Money Time: How Much Fancy Sport Sponsorships Actually Cost?

<p>When it comes to financial terms of <a href="https://www.financemagnates.com/forex/moving-the-goalposts-cfds-sport-sponsorships-go-beyond-football/">sports deals</a>, very little information is available publicly. Primarily, neither the brokers nor sports clubs/personalities reveal the terms. Clubs collectively disclose their sponsorship earnings, and brands put them under marketing expenses. However, there are always industry expert estimations and leaked information.</p><p>To understand the costs of sports sponsorship deals, the anatomy of a sports deal must be known: How do these sponsorship deals work? What are the types of sports sponsorships? Or who is involved in closing these deals?</p><p>Types of Sports Deals</p><p>Sports sponsorships come in all shapes and sizes. A company can slap its branding on the players' jerseys, put its logo on the perimeter fence of the field, on the stadium's giant LEDs, and on every possible real estate with some visibility on cameras.
</p><p>On the digital front, clubs can promote brokerage partners, and top players often directly endorse sponsor brands. Such promotions, though not top-tier deals, can be very effective: Real Madrid has 141 million followers on Instagram; FC Barcelona has 122 million; and Paris Saint-Germain and Juventus have 67.3 million and 62.1 million, respectively. Other smaller football clubs also have tens of millions of social media followers. So, one branded post on these clubs' social media channels will attract the eyeballs of many football fans, mostly male, while retail traders are also predominantly male.</p><p>"The connection between top-flight football and online trading is quite pronounced, especially when it comes to target demographics. Football fans and online traders have a great deal in common, but we are looking to go further and bring them together over a shared sense of purpose," said Marios Chailis, the Chief Marketing Officer at Libertex Group.</p><p>Many brokers are also tapping individual sports personalities. XTB is a prime example that has signed a former <a href="https://www.financemagnates.com/forex/iker-casillas-joins-xtb-as-a-brand-ambassador/">Spanish footballer, Iker Casillas</a>, a UFC fighter, Conor McGregor and a few other martial arts celebrities as brand ambassadors. AvaTrade onboarded Usain Bolt, a famous track athlete and Olympic gold medalist. McGregor, Casillas, and Bolt now have 46.5 million, 20 million, and 12.6 million Instagram followers, respectively. Their branded posts would directly hit the eye of their fans and followers.</p><p>Also, there is exclusivity in these sports sponsorship deals. While there can only be one main shirt sponsor and one or two sleeve sponsors, some brokers become exclusive online trading partners of the sports teams.
</p><p>"From a brand perspective, if it is an exclusive online trading partner, there can't be any other online trading partner. If you have global exclusivity, you, as a brand, are the only online trading partner of that club," explained Maximilian Schindler, a Senior Director at Sportfive, a sports marketing agency.</p><blockquote><p lang="en" dir="ltr">I’m excited to announce my new partnership with online broker <a href="https://twitter.com/AvaTrade?ref_src=twsrc%5Etfw">@AvaTrade</a> – they’ll get your trading game up to speed. To learn more: <a href="https://t.co/ZwdiAo36D7">https://t.co/ZwdiAo36D7</a> <a href="https://twitter.com/hashtag/AvaTrade?src=hash&amp;ref_src=twsrc%5Etfw">#AvaTrade</a> <a href="https://twitter.com/hashtag/Bemorebolt?src=hash&amp;ref_src=twsrc%5Etfw">#Bemorebolt</a> <a href="https://twitter.com/hashtag/Ad?src=hash&amp;ref_src=twsrc%5Etfw">#Ad</a> <a href="https://t.co/Uw1og73E70">pic.twitter.com/Uw1og73E70</a></p>— Usain St. Leo Bolt (@usainbolt) <a href="https://twitter.com/usainbolt/status/1422160841064001539?ref_src=twsrc%5Etfw">August 2, 2021</a></blockquote><p>How Much Does a Sports Deal Cost?</p><p>As already mentioned, brokers or sports clubs hardly reveal the financial terms of the deals. However, in more than a decade of such deals, the estimated costs are very clear. The range is wide and depends on factors like the popularity of the sports team and the type of the deal.</p><p>"There's a massive range in the cost of sponsorship deals depending on the respective package and the rights procured as part of these deals. To give an extremely broad overview, packages range from $1 million for Global Partnership deals at top European challenger clubs to over $50 million for top-level, premium uniform positions at the Deloitte Money League's top clubs (e.g., Manchester United shirt sponsorship / Barcelona shirt sponsorship)," said Matt House, the CEO and Founder of SportQuake, a sports sponsorship agency specializing in football sponsorship.
