OPINION: Four For One

This season climaxed with Chelsea and Manchester United, two of England's Big Four football clubs (Arsenal and Liverpool complete the quartet) contesting the Champions League Final in the Olympic Luzhniki Stadium in Moscow.
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A global audience of 1.2 billion viewers tuned in to see United beat the Blues on penalties in the biggest match in the football calendar – and maybe the biggest game ever between two English teams.

The success of the Premier League teams in the Champions’ League, where three of the Big Four reached the semi-final stage, not just this year, but last, is testament to the growing strength and domination of the English Premier League in Europe.

These sides have established themselves as truly global sporting brands, with all four comfortably established among the world’s Top 10 richest clubs. And yet, how do the licensing revenues of these great brands stack up?

So often, we hear talk of the clubs raking in the money from merchandising and licensing, but the reality is that the vast majority of football club revenue is actually generated from the lucrative TV deals, the multi-million pound sponsorships and the match day revenues which can reach anywhere between £2m and £3m per game.

Aside from the clubs’ kit deals (the Big Four are split between the world’s top two sporting brands: Arsenal and Manchester United are with Nike, whilst Liverpool and Chelsea wear Adidas), the true value of the clubs’ merchandising revenues is largely unknown.

From a licensing perspective, all four operate traditional licensing models. Manchester United’s rights are managed from Old Trafford by a Nike subsidiary company, whilst the other three run their licensing in-house, with Arsenal and Liverpool only recently emerging from a seven year agency agreement with Granada Ventures.

And yet, while all four clubs have broad licensee portfolios in the domestic market, ask any member of the public where they would be able to buy a pair of Manchester United slippers, an Arsenal mug, or a Liverpool notepad, and they may well be hard-pressed to give you an answer beyond ‘the club shop’ or ‘maybe JJB’.

The truth of the matter is that despite their position as truly iconic brands of world sport, the English football clubs have yet to really prove themselves to the High Street retailers as sustainable and profitable licensed properties.

After 13 years working at Manchester United, first for the club, and latterly for Nike, I have seen huge changes in the world of football merchandising.

And yet in all my time at United, we only very rarely managed to crack the eternal distribution conundrum that seems to face the big football clubs in the UK market. So often my licensees would traipse into my office, head bowed, to declare that High Street retailer X, or retailer Y is “not interested” in the Man Utd product range they had developed at great expense (and quite often, for which they had stumped up a not insignificant minimum guarantee).

The reasons for retailer rejection?
* ‘Football’s too tribal’
* ‘Can’t sell Man U in my Liverpool stores’
* ‘Arsenal won the league last year, didn’t they?’
* ‘We’re sticking with on-trend brands like (anonymous and already forgotten transient brand) X, or (this year’s big hit, next year’s bargain bin filler) Y’
* ‘my boss hates Man U’

Don’t get me wrong, United had plenty of distribution successes, yielding some excellent licensing revenues, including a hugely successful partnership with JJB, and not insignificant coverage in the country’s mail order catalogues, as well as what can seem little more than an occasional excursion into the mass market with the odd hot product. Certainly, we have never seen football presented in the co-ordinated and collective way that would undoubtedly attract their football-supporting customers.

But the truth is, the supermarkets and major high street retailers have never really got their heads around how to make football work in their stores on a long-term basis. Football is far and away the country’s favourite sport, these are the world’s most successful and popular clubs, brands with almost universal spontaneous awareness, and yet they have less high street distribution than a stuffed cat, a celebrity chef, or this year’s latest boy band.

The quest to establish football merchandise on the high street has become the holy grail for me. Despite my position at Manchester United (unquestionably the team with the biggest and most geographically spread fanbase in the UK, and therefore the team most likely to be able to stand alone in nationwide retail distribution) I still believed passionately in what has become known as a multi-club approach and the need for the clubs themselves to play a more active role in a co-operative and co-ordinated way to support the licensees in the development of relationships with retailers.

The UK licensed football merchandise market is incredibly segmented and disparate. Often, the big clubs will have different licensees across the same product range – so if you want a Man United scarf you have to buy from licensee X, but if you want an Arsenal one it’s licensee Y, and if you want a Liverpool one, bad luck because they don’t have a licensee for scarves because of their contract with Adidas.

This is not meant to be a bad reflection on Liverpool or Adidas, just an illustration of the complexity of the market in which we are operating.

I have travelled on numerous occasions to the US, where I often meet with the licensing folk at Major League Baseball, the National Hockey League and the NBA. They never cease to be amazed at the complexities of the licensed ‘soccer’ market in the UK, when compared to their simple model where all club licensing rights are managed centrally by the league itself.

This means that, in the States, a licensee who wants a deal with the New York Yankees, has no choice but to sign up with all the other franchises in the league, from the Baltimore Orioles to the Washington Nationals. It certainly makes life easier for the retailers, who can buy into an ‘MLB corner’ with all the clubs covered by a relatively small number of licensees.

There are of course a few savvy UK licensees who have recognised the value of the Big Four, and signed up all the clubs they need, but these are relatively few and far between, and not always in the key categories that would form the heart of a core range of football merchandise – a range that would create the theatrical experience in-store that is so often created by the big character and entertainment brands, where fans of football can choose from a wide assortment of great products from their clubs.

And so, what is the solution? A stronger Premier League licensing programme, akin to the US model? Alas, it is probably too late for the league to wrest the licensing rights in any of the really core categories back from the clubs, who despite the relatively poor showing on the high street, can still command significant guarantees in their own right, so are unlikely to give this up for a small slice of a big Premier League pie.

Direct-to-retail licensing is certainly an option, but many of the clubs have tied themselves in to long term ‘exclusive’ licence contracts which they are loathe to challenge. The only real way to reach the holy grail is for the clubs themselves, in particular the Big Four, to co-operate together, and find a way of establishing relationships directly with the key retailers, at the right level, and for the retailers to abandon their prejudices, fixed mindsets and perceived logistical obstacle courses and get behind these Great British brands.

This is not a simple project, but with the necessary desire from the retailers, and a co-ordinated push from the clubs themselves, who should discard their rivalries for the good of the collective reward, it can be achieved. Certainly, my recent departure from Manchester United to set up my own company, Fluid Brand Management, was to some extent prompted by a desire to assume a position of neutrality in the football licensing world in order to make this damned dream a reality. What we need is one of the big retailers to wake up to this phenomenal opportunity to celebrate the world renown of our most prestigious clubs, and make football really happen on the High Street.

Early indications from conversations my company has had with the clubs themselves, a number of major UK retailers and some of the governing bodies of the football world would suggest that we are closer now than ever to making it happen.

Tom Howgate can be contacted at tom@fluidbrands.co.uk

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