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Football Shirt Sponsorships:

SEGA Europe and Arsenal F.C.*

Philip Rosson

Professor of Marketing & International BusinessSchool of Business Administration

Dalhousie University6152 Coburg Road

HalifaxNova Scotia

Canada B3H 1Z5

Tel. 902–494–3161Fax. 902–494–1107

Philip.Rosson@dal.ca

March 2001

* This case study was made possible through the financial support of theAsia-Pacific Foundation of Canada.

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Football Shirt Sponsorships:SEGA Europe and Arsenal F.C.

Executive Summary

Commercial sponsorships have become an important element in most sports. This is certainlytrue in English football where, since the early 1980s, shirt and kit sponsorships have generatedimportant revenues for clubs at all levels. This article describes the development of a shirtsponsorship in the Premier League. In 1999, the European subsidiary of the Japanese electronicscompany SEGA Enterprises, announced that it had entered into a shirt sponsorshiparrangement with Arsenal F.C., one of the top English clubs. The circumstances that led to thepartnership are detailed in the case study below.

The arrangement helped to relieve pressures felt by both parties. SEGA was about to launch itsnew video gaming console in European markets and needed to come up with a high-impactmarketing program if its Dreamcast system was to seriously challenge Sony’s market leadingPlayStation. SEGA’s executives believed that football could play a significant promotional rolefor the Dreamcast and wished to partner with leading clubs in important European markets.SEGA’s interest was timely for Arsenal F.C., which needed to find a new shirt sponsorfollowing JVC’s decision to end its 18-year relationship with the club.

As well as describing specific organizational factors leading to the sponsorship decision, thecase study identifies commercial developments in football of a more general kind. These havehelped to create an environment where shirt and kit sponsorship deals produce importantrevenue streams for teams. The case study provides information on developments over the first18 months of the relationship, including SEGA’s decision to get out of the video consolebusiness.

The paper ends with a general discussion of some of the themes arising out of the case study.Although the lessons are examined in the context of football sponsorships, many apply moregenerally to sports marketing.

The case study was prepared using materials drawn from documentary sources and interviewswith key informants in football and sports marketing organizations, and football researchers.1

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Introduction

SEGA Enterprises, a Tokyo-based video game company, launched its new Dreamcast console inthe Japanese market on November 27, 1998. North American and European introductions wereplanned for September 1999. SEGA had high expectations for the Dreamcast console,envisaging that it would challenge Sony’s PlayStation for market leadership. Management atSEGA’s European subsidiary was developing its launch plan and considering football shirtsponsorships as one element in its marketing strategy. Why football? Because it was the numberone sport in Europe and its fans’ demographics increasingly mirrored those for video gamers.In addition, television (TV) was broadcasting more and more football games—often on a pan-European basis—providing valuable exposure for companies and their brands. The UK wasparticularly strong for video gaming and, in late 1998 SEGA Europe management was givingactive consideration to partnering with a top English football club via a shirt sponsorshiparrangement. There was about a six-month window before a sponsorship deal would come intoeffect, and the Dreamcast launch was nine months away. In other words, there was somepressure for a decision to be made.

London’s Arsenal F.C. was a logical football club for SEGA to consider as a sponsorshippartner. Arsenal has had a long and rich history. Founded as the Royal Arsenal F. C. inWoolwich, Kent, in 1886, the club’s name (and its nickname “the Gunners”) reflects its historicalassociation with Woolwich, which at the turn of the 20th Century was the single most importantmilitary town in England. The club moved to its present location at Highbury in North Londonin 1913 (Soar & Tyler, 1989). It is one of a handful of English football teams that is well knownand supported around the world and in the last decade, after Manchester United, has had thesingle best record of English clubs. During this period it won the Football LeagueChampionship three times, the Football Association Cup twice, and the League Cup andEuropean Cup-Winners Cup once each. In December 1998, it was announced that Japaneseelectronics giant JVC would end its long-standing shirt sponsorship with Arsenal, effective June30, 1999. This meant that Arsenal would have to seek another shirt sponsor for the 1999–2000season, which kicked-off in late August.

The case study that follows examines SEGA and Arsenal in turn. Each organization is situatedin its industry environment before attention turns to the factors that are directly related to ashirt sponsorship arrangement. The case study describes the shirt sponsorship deal that wasstruck as well developments in the first 18 months of the relationship. The paper ends with anumber of lessons of a more general nature.

The Video Gaming Industry

In the late 1990s, three Japanese companies fought for dominance of the global video gameindustry. Despite its late entrance, Sony was the market leader. Nintendo and SEGA had atvarious times occupied the top spot but these long-standing rivals currently trailed in Sony’swake. In an industry where technology advanced rapidly, SEGA had launched its newDreamcast video console in Japan late in 1998, and planned North American and Europeanintroductions in September 1999. Nintendo was also expected to launch a new product althoughno formal announcement had been made. Through new product launches, both companiesexpected to gain substantial ground on Sony and its extremely successful PlayStation. However,Sony itself would be launching a new product—the PlayStation 2—in 2000. Product and gametechnology, market timing, and marketing flair were all critical to company success in thisindustry.

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History. The video game industry started in the 1980s, when Atari machines and the Pac-Mangame became household words. Like many industries, it has gone through several cycles ofboom and bust, with shakeouts of marginal companies and the arrival of newcomers. Theindustry grew in the late 1980s when Nintendo and SEGA used 16-bit technology to developmuch faster and more sophisticated games. Another period of depressed sales occurred in theearly 1990s when PC technology played leapfrog and drew users away from video gamecompanies. In late 1994, video gaming broke back when an industry outsider introduced aninnovative product—Sony with its PlayStation. This development changed the industrydramatically. The quality of images and sounds made possible by the technology meant that theindustry was seen as selling something more than a toy. For the first time, large numbers ofadult users were attracted to video gaming. Nintendo launched the N64 in 1997 in an attempt toregain some ground lost to Sony. In late 1998, all eyes were watching as the once pre-eminentSEGA launched its own innovative Dreamcast game system in Japan, based on 128-bittechnology. The games industry is substantial. By the end of 1999, it was forecast that theinstalled base would number more than 100 million Sony PlayStations, Nintendo N64s, andSega Saturns and Dreamcasts globally. Household penetration levels in three key markets were50% in Japan, 33% in America, and 20% in the UK. The value of industry sales (consoles andgames) was about US$20 billion in 1999 (£12.2 b)2—larger than Hollywood box-office revenuesfor the first time (“Business,” 1999)

Competitors. Sony was the competitor to beat, dominating almost everywhere with marketshares in the 60%–70% range. Launched late in 1994, Sony’s PlayStation had proven to be a starproduct for the company. It was estimated that 50 million homes owned the gaming console in1999, and that in the fourth quarter of 1998, it provided 16% of Sony’s sales and 44% of profits(Fulford, 1999) However, after four years of booming PlayStation sales, Sony saw change on thehorizon. Global sales of the console for the year to March 2000 were forecast to be 17 millionunits, down from 21.6 million the year before (“Sony,” 1999).

