Commercial revenue, the money earned from partnership with commercial entities, is constantly on the rise. And that is brands have realized that the power of benefiting from the association with sports, like the most watched European football, can be immense. It completely depends on the business or brand how they utilise the power. For the rights holder, the commercial revenue stream has never-ending growth potential
Just a day back, Atletico Madrid and Saudi Arabian airline Riyadh Air have expanded their sponsorship agreement to cover the naming rights to the Spanish soccer giants’ stadium with the deal reportedly in the range of €250mn – €300mn over 9 years at least, or around €27.7mn – €33.3mn per year. This is in addition to being their front-of-shirt sponsor which is reportedly worth €40mn a year. This makes a single commercial business contributing €67.7mn – €73.3mn per year to the club, or roughly 55% of the commercial revenue reported from Atletico Madrid in 2022/23
In this blog, we study the growth of commercial revenue in European football, specifically ‘big five’ leagues
The Gainers
As per data from Deloitte Annual Review of Football Finance, commercial revenue comprising of sponsorships, licensing, retail including merchandising contributed approximately €6.17bn or 32% of total league revenues in 2022/23 in which Premier League’s share in the total stand highest at 37% followed by LALIGA at 20%, Bundesliga at 18%, Serie A at 14% and Ligue 1 at 11%
Amongst the leagues, while aggregate commercial revenues of Premier League clubs grew at a CAGR of 10% since pandemic, Ligue 1 clubs grew most at 15% CAGR although most growth happened in the 2021/22 season over 2020/21
Analysing the post-pandemic reports of the ‘big five’ leagues and the top 15 clubs, a very interesting trend is evident. While the cumulative CAGR of the leagues is 10%, aggregated commercial revenues of the top 15 clubs grew at a CAGR of 9% while the aggregated revenue of the balance clubs within the league grew at a CAGR of 13%. This can be attributed by the lower base value of clubs other than top 15, it nevertheless shows that even these clubs have realized the power and importance of commercial revenues
At an individual club level, the CAGR growth in commercial revenues post-pandemic grew at an average of 10% with only Inter Milan de-growing at a CAGR of 14%, mainly by two factors, payment default from few sponsors and expiration of several Asian sponsorships with the hand over from Suning to Oaktree Capital Management. The five clubs recording highest growths as given in chart
Equation with Social Media Following
Commercial revenue of a football club can be generalized as directly proportional to the size of its fan following. As we look into the revenue share by club, we see a very interesting trend. The more popular / global a club is, that is a club with a bigger fan base, has a higher share of commercial revenue. This is implying the direct connection between fan base and commercial revenue. In a broad scope, clubs with global fan presence attracts the bigger brands and subsequently highest financial returns. A club with more concentrated local presence, as a result, attracts attention from the local brands
To understand this in a better manner, we corelate social media following from teams in Premier League 22/23 season and analyse with their commercial revenue (22/23 season). Here are the interesting observations
- Top 6 clubs, >90m SM followers (87% of total followers) – 78% commercial revenue
- Next 5 clubs, 10-30m followers (8% total followers) – 11% revenue
- Bottom 9 clubs, <10mn followers (5% total followers) – 11% revenue
Conclusion
The fact that commercial revenue stream and its growth is completely within the hands of the club makes it unique. The focus for rights holders should be to strategize, be creative, plan, implement and review an objective led sponsorship plan to grow and thereby strengthen the club brand globally
Conversely, for the sponsors too, they must let go of the old models, based on brand visibility and conventional media metrics, and invest in creative, idea-led partnership strategies
SBI’s Masters in Football Business Management program focuses on extensively on the different revenue streams with special emphasis on the commercial revenue and sponsorship. The 2024-25 edition of the program is about to begin. There is still time for you to join. Check out the program details here if you’re looking at kickstarting your career growth in the football industry
