Top of the league: How football clubs protect and exploit their brands in a global marketplace
The 2017/18 Premier League season kicks off today and the revenues of the league and its football clubs continue to go from strength to strength. Increased broadcasting revenues have already lead to record transfer fees; many teams are spending the pre-season playing international tours in Asia and North America; and clubs have been busy negotiating and announcing a range of new commercial deals. The combined commercial revenues of the Premier League clubs exceeded £1 billion for the first time in 2015/16. But when it comes to sponsorship, merchandising and other licensing arrangements, how should a football club maximise the value of its brand? This article explores these questions, specifically looking at:
- Building a brand in the global market place
- Protecting the brand
- Exploitating the brand - licensing
- Monitoring and enforcing the brand
For more on brand protection in football, with a focus on trade marks, please also see this LawInSport article: The importance of trade marks in football - controlling brand value avoiding own goals.
Building a brand
The global appeal of the Premier League means that top flight English football clubs are fast becoming global brands in their own right. In most brand valuation lists, football clubs lag behind sports media and sports merchandise businesses, not to mention global brands such as Apple, Google or Coca-Cola. However, football clubs have the advantage of a strong appeal to a growing, captive and committed audience of supporters, and that value is reflected by the fact that the top global brands often compete to sponsor Premier League clubs.
Recently, an annual football brand valuation report suggested that football clubs were not making the most of the "huge opportunities" available to their brands. In particular, football clubs should capitalise on opportunities through commercial exploitation, rather than relying on broadcasting revenue. Six of the top ten most valuable club brands (calculated using a royalty relief approach to estimate the chargeable rate for the use of the brand to a commercial partner) were Premier League clubs; and with Premier League newcomers AFC Bournemouth calculated to have a more valuable brand than European titans Inter Milan, Valencia and Ajax, it is clear clubs can extract far greater value from their brands than they currently do.
Protecting the brand
The use and registration of trade marks traditionally lies at the heart of an organisation's brand strategy. Trade marks act as a badge of origin to enable consumers to distinguish products from those of competitors, and the goodwill associated with a successful brand (and its trade marks) can be an enormous commercial asset. Legally, the effect of a registered trade mark is that the owner can bring legal action to prevent unauthorised third parties from using the same (or a confusingly similar) mark in the same commercial areas. An organisation may still protect its assets without trade mark registrations, but to do so is often more difficult and expensive, and ultimately of less commercial value to sponsors.
Recent research by World Trademark Review identified a trend in the increasing number of trade mark registrations by European football clubs, in both their domestic and international markets. Premier League clubs led this trend, with Manchester United, Chelsea and Arsenal registering 69, 50 and 41 new marks respectively in the last year. The top European clubs typically own over 200 trade marks each, covering the club name, crest, colours, players, and even elements of its history or culture, with a significant proportion of these marks registered in non-European markets. These statistics demonstrate the importance of non-European markets to the growth of European football club brands and are a signal of intent by those clubs to protect, and potentially exploit, their brands in those markets.
Development of brands in the internet age means focussing on trade mark registration is not enough; football clubs cannot ignore their online presence. Social media and the availability of new generic top level domains present opportunities for clubs to align fan interaction and marketing channels to reflect brand strategy and promote the club in a manner which emphasises the ethos and qualities of the brand. It is essential that a club's traditional trade mark strategy and online marketing campaigns are aligned. Clubs can also use these global platforms to tailor branding and content to local markets. By way of example, Manchester United operates tailored twitter feeds in English, French, Spanish, Japanese and Arabic and has announced plans to distribute its own content on MUTV via a worldwide digital app.
Exploitation: Licensing the brand
Ownership of trade mark registrations across the world enable a football club to strike deals in new markets, leveraging its well-established and clearly identifiable brand. Registered rights give licensees more confidence that any unauthorised associations can be dealt with swiftly. Commercially savvy clubs license their marks, and the exclusive right of association with their brand, to commercial partners across a multitude of different product categories, including sectors which are historically unconnected to football. This broad appeal reflects the diverse audience of Premier League football; a product which is increasingly crossing age and gender boundaries across the world – one 2015 survey of worldwide internet users found that 29% of women and 58% of men watched the Premier League on TV or online.