Sony was planning to introduce its PlayStation 2 to the Japanese market in time for Christmas1999. Early reports suggested the new console would be a formidable competitor. Technically,the console would be able to outperform PCs and workstations. The new player would also be“backwards compatible,” i.e., old game libraries would not be made obsolete by the console.This was a benefit for users, software producers and resellers alike.

Nintendo was second in most countries, accounting for much of the rest of the market. Itentered video gaming in 1983 and the 8-bit Nintendo Entertainment System (NES) dominatedthe second-generation of consoles. Nintendo also pioneered handheld games and still leads thatmarket with the GameBoy. Its success with the NES made it slow to develop a successor and the16-bit Super NES (and later N64) failed to meet profit expectations. Although it had not publiclyannounced plans for a successor to the N64, Nintendo was rumoured to be working on aconsole to be launched in Japan in time for the important Christmas 2000 holiday.

Convergence in entertainment. Video gaming was fast becoming a “mainstream activity,”appealing to a more mature user. In the early 1990s, video consoles were primarily owned byeight to 16 year-old males. Following the release of the PlayStation, consoles sold across a widerage range (eight to 29 years), with the average owner being 17 years old (Littlewood, 1999). Thebroadening in the appeal of video gaming meant that close parallels existed between the primemarket segments for gaming products and football. A Sony developer in the UK described thePlayStation (and other video consoles) as follows. “ It’s become a lifestyle accessory. It’s boughtby people who’ve got their own disposable income, and it’s installed next to the video and hi-fi,not just in kids’ bedrooms” (Schofield, 1999). Reflecting this fact, in the UK (1) video game salesnow exceeded rentals, (2) many major football grounds and night clubs had a game zone, and

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(3) Sony was preparing to open a chain of PlayStation pubs, run by brewers Scottish Courage(Edwards, 1999)

Given the size and continued growth prospects, it was rumoured that Microsoft had designs onthe US$15 billion (£9.1 b) global video-game market. Another factor was the advanced graphicscapabilities of the new consoles, which were seen as challenging the future of PC-gaming and,more broadly, interactive entertainment, including the Internet and digital TV. Microsoft couldnot allow these markets to move away from its domination (Ward & Chang, 1999).

SEGA and the Dreamcast

SEGA had seen its share of world markets slide dramatically since 1992. Its 16-bit MegaDriveconsole, launched in 1989 as the Genesis in North America, was the dominant third-generationgaming-machine. However, SEGA was unable to make the transition to the next generation ofplayer (using CD-ROM disks). The Saturn console, launched the same year as Sony’sPlayStation, never met corporate objectives (Schofield, 1999). As a result of recentdevelopments, SEGA’s share had gone from about 50% in the early 1990s to currently stand atlittle more than 1% in the US market. SEGA fared better in the UK, where in 1997 it sold 90,000Saturn units, worth £11.7 million. This compared with Sony’s 1.2 million PlayStations (£162million) and 600,000 Nintendo N64 units (£84 million) (Killgren, 1998). UK market share figuresfor three recent years are shown in Table 1, along with software sales volumes and advertisingspending.

SEGA’s decline following the advent of the PlayStation created difficulties for the company.Smaller volumes of business meant there was less interest on the part of software developers inproducing games. Similarly, within SEGA, declining sales meant less money could be allocatedto marketing and advertising. Because of lower spending, sales plunged further and so thespiral continued. These difficulties affected corporate performance. Although SEGA earned alarge percentage of its revenues from the manufacture of amusement arcade machines andoperation of theme parks in Japan, its declining share of the video gaming market impactedadversely on gross sales. These fell from US$3.5 billion (£2.1 b) in 1996, to US$2.9 billion (£1.8 b)in 1997, and US$2.5 billion (£1.6 b) in the year ended March 1998 (Edwards, 1999).

— Table 1 about here —

A new start. After several difficult years, SEGA now had what it believed would be a winningcombination: the newest gaming console backed by an aggressive marketing strategy. SEGAwas determined to win back a leadership position in the video game market and had very highexpectations for the Dreamcast system. The Dreamcast was the first gaming system to bedesigned around 128-bit technology and, it was claimed, enabled SEGA to offer a system thatran three times as fast as the latest arcade game and 15 times as fast as Sony’s PlayStation.

Launched in Japan late in 1998, the debut of Dreamcast in North America was set for September9, 1999. The European launch was planned for September 23, 1999. Being first-to-market hadproven important in the video game market. SEGA expected to have a lead of at least one-yearover Sony and Nintendo with its “next generation” console. The Japanese launch had gone well,with 900,000 units sold by March 1999. The console was priced at the equivalent of US$250(£152). Initially, nine games were available for use on the console. SEGA had signed softwarelicenses with 50 companies (Edwards, 1999). Shipments were below the target of one millionconsoles, with the shortfall explained by production difficulties. Despite a good early showingby Dreamcast, SEGA was expected to post a consolidated net loss of about ¥45 billion (£238 m)for the year to March 1999.

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Shoichiro Irimajiri, President of SEGA Enterprises, spoke of the Dreamcast capturing half theglobal market for gaming consoles. Industry observers were sceptical that SEGA could achieveat this level, noting several obstacles that lay in its way. First, Sony had become the dominantproducer in the industry and would remain a formidable competitor. Second, SEGA had lostmomentum in the market and, according to some, was not seen to be a “cool” brand. To someextent, this was due to Sony’s phenomenal success. However, SEGA had been less thanconsistent in providing budgetary support for marketing in the past (see Table 1c). Third,success depended very much on the games available to use on the console. The technology onlybecomes relevant when there are great games for users to play on the machine. SEGA wouldneed to work hard to woo software developers to support the new platform (Littlewood, 1999).

European launch of Dreamcast. In preparation for the European launch of the Dreamcast,London-based SEGA Europe made a number of management changes. Jean-Francois Cecillonwas appointed CEO in November 1998, to be responsible for all SEGA Europe operations,including subsidiaries in the UK, France, Germany and Spain. Mr. Cecillon had worked for EMIRecords UK and Ireland for 10 years, ultimately as President and CEO. Mr. Cecillon saw manysimilarities between the video gaming and music businesses—in terms of both the consumerstargeted (youth and young adults) and the rapid pace of change.

