Sportcal Interview：Insights on the world’s sports sponsorship industry

Interviewer: Zhang Tingting, Yutang Sports
Interviewee: Benjamin Fuchs, Senior Sponsorship Analyst, Sportcal

How is the current general condition of the UK’s sports sponsorship industry? 

The sponsorship industry in the UK or in Europe is currently in a healthy state. According to the European Sponsorship Association, the 2014 sponsorship market size in Europe is around €26 billion. That is an increase of 1.25% compared to 2013. It has increased in the past and is predicted to continue to do so. The main driver in the UK is the Premier League and soccer in general, with the Rugby World Cup taking place here this year the local sponsorship market is expected to grow as well. After 2012 the UK market was in decline but this is easily explained as the Olympic Games took place in London in 2012 so this obviously had a major effect on the market in the country. Another important sponsorship market in Europe is Germany whose sound economy also contributes significantly to the European sponsorship market size. 

So, football is the most important sport for sponsors?

In the UK, I would say that the most money is spent on soccer. The sheer size and impact of the Premier League and its teams such as Manchester United who have a huge global fan base make English soccer an interesting proposition. 

Is it more about the amount of sponsorships? Manchester United have the biggest advantage. Do you mean they have very big numbers of sponsorships or they get a lot of money? 

The number of sponsors is normally irrelevant since category exclusivity still plays an important role in the sponsorship sales strategy of rights holders. Money is also not the primary concern as there are also a lot of valuable in-kind partnerships.

Manchester United however is a bit of an exception. 

As the club has a strong global fan base, their approach is to also sell regional sponsorships. An example is Manchester United signing an official tyre partner for Taiwan and China only. During the 2014/2015 season the club had 38 such regional sponsors bringing in more than $40 million. For this strategy to work you most certainly need to be a strong brand with an international fan base so this approach is less likely to work for smaller clubs and rights holders. For them it’s really important to tailor their offering to the partners’ needs helping sponsors to achieve their specific sponsorship objectives (e.g. image transfer, increase in brand awareness, direct sales etc.). All in all if a rights holder’s main objective is to generate a lot of money through a sponsor, it then needs to provide a platform which can almost guarantee a return on investment to the brand. Obviously this is not solely the rights holder’s responsibility as it doesn’t always have enough influence on the sponsors’ activation strategies.

You just said that UK sponsorship has grown. 

In terms of sponsorship spend, yes. That doesn’t necessarily mean that there are more sponsorship deals, although this is probably the case as well. 

Yeah. So money is important.

It depends. Let’s stay with the example Manchester United. In the financial year to June 2015, the club generated £154.9 million. This certainly gives them a competitive edge over its rivals as this substantial amount can potentially be invested in transfers, the youth academy etc. That being said, in-kind partnerships can be equally important in sports like Formula 1. Teams heavily rely on technical support so the services they can generate through brand partnerships can be of similar importance.

Do you have any insights on the whole world’s sponsorship industry? 

IEG estimates this year’s global sponsorship spending to be at $57.5 billion with North America being the biggest at over $21 billion. It is estimated that sports sponsorship contributes around 70% to this figure. 

The market has grown even after the financial crisis in 2008. Experts thought the crisis might have a major impact on the sponsorship industry which is true to some extent, however sponsorship can be cheaper than traditional marketing tools and can be more effective when executed well. That’s why global sponsorship market is thriving and will continue to do so.

Any evidence for the growth? 

There are regular studies conducted by national and continental sponsorship associations. When analysing and combining those, one can see how and in which regions the sponsorship industry is growing.  

What’s the current figures of UK’s sponsorship spending in 2014? 

As mentioned, Germany and the UK are the two biggest markets in Europe. Sponsorship spending in Germany is between €5-6 billion so we can assume the industry in the UK to be of similar size.

Which country do you think is the biggest country in sports sponsorships in terms of spending?

That would be the US. North America is the biggest market if you look at it from a continent perspective with most investment being made in the USA. 

How about Europe?

Europe comes right after North America, followed by Asia, which has the highest growth rate in the sponsorship market.

How about the countries in Europe?

The sponsorship spend in Europe is mainly driven by the UK and Germany but I also see growth in Scandinavia and Austria. 

Asian countries? Which one do you think is bigger than others?

China is certainly the biggest market. It’s where most opportunities lie, because of the amount of people brands can engage with. The economy in China is weak at the moment which can have an impact on the sponsorship market as a whole, however from what I’ve seen, there is increasing interest of European companies to invest in China’s sponsorship market as well. This should drive market growth. 

What are the possible future trends in the sponsorship industry?

I mentioned briefly Manchester United's regional approach. It remains to be seen if this could work for smaller rights holders as well or not. I doubt it to be honest. It's something to really keep eye on. 

FIFA recently introduced regional sponsorship packages. This seems to be a good idea for an organisation like FIFA due to thelevel of interest from many brands, it should increase FIFA's income. It is also easier for brands to activate its sponsorship in a targetted region which makes this offer very interesting to mid-sized companies. Companies do have to keep in mind however to monitor the current FIFA crisis before engaging with the global football federation.

In addition new opportunities keep arising with new digital and social media tools being launched on an almost daily basis. This will lead to more one-to-one conversational sponsorship activations in the future.
Generally the sponsorship industry as a whole will continue to grow. I don't see this trend stopping, unless there are major economic changes such as the financial crisis in 2008. 

Does Sportcal have any specialty in China? Could Sportcal provide any insights or help for Chinese market?

Of course. We have plenty of valuable data and insights available in our database, these can easily be analysed by searching the events taking place in China and who's sponsoring them. In addition, brands with HQ’s in China can be searched and the events they are sponsoring analysed. If you subscribe to our database, the information you’re looking for is usually just two clicks away. The same applies our media, events and bidding services.

As I've said before, one of the things that we find is that more and more European companies want to invest in Chinese properties. At the same time, what's also a good sign is that lots of right holders are interested in partnering with Chinese brands. Being able to engage with all those people in China is both an objective for many companies and a major challenge, especially for all rights holders outside of Asia.

This article is an abridged one from the original interview