Premier League football clubs are global brands with growing international audiences, and therefore many common commercial deals, such as a kit manufacturer partnership and a shirt sponsorship, are necessarily global partnerships. Partners often spend double the sponsorship fee on activities to "activate" and publicise the partnership. As a consequence, clubs need to think beyond national borders to optimise their value. For the 2017/18 season, gambling operators dominate the shirt sponsorship market, and a number of the sponsors are businesses domiciled in or with their roots in Asia, including Yokohama Tyres (Japan - Chelsea), AIA (Hong Kong - Tottenham Hotspur) and Palm (China – West Bromwich Albion).
In addition, 2017/18 is the first season in which Premier League clubs will be allowed a second shirt sponsor – on the left shirt sleeve of the playing kit. Such partnerships are estimated to be valued at 20% of the value of the main shirt sponsorship (approximately £9-12 million for the top clubs) and nine clubs, including Manchester City, Chelsea and Liverpool, have already announced sleeve sponsors. Such sleeve sponsorships are considered to be more appealing to companies who value brand exposure over marketing rights and a more in depth partnership, but it remains to be seen whether sleeve sponsorships might affect the value of shirt sponsorship rights, or what rights a shirt sponsor has over the club's choice of sleeve sponsor. Interestingly, Chelsea have confirmed their sleeve sponsor as Alliance Tyres, a brand operated by shirt sponsor Yokohama, and Southampton have agreed to display the Virgin Media logo, in moves to further expand their existing partnerships.
The most commercially successful football club in world football is considered to be Manchester United. One 2014 report suggested that United generated more than 350% extra income than its European rivals by securing local sponsorship opportunities outside of a football club's traditional revenue streams. The club utilises a "global, regional and product segmentation sponsorship strategy" alongside a global strategy for retail, merchandising, apparel and product licensing. Partnerships including an "Official Noodles Partner" and an "Official Paint Partner" have followed. As a leading brand, Manchester United considers that, in some product categories, creating geographical markets for licensees is a more lucrative approach. For example, United license a number of different telecommunication partners in different territories all over the world with limited dilution of the brand given that telecom providers typically work within strict geographical boundaries.
But operating on a global level requires thoughtful consideration; clubs should ensure that brand assets (including players) are suitably prepared for new issues a global brand has to balance. The short-lived kit colour change from blue to red made by the owner of Cardiff City to appeal to a Far East audience demonstrates that whilst global markets should be considered, preserving an existing brand maintains an integral aspect of its appeal. In addition, the detailed public statements made by Chelsea FC in response to statements made by its Brazilian winger, Kenedy, on its a pre-season tour of China make it clear that maintaining brand goodwill in significant emerging markets is a key concern.
Monitoring and enforcing the brand
In 2016, an Organisation for Economic Co-operation and Development report on the trade in counterfeit and pirated goods calculated that fake goods comprised 2.5% of global imports and the total value of imported fake goods worldwide was US$ 461 billion in 2013 (based on the most recently available figures). Such trade was described as a "global and dynamic phenomenon", and has proliferated with the aid of market globalisation and online marketplaces.
Given the value associated with football club merchandise, the sports sector is rife with counterfeit goods; since 2011/12, the Premier League has seized over £7.7m worth of counterfeit merchandise. This figure is over and above the clubs' and kit manufacturers' own seizures of counterfeit goods.
The internet empowers fans to promote their favourite football clubs themselves, and engage directly with the brand and other fans. However, clubs also need to be alive to the risks of social media and online markets, particularly in relation to the sale of counterfeit goods and the proliferation of direct purchase options via social media sites.
Brand owners should implement a detailed brand protection strategy to protect brand equity and customer loyalty. Unauthorised use by third parties can lead a brand to lose its legal protections, its cachet and consequently its commercial value. Clubs should act quickly and robustly to nip any unauthorised use of their brands in the bud. In fact, commercial deals frequently require clubs to monitor unauthorised use and enforce their rights against unauthorised third parties. New technology is making monitoring and issuing take-down notices much more streamlined and cost effective, enabling clubs to track and link infringing activity to deal with threats to their brand swiftly and with greater strategic impact.
Football is a global game and there is significant worldwide interest in the clubs that participate in the Premier League. As significant brands in their own right, Premier League football clubs have tremendous opportunities to expand their appeal into new markets and audiences from their traditional localities.
A carefully constructed business strategy will assist a club to effectively exploit these opportunities for commercial gain by dividing up revenue streams and markets. However, in doing so, clubs should be careful to take commensurate steps to proactively and reactively protect their brands in new and existing markets, and be aware of both the opportunities and the risks of online markets and social media.
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Rebecca is a Senior Associate in our Intellectual Property Group based in London focusing on the media, entertainment and sports sector.