Building a strong management team and refining the marketing strategy took much of Mr.Cecillon’s time in the first few months at SEGA. Giles Thomas was appointed to the new post ofEuropean Marketing Director in preparation for the launch of the Dreamcast console. Thomaswas recruited from MTV Networks and was responsible for the coordination of advertising,marketing and public relations across major markets. The appointment of Thomas reflected achange in SEGA strategy for, since 1996, responsibility for marketing had been decentralized. Inthis period, SEGA focused principally on the UK market, with marketing elsewhere in Europeessentially run by local distributors. Other appointments were also made, principally of youngmanagers with a background in video games, software and advertising.

Having boosted its youth marketing credentials through hiring, SEGA then set about planningthe £50–60 million marketing campaign to launch the Dreamcast in Europe. Two advertisingagencies were signed to assist the company: Bartle Boyle Hegarty, to deal with brandadvertising; and M&C Saatchi, which was to handle other activities, including sponsorship,direct and digital marketing, and sales promotion. Marketing Director Giles Thomas and hisstaff were tightlipped about the specifics of the marketing plan for the Dreamcast. However,industry members knew that the Dreamcast launch would determine SEGA’s future in gaming.A games analyst at a brokerage house put it this way, “SEGA has to make this work; it has nocontingency plans. It is heavily into debt to fund the marketing” (Littlewood, 1999). The failureof the Saturn console had led SEGA management to realize that image was critical to success(Curtis, 1999). The Dreamcast’s launch was seen as advantageous for two reasons. First, itwould provide SEGA with a one-year lead over Sony and Nintendo. Second, since it had beentwo and a half years since the last new console was released (N64), the market was consideredready for the “buzz” associated with new technology.

It was in this environment that SEGA developed its plans. A clue was provided of the shapethat these would take when a company spokesperson made the announcement that “SEGA isvery open-minded about the marketing mix. It is looking to do things in an unconventionalway.” The company’s approach was clarified when Thomas said “We are here to launch abrand [Dreamcast] first, a console second.” SEGA clearly wished to reverse the lingering viewthat the company and its brands were not “cool.” The key was to make Dreamcast “famous” bylinking the brand with activities and personalities that are popular with, and appeal to youthsand young adults. An early indicator of SEGA’s plans was provided by the March 1999European-wide sponsorship of the premiere of the futuristic thriller film eXistenZ, starring Jude

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Law and Jennifer Jason Leigh (Littlewood, 1999). Pan-European promotional plans also calledfor cinema ads over an eight-week period at all venues showing the new Star Wars movie ThePhantom Menace, to be followed by TV ads until Christmas. Because the Dreamcast consolewas the first to provide Internet access, these ads would stress the possibility of multi-playergaming on-line. The ads were to end with the line “Up to 6 billion players” and the voiceover“We all play games, why don’t we play together.” SEGA also planned to install the newconsoles in 50 cinema complexes throughout the UK for consumer trial, as well as at trainstations and other urban locations on the launch day (Campbell, 1999).

Football sponsorship. Another marketing vehicle that was seriously considered by SEGA wasthe sponsorship of football teams in major European markets. Commercial sponsorship offootball events, teams and players was growing quickly in most developed nations and this facthad not escaped SEGA Europe management, who saw big possibilities for capitalizing on thepopularity and drama of the game. Sponsorship deals in English football date from the early1980s. Commercial sponsorship is different from advertising and has been defined as “… thepurchase (in cash or kind) of an association with a team, event, etc. in return for the exploitablecommercial potential linked to that activity” (Meenaghan, 1983).

High profile brands adorned the shirts of most leading English football teams. These includedglobal brands such as Sharp (Manchester United), Carlsberg (Liverpool), Packard Bell (LeedsUnited), Dr. Martens (West Ham United), as well as national brands such as Newcastle BrownAle (Newcastle United) and BT Cellnet (Middlesbrough). With increasing levels of TV coverageof big league and cup games in England, as well as European competitions involving topEnglish clubs, considerable exposure was possible. Further, as one sponsorship consultant put it“Sport is a universal language that crosses boundaries and elicits a lot of passion. Companieswant to associate their brand with such powerful passions, and sponsorship can deliver this”(Bell & Campbell, 1999).

The launch. It was expected that the Dreamcast would be launched at a retail price of £199 inthe UK, compared to street prices of £99.99 for both the PlayStation and N64. The Dreamcastprice was seen as relatively low for a new entrant. Some 10 games were expected to be availablefor the Dreamcast launch, including Sonic Adventure, Toy Commander, Metropolis StreetRacer, Monaco Grand Prix and UEFA Striker. A further 20 games were expected in time forChristmas 1999 (Littlewood, 1999). Whether Sony and Nintendo would engage in price-cuttingwas unclear, although there was speculation that Sony would drop PlayStation prices to £69 tocounter the Dreamcast introduction.

Some industry observers anticipated that the Dreamcast would sell well up to Christmas butthat sales would then fall away because European consumers would be prepared to wait for thenew machines Sony and Nintendo would introduce late in 2000. Other observers were morecritical: they did not see a long-term place for SEGA in the industry and argued that thecompany should focus on its strengths in software development and write for other platformsrather than continuing to compete as a hardware manufacturer (Killgren, 1998). SEGA’sCecillon countered these viewpoints by emphasizing that Dreamcast was a reality whereasPlayStation 2 and Nintendo’s new console were “just theory.” SEGA forecast that Europeansales would total one million units in the first year and that by Christmas 2000, it expected to“have sold 1.5 million units and to have more than 100 games. We will have a great advantage”(Edwards, 1999). Dreamcast was certainly a critical play for SEGA.

Football in England

Football had seen a resurgence of interest in England. Through the 1980s, attendance at gameshad declined quite sharply. A combination of factors explained this situation: an economic

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recession in the early part of the decade; hooliganism at grounds, and on the way to and fromgames; and crowded and antiquated spectator facilities. From 1987 on, the situation changed.First, a consumer boom following the recession increased leisure spending. Second, governmentand clubs alike took action to deal with football violence and so make football a safe spectatorsport once again. Third, in the wake of the Hillsborough disaster—when 96 Liverpool fans werecrushed to death as a result of policing and stadium problems—the Taylor Report madesweeping recommendations about safety and comfort within grounds. These included the moveto all-seater stadiums and the removal of perimeter fencing.

Television. The increased popularity of English football was also a result of TV developments.The advent of satellite and cable pay TV brought new companies into the industry, which brokethe cartel of the established channels (British Broadcasting Corporation and IndependentTelevision) and resulted in larger contracts for the right to televise more football. Thus, the TVrights to show 10 games cost £2.6 million in 1983, compared to £130 million for 60 games in1997–98 (Szymanski & Kuypers, 1999). The contribution that football can make to the growthand profitability of TV channels was reflected in remarks made by Rupert Murdoch. The part-owner of Britain’s largest satellite broadcaster (BSkyB) stated that “Sport overpowers film andeverything else in the entertainment genre … Football, of all sports, is number one” (Szymanski& Kuypers, 1999). Sports programming delivered large numbers of viewers to the TV channels,which, in turn, permitted the selling of prime-time advertising slots. But TV companies werenot the only winners. Clubs benefited from TV in two ways: first, substantial revenues flowedfrom new TV contracts; and second, the greater number of games aired at prime time fuelledfan interest and participation.

