One of the most fundamental questions for any rights-holder is determining the value of their sponsorship. This question is particularly challenging for senior business audiences in the realm of sports sponsorship. To shed light on this topic, let's examine an example that is familiar to many: shirt or jersey sponsorships. While the English Premier League is often seen as the benchmark for valuation, Real Madrid stands as the global leader in jersey sponsorship. The club recently extended its partnership with Emirates airlines for another four years, worth an astonishing €70 million annually.
With such astronomical figures, it's clear that shirt sponsorships can range anywhere between zero and that eye-watering amount. But how can you obtain a more accurate understanding of your own sponsorship's worth? We're all familiar with the adage, "something is only worth what someone is prepared to pay for it." The same principle applies to sponsorships. However, in today's fragmented and cluttered media landscape, sponsorships are becoming increasingly valuable as brands focus on global opportunities that only sponsorships can provide.
From a macro perspective, the emergence of Saudi "sportswashing" cash has significantly transformed the market, and the changes are occurring rapidly. It began with their revolution in the golfing world and has now spread to the soccer world. Not only do they own clubs like Manchester City and recently Newcastle United, but they are also offering players previously unimaginable sums to join the Saudi League. This remarkable growth has fuelled the industry, with the global sports sponsorship market size reaching 70.22 billion USD in 2022. Furthermore, it is expected to grow at a compound annual growth rate (CAGR) of 8.70% between 2023 and 2028, projected to reach a value of 115.41 billion USD by 2028. Take a look at our list of top shirt deals in football.
Source: Sports Industry AU
But what about the landscape closer to home? Based on 2018 data, AFL clubs generated over $212 million in sponsorship revenues the previous season, averaging $11 million per club. This represented an increase of $8.3 million (4.1%) compared to the previous year. Collingwood and Sydney lead the sponsorship table, with each club securing more than $18 million. As Australia's biggest sport in terms of total commercial value, it's not unreasonable to estimate that major shirt sponsorship deals in the AFL would likely be priced in the range of $2-4 million for protected partners. Add a range of other assets, each valued at a couple of million, and the numbers quickly add up. Other sports such as the NRL, Cricket, Tennis, NBL, and A League follow behind with the rights-holders all working their little black books or trying to squeeze a few extra bucks from the incumbent when renewal time comes around.
While a few million dollars from a shirt deal would certainly bolster most clubs' coffers, let's consider the global market outlined earlier. Why not aim higher? If something is truly worth only what someone is willing to pay for it, then it's clear that the more people who know about your offer and are eager to bid, the higher price you can ultimately achieve. Real estate agents understand this principle well; that's why they invest their valuable Saturdays in auctions to reap the benefits of heightened competition. Promotion drives awareness, and when combined with a compelling offer, it drives competition and maximises price.
Of course, it's important to remember that sponsorship isn't just about the transaction itself. Starting with a fair price that reflects real market value though is simply good business and sets the stage for building relationships and fostering true partnerships that benefit all parties.
Now, let's address the fear of losing confidentiality. In reality, if one person knows the value of your shirt, you can be certain that even their grandma knows. The only people who won't know are those outside your current networks, and those are precisely the individuals you need to be aware in order to maximise the value of your assets. By taking the initiative and promoting your offer on the world stage, you control the messaging and communicate the real value, rather than having outsiders fixate on just the sticker price.
In sales, it is an undeniable truth that you cannot sell a secret. With the money currently available for outstanding offers on the global stage, keeping everything close to your chest will only hinder your progress. Why not expand your audience and seize valuable opportunities? You can click HERE to learn how SportsXGlobal can help you reach a broader audience, or feel free to get in touch with me directly if you’d like to discuss how we can assist.
Matt
CEO SportsXGlobal