mortgage lending bank Banco Hipotecario in Argentina. It also works very well. The other alternative would be to tuck the sponsor’s logo under the club badge as with the current Manchester City away strip and Etihad Airlines.
I think there may well be overall advantages not only aesthetically but commercially in removing clutter and noise for a “suite” of sponsors. This works very well in the NFL, CFL, NHL and NBA. The NFL is currently considering allowing sponsor’s logos on training kit but not on match strips.
The commercial strategy we adopt and the associated negotiating strategy and tactics are going to be crucial to maintaining a competitive financial edge to invest in the playing squad over the coming decade. We’ve got to get this right. Hicks & Gillett at Liverpool and the Glazer family at Old Trafford have contributed nothing to the clubs upon which they have leached. The one success they have had however is in radically increasing commercial income. We now have the expertise in place at Arsenal to build a platform for similar success. It’s an opportunity we simply can’t afford to miss. It’s the major off the field commercial area where the club isn’t competing at the moment. We should be leading rather than following. That’s the Arsenal way.
Keep the faith!

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