Revenue sources. Football teams generate revenues through a variety of activities. Historically,the major source of revenue was gate receipts. Over time, the combination of more diversifiedoperations and lucrative TV contracts had reduced the importance of ticket sales (even thoughticket prices had grown quite rapidly). Gate receipts still accounted for the largest stream offootball club revenues—36% of total revenues for a sample of nine Premier clubs in 1998–99.The growing importance of TV revenues is shown in Table 2.

— Table 2 about here —

Among nine Premiership3 clubs, TV grew from 21% of total revenues in 1996–97, to 26% in1997–98. Since these clubs had larger revenues in 1997–98, TV monies have clearly becomerelatively and absolutely more important for top clubs. Teams that qualified for Europeancompetitions received additional monies from televised coverage of those games.

British football clubs were at the forefront in “off-the-field” developments that have producednew revenue streams. The resurgence in football’s popularity (and, to some extent, its move up-market) has attracted numerous sponsoring corporations. One type is the so-called shirtsponsor, while another is the kit sponsor. Usually, shirt sponsorship deals involved smalleramounts of money than kit sponsorships.

Shirt sponsors are sometimes referred to as club sponsors since their presence is very obvious atthe club in question. As well as appearing on the team’s shirts, the sponsor’s name/logo wasusually very much in evidence on stadium entrances, grandstands and perimeter boards, onmatch programs and tickets, web sites etc. Although M&C Saatchi Sponsorship warned thatthere would be a “spiral of decline in revenue for all but major clubs,” Salomon Brothers statedthat the shortage of quality “properties” meant that major teams would be big winners withshirt sponsors (Salomon Bros. Inc., 1997). The Football Association regulated the placing ofcompany or product names and logos on football shirts and the relevant provision stated “Such

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advertising may occupy an area no greater than 200 square centimetres to be calculated bymeasuring around the outline of the advertising …” (FA Handbook, 1999, p. 226).

Manufacturers of sports clothing such as Adidas, Nike, Umbro and Reebok had kit sponsorshiparrangements with leading football clubs. As well as supplying free kit,4 sponsors paid clubs abase fee and a portion of replica kit sales (the latter essentially being licensing fees). There was astrong market for replica kits among children, teenagers and adults and this had become bigbusiness. Children and teenagers wore the kit when playing football and as casual wear. Someadults also wore replica shirts at home, as well as to matches. Typically, about 22.5% of theretail shirt price would flow to the manufacturer and 8% to the club (Szymanski & Kuypers,1999).

In addition to replica kits,5 most Premier clubs offered a full range of sports and leisure wear, aswell as books, videos, jewelry and other items, sold via club shops or through catalogueoperations. Sales also took place through independently owned sports shops and chains.Accordingly, retail and merchandising operations had become big business for clubs. Othergrowing areas of interest for many clubs included “corporate seating and executive boxes, theintroduction of restaurants, museums, travel services, publishing, financial services, car parkingon non-match days and even hotels” (Szymanski & Kuypers, 1999). Ticketing andmerchandising operations led some clubs to develop and exploit substantial fan/customerdatabases.

Football as business. Interest in football was rekindled and large amounts of TV andsponsorship money flowed into the game in the late 1980s and the 1990s. A different breed ofowner and manager also emerged during this period. Whereas clubs had been largely ownedand run as a hobby or as a service to the community, they were increasingly viewed as “for-profit” businesses in the 1990s.6 It was felt that some teams could break out of their traditionallocal areas and, in these cases, become national or even global brands.7 Top teams already had afan base around the world and with increased coverage of English Premier games on local TVnetworks, these supporters were able to follow their team and favourite players. Geographicalmarket expansion developments such as these opened up major possibilities for merchandisingand sponsorship growth.

Considerable amounts of money were being spent to attract world-class players to top Englishclubs. Since there existed a strong positive link between a team’s performance on the field andthe club’s profitability as a business, clubs attempted to assemble the best possible squad ofplayers (see Figure 1). Competition for top players meant wage and salary costs were escalatingquickly; the Premier League clubs had experienced a compound annual wage and salarygrowth rate of 26% growth since 1992–93 (Deloitte & Touche, 1999a).

— Figure 1 about here —

Arsenal Football Club

Arsenal revenues. Mirroring developments at other top clubs, Arsenal’s revenue streams hadgrown and diversified in recent years. Home games were invariably played in front of 38,000fans—a mix of season and regular ticket holders. Some 19,500 season tickets had been madeavailable in recent years (starting at about £200 each) and these have been so over-subscribedthat there is a waiting list of about 10,000 names. Arsenal was considering a number of optionsfor capturing the lost revenues from not being able to accommodate the demand for both typesof tickets. The options included expanding its present ground at Highbury or building a newstadium. Arsenal generated about 40% of its total revenues from ticket sales.

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Arsenal had been a major beneficiary of the TV contract in recent years. It received £9.7 millionas its share of the domestic TV payments in 1997–98 (Deloitte & Touche, 1999a). Other revenuesflowed from the sponsorships with JVC and Nike. The 18-year shirt sponsorship deal with JVCwas said to have been worth about £20 million to Arsenal since 1981 (“JVC ends,” 1998).Arsenal’s kit sponsor is Nike, which had expanding interests in football and had establishedrelationships with top clubs in several leagues in Europe, such as Barcelona, Glasgow Rangers,Inter Milan, Paris Saint Germain, and PSV Eindhoven. One report stated that Nike’s kitsponsorship of Arsenal was worth £40 million over seven years (Fry, 1997).

On the merchandising front, 350,000 Arsenal replica shirts were sold in 1996–97 at a price ofabout £40 each.8 Although replica kits were the major items sold, other merchandise was soldthrough two Arsenal shops and a mail order operation. Arsenal’s mail order catalogue filledmore than 60 pages. Summary financial information on Arsenal’s operations is found in Figure2 and Table 3.

— Figure 2 about here —

Like other major teams, Arsenal had invested heavily to improve the team. In 1998–99, therewere about 30 players in the first-team squad, almost all of whom had represented theircountry at a junior or senior level. The cosmopolitan nature of the Arsenal team was reflectedby the fact that it included six Frenchmen (including Anelka, Petit and Viera), two from theNetherlands (Bergkamp and Overmars), and one each from Argentina, Austria, Liberia,Nigeria, Portugal and Sweden. The balance of the squad was British and included currentEnglish international players Adams, Keown, Parlour and Seaman.