</p><p>Indeed, Emirates reportedly pays Real Madrid $50 million per year to remain its main shirt sponsor. Of course, Real Madrid is among the top European football clubs, and its sponsorship deal always costs a fortune. According to SportQuake, online brokers spent $125 million on football deals in the 2020-21 season.
</p><p>Among the brokers, Plus500, which was initially the back-of-shirt sponsor and then the main shirt sponsor of Athletico Madrid, has spent about $13 million on offline advertising during 2017, according to its annual report, most of which probably went to the Spanish football club's pocket. According to other sources, the online trading platform paid approximately €17 million ($16.7 million) yearly to Athletico as the main shirt sponsor when the club competed in the top-tier European league.</p><p>Last year, Plus500 <a href="https://www.financemagnates.com/forex/brokers/plus500-ends-2022-with-832m-in-revenue/">spent $122 million in marketing</a>, compared to $145.6 million in 2021.
</p><p>Though the Plus500-Athletico deal looks expensive, Sportfive's Schindler argues it's still cost-efficient. "You just reach out to billions of billions of people, but still, compared to TV commercials, if you want to reach out to the same amount of people, it's cheaper. TV commercials of that scale would cost ten times more than such sports sponsorships. So it's always a very cost-efficient tool," he said.
</p><p>The marketing budget of the Polish broker, XTB, which has signed several brand ambassadors, including UFC star McGregor and legendary Spanish goalie Casillas, went up to $25.1 million in 2022 from $7.9 million in the previous year. The multi-year agreement with McGregor will reportedly cost the broker tens of millions.
</p><p>Of course, the money involved in sports deals depends on many things. The size and costs of sports sponsorships depend on the assets within the partnership (besides the club or event).
</p><p>Schindler explained that some of the questions asked while fixing the price are: "Are LED boards included? Do you have cam carpets? What kind of social media appearances can you acquire? Do you have player appearances? What kind of hospitality package do you have?"</p><p>Deals in other globally popular spots also come at a premium price. The entry cost in F1 sponsorship starts from about $500,000, according to ZK Sports Founder and CEO, Oliver Kent, and that excludes the top three or four teams. Because of the high costs, the F1 teams allow shot duration sponsorships for one to three games in a "specific geographical audience that is important to that company."
</p><p>Meanwhile, many brokers that sponsored football teams before are now promoting their brand with other niche sports. One example is ICM.com: it previously supported Fulham FC, Newcastle United FC, Nottingham Forest FC, and other deals in cycling and Formula One. The broker is currently the sponsor of the England Polo Team and the France SailGP team.</p><p>"As part of our dynamic growth strategy, we have decided to venture into new territories and expand our global reach. By diversifying our partnerships, we aim to increase exposure and tap into new market segments across the globe, beyond the realm of football," said ICM.com's Founder and CEO, Shoaib Abedi.
</p><p>BDSwiss' CEO of the Middle East, Daniel Takieddine, agrees with this strategy, saying: "Niche sports like golf have less competition, an affluent demographic, and help with the brand association, in addition to networking opportunities – while I believe that these huge football deals that can cost millions of dollars could have this money spent in a more diverse and strategic way."
