Football, ‘the beautiful game’, is big business. Matchday revenue, broadcast revenue, and commercial revenue, including merchandise, are the cornerstones of every club’s income stream. But licensing processes can be difficult to manage, especially with the extreme changes in revenue that can occur when a team is in a championship.
Football merchandise is booming globally. Gone are the days when someone at the club would organize a few scarves and a couple of pin badges to satisfy supporters of the local team. Nowadays, most clubs have a licensing department, often combined with the club’s retail development department, tasked with bringing innovative product to market.
Many clubs are looking to expand their brands on a global level. A team-identified pencil case or golf club warmer can allow fans to engage with and show their loyalty to a club many miles away, even in territories where new fans can only dream of watching a live game. Far-away fans are able to support the team from the comfort of their armchairs, resting on a branded cushion and sipping from a branded mug.
Club merchandise sales are an even more important source of income with the new UEFA Financial Fair Play break-even rules now in force. The regulations, which came into effect in the 2011-2012 season, require clubs to spend less than they earn. Merchandise sales help clubs offset against expenditure.
Efficient management of a club’s merchandise program is vital to maximizing revenues, both in terms of the breadth of product available and the timely payment of royalties due from licensees at home and overseas.
Even the most organized licensing departments in the top flight confess to being overwhelmed by activity when their club wins a championship.
‘Naturally, team performance on the pitch has a direct impact on licensing activity’, says Mark Bell of Chelsea Football Club. “We are always very busy at Chelsea FC, but the days after a major trophy Managing Workload win see a massive increase in new enquiries and new product submissions. It is vital for us to be on top of our licensing game, to respond quickly and professionally to these new opportunities, and to celebrate the team’s achievement with great new products for our fans. Speed to market is imperative’.
Do not underestimate the increase in new product submissions after a championship, nor the additional validation of royalty statements that will occur when a club performance clause triggers a higher royalty rate for a period after the triumph.
Because any club licensing department’s work ebbs and flows, depending on the club’s performance on the pitch, having solid procedures in place to manage the ups and downs in paperwork is critical. It will prevent any disruption in the licensing process, from product development to royalty collection.
Sales of club merchandise have grown exponentially in the past few years. The official Manchester United Investor Relations website says that more than five million items of Manchester United licensed products were sold in 2011-2012, including over two million jerseys.
The European Football Merchandising Report 2012 by Sport+Markt and PR Marketing found that Europe’s top five leagues generated merchandising and licensing revenue of €631 million in 2011-2012. Spain’s La Liga was number one, with Real Madrid CF and FC Barcelona together generating 80% of the total €190 million revenue in La Liga merchandise.
Keeping on top of enormous sales volumes and associated royalties across multiple categories and territories, with varying royalty rates, is a daunting task when managed manually. As a result, football clubs are increasingly adopting automated solutions to track royalty reporting and contract compliance, easing the process by enabling licensees to upload their sales data directly into the system.
‘Working with a global football brand — Real Madrid CF — brings great responsibility’, says Carolina Linares of adidas, which oversees Real Madrid’s licensing program. “Managing a large range of licensed merchandise developed with licensees around the world requires great attention to detail. Keeping track of royalties, guarantee recoupment, contract renewals, and product development on this scale became very difficult to manage with spreadsheets and emails. Moving to an automated system with Dependable Rights Manager enables us to work efficiently in managing the licensing business, ensuring critical deadlines are not missed and improving communication with our licensing partners’.
It is important to encourage sales through the stadium store and general retail by differentiating ranges and products, and many clubs have multiple brands in the marketplace: retro, kids, stadium store exclusives, and more, all running at the same time. Merchandise, especially if competition specific, often has very tight development lead times, and it is vital to not miss a launch date.
It is not always easy for a club’s creative department to check that only products authorized in a licensee’s contract make it to production, especially in the excitement of a big team win. Automating the creative approval process can greatly speed up the development time, as well as enable easy comparison of products for different markets. It is easier to cross-reference submissions against contract details with an end-to-end solution.
‘It is very important for us to keep track of authorized products and be able to readily identify items that have not made it through the approvals process’, says Christina Kilkenny of Liverpool Football Club. ‘Managing approvals with DRM has helped us tighten controls on the approval process; the system automatically cross-checks products on the royalty statements and has picked up on items that did not follow the correct procedure’.
In fact, having an automated licensing management process in place can greatly help a club’s merchandise program reach full potential in a variety of ways. Web-based solutions facilitate communication between clubs’ internal departments and their licensees, and with agents in other territories. This exchange of information speeds up and improves accuracy in royalty processing and product approvals.
Please visit www.dependablesolutions.com for more information on how to keep on top of your workload and improve your club merchandise program using Dependable Solutions Inc.’s automated brand management tools.