— Table 3 about here —

The relationship with JVC. In December 1998, it was announced that Japanese electronics giantJVC would end its long-standing shirt sponsorship with Arsenal, effective June 30, 1999. At thetime of the announcement, Arsenal’s Vice Chairman David Dein said: “There is no animosity.JVC have decided to channel their energies elsewhere. It has been a marvellous relationshipover 18 years and we have both wished each other well” (“JVC drops,” 1998). The Arsenalsponsorship arrangement was with JVC’s British subsidiary. The subsidiary’s trade marketingmanager stated “…the sponsorship has certainly done the job for us in brand awareness.”However, management had decided to move the budget into mainstream activities so as tobolster JVC Great Britain’s modest current advertising budget (estimated to be about £200,000 in1997). It was reported that JVC would save £5 million by not renewing the Arsenal deal (“JVCparts,” 1998).

As a corporation, JVC continued to believe in the value afforded by football sponsorship. JVChad been one of many sponsors of the World Cup ’98 and it planned to repeat this in 2002,when the finals were to be co-hosted by Japan and Korea.9 The company was also consideringbeing a sponsor of the national-level European Championships to be held in Holland andBelgium in 2000.

Arsenal’s recent Premiership League win (1997–98) added prestige to what was already avaluable sponsorship property. Further, plans to expand Highbury or build a new stadiummeant that the club would need aggressively to seek out all the funding available—fromsponsors and other sources. Arsenal would have to find another shirt sponsor for the 1999–2000season, which kicked-off in late August.

Sponsorship Research

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Although sponsorship was big business in football, the commercial nature of the agreementsmeant that detailed information on the terms struck between the parties, as well as the resultsachieved over the life of an agreement, were not publicly available. Three independent researchstudies provide useful insights. According to one market research company, footballsponsorships provided a way of reaching one in two British males, with a fairly evendistribution by age and social class. When asked to provide names of companies sponsoringfootball teams or leagues, on average between 5% and 10% of males sampled were able to do socorrectly. When prompted with a company name, the level of correct response rose to 12%–35%.One conclusion reached was that sponsorship could provide considerable exposure for acompany, especially via TV. Another was that a major sponsor could make a long-term impactif it enters a sport at an early stage (Wright, 1988).

A second study concerned electronics companies and their involvement in sports sponsorshipsaround the world. Initially, companies were found to use sports as a new and different form ofadvertising, and one that was less manifestly “commercial.” In a second stage, sponsorshipswere used less as an alternative to advertising in awareness building and more as a publicrelations tool to improve, change or maintain the image of a company’s brand or products. Mostof the companies sampled chose to sponsor events or sport associations rather than individualsor teams. Apparently, this was a matter of strategy. Events received a lot of attention for a shortperiod of time whereas an organization, team or individual got coverage so long as at it wasactive and performing well. Because events are often televised internationally, they tend to lendthemselves to the pursuit of high-level marketing goals (e.g., regional or global imageenhancement) rather than more specific country-level objectives (e.g., promotion of a particularproducts). Other findings were that sponsorship:

1. Results are difficult to evaluate over a short-term association.2. Arrangements are seldom fully integrated with mainstream marketing activities.3. Budgets are often large in financial terms but seldom exceed 10% of the total advertising

and promotions budget, and4. Agreements are generally viewed as effective and satisfactory (Armstrong, 1988).

Another study focused on shirt sponsors for teams in the top two divisions of English footballand reported that for 61% of sponsors, outcomes exceeded their expectations, and 77%indicated that their past experience pre-disposed them towards future involvement. The twoleading success factors were “clear objectives and a professional approach” (32%) and “goodcommunications” (28%). Three other factors were each endorsed by 12% of the sponsors: “highprofile club,” “full use of the sponsorship package” and “success on the field.” A variety ofobjectives were served by the shirt sponsorships. The more important objectives (in order)included: “increasing public awareness of the company,” “ increasing media attention,”“showing community involvement,” “building business/trade relations/goodwill,” “guesthospitality” and “enhancing company image.” The main targets for the sponsors were:“potential customers,” “existing customers,” “general public,” and “local community.”Although sponsors were positive about their experience, they generally failed to employ the fullrange of accepted sponsorship techniques, particularly with regard to setting objectives, gainingleverage, conducting evaluations and integrating the activity with other elements of thecommunications mix (Thwaites, 1995).

Shirt Sponsorship: Costs and Benefits

With sports playing an increasingly central role in corporate marketing strategies, sponsorshipcosts were spiralling and some industry observers raised concerns about value-for-money (Fry,1997). Football shirt sponsorship agreements ranged in their cost and duration. A number ofrecent shirt sponsorship deals are shown in Table 4. England’s top-performing club was

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Manchester United and, as would be expected, its arrangement with Sharp was both long-standing and the most lucrative in England. At the other extreme, teams that had struggled toremain in the Premier League (e.g., Nottingham Forest and Derby) commanded arrangementsof shorter duration and/or lower amounts of money.

Another factor had to be considered from a “cost” standpoint. This concerned fan reaction tosponsorships. The partisan nature of football meant that some fans deliberately chose not to buythe products and services advertised on the shirts of opposing teams, especially close rivals.London was the biggest consumer market in England and would therefore be important to thesuccess of the Dreamcast. London was also home to six Premier League football clubs,10 whosefans were very loyal.

— Table 4 about here —

More fundamentally, some insiders saw sponsorships as having only a limited influence on thepublic’s awareness or image of a company. According to one experienced manager“Sponsorship should be judged (and researched) as a reinforcing or catalytic factor, rather thanas an initiating or ‘locomotive’ factor” (Otker, 1988).

Despite the various costs, many companies saw considerable value from the exposure theirbrands would receive at the stadium, as well as through TV (and print) coverage of gamesinvolving the sponsored club. The more games played and televised, the greater the exposureand benefit. In this respect, teaming with a top club made sense because it was likely to receivemore TV coverage. Further, because cup competitions took place on a knockout basis, thestronger teams more often reached the final rounds and hence, played more games. Top clubsplayed in national cup tournaments as well as those that took place on a European-wide basis.Again, this was important for companies such as SEGA that had pan-European interests.

It was difficult to compute the benefit sponsors realized from exposure of their brand onfootball shirts. Two calculations were often made. First, companies computed how much TVadvertising could be purchased for different levels of sponsorship spending. For example,instead of spending (say) £2 million annually on a shirt sponsorship deal, a company could runabout 40 TV commercials in the UK.11 Second, research organizations evaluated how much timea sponsor’s name was visible during a televised game, and worked out the amount of moneysuch exposure would cost through advertisements.12

As well as the exposure gained through the company/product name on the team shirt,sponsors often expected other benefits. These varied from one situation to the next but mightinclude: advertising and promotional rights at games; signage; use of the club stadium; film andphotography rights; player endorsements and services; hospitality; use of club mark; andproduct sampling.