</p><p>The Crypto Boom
</p><p>With the boom in the crypto industry over the past few years, deep-pocket crypto companies are showering money on sports. Crypto.com, a cryptocurrency exchange, has bought the naming rights of an indoor sports arena in Los Angeles and also the Miami Formula One Grand Prix. According to multiple reports, Crypto.com agreed to pay $700 million over 20 years for the LA stadium naming rights and spent another $100 million on the F1 team. Apart from these two prized sponsorships, Crypto.com inked several other sports deals.</p><p>Another company that matched Crypto.com in sports spending is the <a href="https://www.financemagnates.com/cryptocurrency/ftx-the-rise-the-fall-and-the-reaction/">now-bankrupt FTX</a>. The collapsed crypto exchange spent $135 million for the naming rights of the Miami Heat's home arena for 19 years, signed a $17.5 million deal to be the naming sponsor of UFC for ten years, sponsored MLB umpires' uniform, and Formula 1 racing team Mercedes-AMG Petronas. It also had endorsement partnerships with Buccaneers quarterback Tom Brady, Angels ace/slugger Shohei Ohtani and Golden State Warriors star Steph Curry. All of these deals collapsed overnight with the bankruptcy filing of the exchange last November.
</p><p>However, the FTX fiasco did not stop other crypto companies from entering sports. The crypto exchange, OKX has signed a significant deal with <a href="https://www.financemagnates.com/cryptocurrency/news/crypto-exchange-okx-becomes-training-kit-sponsor-of-manchester-city/">Manchester City</a>; <a href="https://www.financemagnates.com/cryptocurrency/crypto-exchange-bitget-inks-sponsorship-deal-with-juventus-womens-team/">Bitget is sponsoring Juventus</a>; and <a href="https://www.financemagnates.com/cryptocurrency/coinbase-enters-european-football-becomes-bvb-sponsor/">Coinbase is backing Borussia Dortmund</a>. Additionally, two top present day footballers are also endorsing crypto exchange: <a href="https://www.financemagnates.com/cryptocurrency/exchange/binance-inks-partnership-deal-with-cristiano-ronaldo/">Christiano Ronaldo</a> signed a deal with Binance; and Lionel Messi became the brand ambassador of Bidget. OKX first became the training kit sponsor of Manchester City, but recently extended its partnership to be the sleeve sponsor in a <a href="https://www.financemagnates.com/cryptocurrency/okx-man-city-sign-70m-deal-after-shaking-off-clubs-ftx-related-fears/">new three-year agreement</a> for $70 million.</p><p>How Do Brokers Approach Clubs?</p><p>Now, the question remains, how does a broker approach a sports sponsorship? Usually, an agency is involved in the entire process of sports sponsorships. They typically represent the clubs and handle all aspects of the deal, including the negotiation.
</p><p>Many agencies also become exclusive partners of football clubs. In Germany, if a brand is interested in a partnership with Borussia Dortmund, Sportfive (the football club's exclusive agency) will always be involved. Last year, UEFA appointed a Swiss sports marketing agency, Team Marketing, as its marketing and sales partner for competitions between 2024 and 2027.
</p><p>However, agencies' involvement may differ slightly in other countries or leagues where exclusive partnerships between agencies and clubs/associations are rare. Previously, popular clubs like Chelsea and Athletico Madrid hired external agencies like Sportfive to sell their most exclusive rights on a single mandate basis.
</p><p>Another important aspect of sports sponsorship is due diligence, especially when closing deals with financial services companies. Multiple sports agencies which Finance Magnates talked to confirmed that for European partnerships, sports team representatives first check the license of brokers. Then, the due diligence process involves Googling the brand, checking the experiences of the users, and verifying the background of the management team. The last step is asking for the financial reports to check if they're valid or almost bankrupt.
</p><p>"There are many examples of brands that have either folded soon after a deal has been struck, not behaved appropriately during the sponsorship term, etc.," Kent declared. "There are also examples of where the Rights Holders are very strict on who they do and don't allow to become a commercial partner of their organization."
</p><p>Schindler likewise pointed out that the arduous processes make it challenging for new brokers to ink a sports deal. "If a broker doesn't have recognition in the market as a brand, it's definitely a little harder for it to enter into such sponsorships," he said.</p><p>Should Brokers Spend a Fortune in Sports Deals?</p><p>Sports deals are costly, there is no doubt about that. Still, brokers are not shying away from partnering with sports teams, sometimes even with big-ticket clubs and players. However, the strategy is changing. Many brokers are now focused on promoting their brands with local clubs for their influence over a niche audience. These deals cost less, and when strategized properly, can be very effective.</p>

This article was written by Arnab Shome at www.financemagnates.com.