To Partner or Not?

SEGA and Arsenal were separately considering the matter of shirt sponsorships by the end of1998. SEGA had nine months before the Dreamcast would be launched in Europe, whereasArsenal needed to finalize a new shirt sponsor in time for the start of the 1999–2000 season.

Management at Arsenal felt the club was in a strong position to select a new partner. Arsenalwas one of England’s most prestigious clubs, it had an excellent recent performance record, waslocated in the lucrative London market, and was the only Premier club that Nike had chosen forkit sponsorship purposes. Top football clubs in England were increasingly viewing themselves

13

to be in the “business” of sport and competitive pressures were driving them to pursuepartnerships with corporations with whom there was a good “fit.”

SEGA executives were aware that Arsenal was the prime shirt sponsorship available to meet thetiming of the Dreamcast launch. In many ways, an arrangement with Arsenal would meetSEGA’s objectives. Arsenal’s history, location, fan support, squad profile, and recentperformance, made the club a desirable “property”. A shirt sponsorship would mean that theDreamcast brand would enjoy good exposure in league and cup games. Another attraction forSEGA was that, at the half way point in the 1998–99 season, Arsenal seemed well positioned tofill one of the 1999–2000 Champions League places available for English clubs. If Arsenalfinished the season in one of the top three positions in the Premier League, they wouldautomatically be involved in European play. This meant that should SEGA become Arsenal’sshirt sponsors, the company would gain even broader exposure in England, continental Europe,and around the world, through TV coverage of Champions League games (see Table 5).

— Table 5 about here —

It is not clear when SEGA Europe and Arsenal F.C. first began to discuss a potentialpartnership. It is assumed that SEGA management had first committed the idea of a footballshirt sponsorship, and then was concerned to select the best club. The first indication that a dealwas under consideration surfaced a few days after the termination of the JVC sponsorship wasmade public. Whether the two organizations were brought together by a third party isuncertain, although numerous agents and the Premier League offered their services in trying tobroker a deal (“Premier,” 1998). One month later (January 24, 1999), it was reported that SEGAand Arsenal were in “advance negotiations.” There was some controversy about theinvolvement of two officials of the Premier League who, it was claimed, had helped set up andattended the meetings. Other clubs felt that involvement with Arsenal compromised theindependence of the Premier League in pursuing its own sponsorship deals. The speed withwhich the negotiations proceeded came as a blow to Sony and Nintendo; SEGA’s key rivals hadboth been approached about a sponsorship (Draper, 1999).

The SEGA–Arsenal Partnership

SEGA and Arsenal announced a shirt sponsorship agreement on April 22, 1999. For the1999–2000 season, Arsenal’s red and white shirts would bear the “Dreamcast” brand namewhereas the SEGA corporate name was to feature on the change shirt (yellow with blue trim).The precise details of the sponsorship were not released. However, it was widely reported to bea four-year deal worth £10m.13 Whatever the case, it was believed to be a record amount, i.e.,surpassing the agreement negotiated a year before between Sharp and Manchester Unitedsponsorship (worth £4.8 m over two years).

Jean-Francois Cecillon, CEO of SEGA Europe, explained the Arsenal deal as follows:

There are two reasons why we made a deliberate choice to become involved withArsenal F. C. … they are a European club with European players … This was anopportunity we could not miss. The chance to be associated with one of the bestclubs in the world … The main Arsenal fan profile is ages 16–30 and this matchesSEGA Europe’s customer base. Together with Arsenal we will launch our newDreamcast product in the UK and throughout Europe (“SEGA Europe,” 1999).

Giles Thomas, SEGA European Marketing Director, added:

14

We’re bringing a new product with a new name to the market and theassociation with one of the world’s leading clubs brings instant fame.

David Dein, Vice-Chairman of Arsenal F.C. said,

These are exciting times at Arsenal … and this new sponsorship deal with SEGAEurope positively drives the club into the new millennium. Dreamcast is aninnovative product and its association with Arsenal will ensure it becomes amarket leader … Everyone at the club is looking forward to working with SEGAEurope in what is sure to be a long and fruitful relationship … Every club needssponsorship. We need to make money from various sources and sponsorship is amajor one.

Two months later, SEGA entered into shirt sponsorship deals with football teams in France(A.S. Saint-Etienne) and Italy (U.C. Sampdoria). These teams were of lesser stature thanArsenal, the former just promoted to the top division in France, while the latter had just beenrelegated from the top division in Italy. A year later, SEGA announced a shirt sponsorship dealwith R.C. Deportivo de La Coruna, the Spanish champions in 1999–2000.

Postscript

SEGA Dreamcast performance. The European launch of the Dreamcast was delayed untilOctober 14 due to technical issues concerning Internet connections. There was considerablepent-up demand for the new gaming console following SEGA’s pre-launch promotion andstories in the media. Retailers such as Virgin Megastore, HMV and Tower Records in Londonheld celebrity events for the launch that attracted large crowds. In the first two months after thelaunch, SEGA Europe reported sales of over 500,000 Dreamcast consoles with a retail value of£225 m Over 150,000 on-line Internet registrations were made, with 40% of customers usingDreamcast’s on-line capability. The Dreamcast sold in the UK for £200. Sony and Nintendoreduced prices to £80 and £65 respectively, in an attempt to neutralize SEGA’s launch.The Dreamcast was expected to sell well through the Christmas period, having received manyfavourable reviews.

Competition. In early September 1999, Sony was reported to have delayed the Japanese launchof the PlayStation 2 to March 4, 2000. It was speculated that difficulties in producing the super-fast graphic chips explained the delay. Sony was planning to ship one million units in the firstweek following the launch, with another 500,000 in the following weeks. With large-scaleshipments forecast in March, the delay in the launch was expected to have minimal impact onSony’s projected earnings of ¥110 billion (£582 m) for the year ending March 31, 2000 (Gibbs,1999). Nintendo has yet to launch its new console in Japan. This was not a surprise (Inoue,1999).

Arsenal performance. The battle for supremacy between Arsenal and Manchester United camedown to the final day of the 1998–99 season, with Manchester winning the Premier League by asingle point. Both teams therefore qualified to take part in European competition. In the1999–2000 Champions League, Arsenal was drawn in a difficult group of four teams, finishedthird and therefore did not advance to the second round. This was rumoured to have cost theclub £7.5 m through lost appearance money, bonus payments and a share of TV revenue(Stammers, 1999). As a consolation, Arsenal and some other teams automatically became part ofa second level European competition (the UEFA Cup). Arsenal progressed to the final wherethey met Galatasaray of Turkey. The game was scoreless after extra time and Arsenal lost onpenalty kicks. In the Premier League, the club once again finished as runners-up to ManchesterUnited.

15

The future. On January 31, 2001, SEGA Enterprises announced that it would end production ofits Dreamcast game console on March 31, 2001, and restructure the company to focus solely onvideogame content. This decision was precipitated by sales of 2.32 million units between Apriland December 2000—some 44% below company forecasts. Sales were particularlydisappointing during the Christmas 2000 season. The company explained its new strategy asfollows “… SEGA will be significantly broadening its market of consumer purchasers, whiledramatically expanding its revenue possibilities” (“SEGA scraps,” 2001). SEGA planned to sellsoftware to its former rivals Sony and Nintendo, was in talks to provide software to Microsoft’sX-Box, and will deliver SEGA games to Palm handheld computers and Motorola mobilephones.

It was not clear what effect this would have on SEGA’s football shirt sponsorships. One viewwas that nothing would really change since the Dreamcast brand would be migrated to the newsoftware offerings (“SEGA pull,” 2001). Meanwhile, Arsenal’s financial picture was lookingbright. In September 2000, Granada Media group spent £27 million to acquire a five percentshareholding in the club. Granada also invested £20 million in a new company, AFC Broadbandto exploit new media rights. Arsenal saw these investments as assisting the club in meeting itstwo key objectives—building a world class team and stadium, and developing the Arsenalbrand on a global basis. In March 2001, Arsenal’s Chairman, reported an operating loss of £5.0million for the six-months ended November 30, 2000. However, profit before tax totaled £32.8million, largely as a result of the transfer of two players (Overmars and Petit) to Barcelona(“Chairman’s,” 2001). The club was continuing to enjoy success on the football field: it was insecond place in the Premier League, had reached the semi-finals of the FA Cup and thequarterfinals of the Champions League. The Dreamcast name continued to receive significantexposure in the UK, Europe and around the world, through its shirt sponsorship of Arsenal F.C.

Lessons

The SEGA–Arsenal case study provides a full description of a partnership arrangementbetween two organizations. An attempt was made to describe the industry context of eachorganization, rather than focusing narrowly on the negotiation of a football shirt sponsorshiparrangement. It is believed that an appreciation of industry context is important inunderstanding the strategies pursued by individual organizations. But what does this casestudy offer by way of lessons? Although generalization can be dangerous, it is important to lookat the bigger picture.

A starting point is the question of the overall sponsorship decision process. Sports marketingwriters argue for a logical and disciplined approach to sponsorship decisions (Miles, 1999,Shank 1999, Shilbury et al, 1998). Thus, a sponsorship decision is guided by the organization’smarketing strategy, and involves the setting of measurable objectives, which are monitoredduring and after execution. It is not clear how closely this prescription was followed by SEGAor Arsenal. Presumably, the importance of the Dreamcast launch meant that SEGA’s marketingbudget of £50–60 million was allocated carefully across the various expense categories (media,sales promotion, trade, sponsorships etc.) and European country markets. With shirtsponsorships in the English, French and Italian leagues, SEGA allocated a good proportion of itsbudget to football. From Arsenal’s standpoint, it could be argued that the decision process waseasier since SEGA was simply a replacement for JVC —albeit at a higher level. Industry analystsstate that decision processes seldom follow the accepted models. Interviews conducted inresearching this case study suggest that there is a lack of science on the part of companies in theestablishment of sponsorship objectives and in measuring results. Football clubs do not escapecriticism either: although the situation is improving, there are very few clubs that arecommercially sophisticated at this point in time.

16

Another issue is partner selection. Again, researchers and consultants recommend a disciplinedapproach (Miles, 1999). What is unclear, however, is the extent to which selection truly takesplace. In other words, how long is the list of prospects? For prime partners (on both sides), it isunlikely that there will be very many available, and those that are will be subject toconsiderable interest. Some clues are presented about this topic in the case above. Apparently,Arsenal approached all three of the video gaming giants and possibly other companies. Less isknown about SEGA’s selection options, although there were no reports of their interest inEnglish clubs other than Arsenal. This leads to the following general comment. Since clubs aremuch more limited in number than companies, it is probably true to say that clubs have morepartner options available to them.

Timing is an important consideration. The situation confronting one or both partners oftenrequires relatively fast decision-making. In the case above, SEGA was reported to be talkingwith Arsenal just days after JVC’s sponsorship termination was announced. Seriousnegotiations were underway a month later and the deal was concluded and made public withinfour months. It seems obvious to state that the speed at which the process unfolds will affect theamount of preparation and research that can be done. This could be a serious problem the firsttime an organization is involved in sponsorship negotiations. To some extent, employment ofan agent or sports marketing experts will mitigate the problem but there is no real substitute fordirect experience. If a company or team has past involvement in sponsorship, the experienceshould lead to understanding and knowledge that will prove invaluable in negotiating andstructuring future agreements, particularly when time horizons are shorter than the ideal.

A further question deserving commentary is pricing. A football club can offer a potentialsponsor a number of benefits. These include (1) media coverage, (2) clearly defined targetaudiences, (3) player endorsement and involvement, (4) access to mailing lists, (5) leafletdistribution, (6) corporate hospitality, (7) incentive schemes, and (8) advertising benefits (Miles,1999). The appeal of Arsenal as a sponsorship property to SEGA was greatly enhanced by first,the exposure that Dreamcast would enjoy as a result of TV coverage of games in the UK, Europeand internationally, and second, the fact that the demographics of video gamers and footballfans overlapped greatly. Accordingly, Arsenal was able to extract a record shirt sponsorshipdeal from SEGA. Interviews with industry experts confirm the importance of the first twobenefits above, which exert the greatest influence in negotiations concerning the price of thesponsorship.

Of course, the benefits listed above have to be turned into tangible results. That requiresconsiderable attention and effort on the part of the sponsoring company, as well as cooperationfrom the club (both on and off the field of play). The case describes the performance of bothSEGA and Arsenal in the first 18 months of the sponsorship arrangement. It could be said thatSEGA’s decision to stop producing gaming consoles demonstrates casts a negative light on itsfootball sponsorships. That would be too harsh a judgement given that industry experts sawthis eventuality some years ago. But how well did football sponsorships work for SEGA? Wemay never know the answer to that question. More generally, experts say that it is difficult toisolate the effect of sponsorship, particularly for large companies that are involved in manyforms of promotion. Expertise is available to help answer this question, but companies shouldexpect to spend 2–5% of their sponsorship costs annually on research.

In conclusion, it should be recognized that the case study presented and discussed above hasfocused on a shirt sponsorship agreement at the highest level. Two prestigious organizationswere involved and clearly what is true for SEGA and Arsenal is probably not for companies thatdo not have global business interests or deep pockets, or clubs that cannot offer sponsorsexposure at the highest levels of football. A final point concerns other types of sponsorship.

17

Some would say that the case discussed here involves a fairly straightforward sponsorshiparrangement. With just two parties involved, shirt sponsorships are much less complicated tobring about than the multi-sponsor arrangements in which organizations such as the FA andPremier League are engaged.

18

Table 1

a) Games console UK market share

1996 1997 1998

Sony PlayStation 40.4% 61.2% 69.3%Nintendo N64 N/A 19.3 24.7Sega Saturn 11.6 7.5 2.7Nintendo GameBoy 6.6 3.8 1.5Nintendo SNES 13.0 2.7 0.8Sega MegaDrive 23.3 5.1 0.7Nintendo Colour GameBoy N/A N/A 0.2Others 5.1 0.4 0.1

b) UK software market (£ m)

1995 £3401996 £6901997 £1,200

c) Gaming expenditures UK adspend (£ m)

1995 1996 1997 1998

Nintendo 0.9 0.9 4.7 1.7Sega Europe 2.6 2.0 0.5 <0.1Sony Corp. Entertainment 2.4 3.4 8.9 3.7

Source: Littlewood (1998, p. 28)

19

Table 2

Premier LeagueSources of revenue*

Four main revenue streams 1996–97 1997–98

Gate receipts 37% 36%Television 21 26Retail/merchandising 21 17Other commercial activities 21 21

*Average data based on information from nine Premier clubs.

Source: Deloitte & Touche (1999a, p. 12)

20

Table 3

Arsenal F. C.Summary Financial Information (£m)

Arsenal “Average” PremierLeague Club

96–97 97–98 96–97 97–98

Revenue (excluding player transfers) 27.2 40.4 21.6 28.5

Wages & salaries 15.3 21.9 10.4 14.7

Operating profit (loss) before transfers 1.9 7.2 3.9 5.0

Net transfer fees receivable (payable) (3.5) (1.3) (3.3) (3.9)

Pre-tax profit (loss) (1.6) 5.9 0.5 1.0

Net assets (liabilities) 12.8 16.6Net cash at bank (bank loans & overdrafts) 25.4 3.1Other loans (14.4) (6.5)Book value stadium/equipment 28.2 24.7

Selected Comparisons

Indicator Arsenal Premier League Rank

1997–98 Premier League position – 1st

Average League match attendance 38,053 3rd

Revenue (£m) 40.4 5th

Operating profit (£m) 7.2 5th

Wages & salaries (£m) 21.9 5th

Pre-tax profit (£m) 5.9 3rd

Source: Deloitte & Touche (1999b, Appendix 1 & 5)

21

Table 4

Premier LeagueRecent Shirt Sponsorship Deals

Club Sponsor Industry Deal* Annual(amount/ amountduration)

Aston Villa AST Computers £6 m/ 5 yrs £1.2 mChelsea Autoglass Car components £6 m/4 yrs £1.5 mCoventry City Subaru Cars £2 m/3 yrs £0.7 mDerby County EDS Computers £0.5 m/ I yr £0.5 mEverton One 2 One Mobile phones £2 m/3 yrs £0.7 m

Leeds United Packard Bell Computers £4 m/4 yrs £1 mLiverpool Carlsberg Brewing £4 m/4 yrs £1 mManchester United Sharp Electronics £4.8 m/2 yrs £2.4 mNewcastle United Newcastle Brown Ale Brewing £4 m/3 yrs £1.3 mNottingham Forest Pinnacle Insurance Insurance £2m/3 yrs £0.7 m

Tottenham Hotspur Hewlett-Packard Computers £4 m/4 yrs £1 mWest Ham United Dr. Martens Shoes £3 m/3 yrs £1 mWimbledon Elonex Computers £3 m/3 yrs £1 m

* Estimates only since details are seldom made public. Ultimate value may also depend on teamperformance, attendance levels and crowd behaviour.

Source: Louella Miles (1999); Szymanski & Kuypers (1999)

22

Table 5

Arsenal F. C.Fixtures 1999–2000

Competition Format No. of games

1. EnglishPremiership League League 38*FA Cup Knock-out 6** (if progress to final)League Cup Knock-out 6 ** (if progress to final)

2. EuropeChampions League League, then knock-out 17† (if progress to final)

Source: Arsenal F.C.

23

Figure 1

Value Chain for the Football Business

• Primarily in the squad • Direct audience • Increased• In the facilities (gate attendance) investment

• Indirect audience capacity (media)

Source: Salomon Brothers Inc. (1997, p. 67)

Invest-ments

Winningteam

Consis-tency

Audience

Merchan-dising

Superiorreturns

24

Figure 2

Arsenal F. C.10-year revenue and profit performance (£ m)

Source: Szymanski & Kuypers (1999); Deloitte & Touche (1999b)

44

40

36

32

28

24

20

16

12

8

4

0

-489–90 90–91 91–92 92–93 93–94 94–95 95–96 96–97 97–98 98–99

Revenue

Pre-tax profit/loss

44

40

36

32

28

24

20

16

12

8

4

0

-489–90 90–91 91–92 92–93 93–94 94–95 95–96 96–97 97–98 98–99

Revenue

Pre-tax profit/loss

25

Endnotes

26

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1 SEGA Europe and Arsenal F.C. declined interviews, stating that information on the shirt sponsorshiparrangement was proprietary and could not be disclosed.2 Currency conversions are shown at the prevailing rates for January 1, 1999.3 The English First Division was renamed the FA Carling Premiership in 1993. Carling is a division ofBass Breweries. In 1997, Carling renewed its sponsorship of the Premiership for four years, at a cost of £36million.4 As a minimum, kit supply included shirts, shorts and socks for each match, track suits, as well astraining and leisure clothing.5 Since their names were on the replica shirts, such sales provided additional exposure for shirt sponsors.6 In fact, some 18 English clubs became public companies in the same period. Arsenal remained a limitedand closely held company.7 Manchester United announced in May 1997 that it was in talks with licensees to open up to 50 cluboutlets in Asia.8 Sales of replica shorts and socks would add to these figures.9 The World Cup is held every four years. Following a lengthy qualification process, surviving nationalfootball teams play a series of matches in the finals.10 In the 1998–99 season, the London-based teams in the Premier Division were Arsenal, CharltonAthletic, Chelsea, Tottenham Hotspur, West Ham United and Wimbledon.11 A 30-second, prime-time television commercial cost approximately £50,000 in the UK (Zenith Media,1999).12 Calculations also included print media coverage of games and the prominence of company brands inthe stories and photos.13 In one account, the agreement was stated to be worth £12 million (“Tablets,” 1999).