Sponsorships And Cash

Over recent weeks Everton have signed deals with both Hummel as kit manufacturer and Cazoo as as shirt sponsor. The feedback to both deals it’s fair to say is mixed although generally erring towards optimistic. In both cases it is difficult to really judge each in isolation as you are seemingly weighing up historically poor commercial deals as a base alongside a very challenging period to negotiate new sponsorships. My own take is that the club have done quite well in the immediate context to secure the agreements they have done in what must been a very challenging financial market to operate in.

The inherent contradiction the club found themselves in plays out in different ways and can be interpreted as such. Depending on your persuasion and outlook will govern how you see each. The historical underperformance commercially can be viewed as a low bar that they should be achieving more from, or evidence of long term poor processes that take time to turn around. Again I don’t fundamentally believe either conclusion is right or wrong, both views have some validity. What does appear to be true, is that the commercial operation is slowly improving. There can be questions about the speed and scale of the improvement, but there’s little doubt improvements are being made. Most people in business would also concede that the first tentative steps in the right direction can often be the hardest, so some credit is due there.

It is a very difficult market to have secured deals in. In truth it would not be enormous hyperbole to describe the situation the club found itself in – having to negotiate 2 new lucrative partnerships as nightmarish. Sponsors during this period will likely be some downgrading deals, cancelling others and securing reductions in the long term. We will not know if the club had better offers on the table than the ones they secured, or they had to concede some ground on the demands in the intervening period, but it would not be an enormous leap to assume either of those eventualities occurred.

As is often the case with such deals it is difficult to gather exactly how much each are worth beneath the soundbites that are put out. We are told the Hummel deal is worth up to twice as much, but also around £10m per season (eerily similar to the Umbro deal) and early reports seem to suggest the Cazoo sponsorship matches the Sport Pesa deal. If we were to generalise it would be assumed that the club probably haven’t lost money and may have made an overall increase on what went before. Again within the wider context (that I’ve written at length about) this should not be sniffed at. I think we will see quite a sharp decline in the value of deals and this may well be more prolonged than just a single summer, if economies take 12-18 months to hit rock bottom from this pandemic the effect on football could go on beyond that point.

That is very much the glass half full version, the glass half empty would be we are still substantially behind the top 6 teams. We are the 7th team who have been ever presents in the Premier League and are substantially behind all of them. The club are to some extent stuck in a bind that unless they start competing for trophies it becomes a hard sell to gain the bigger sponsorship deals, but it needs the sponsorship deals to generate the funds to do this.

My own take is that in isolation these deals are good. The value is steady in what is undoubtedly a declining market. There is an obvious link with Hummel to Alan Ball and the 50th anniversary of the league title win in 1970. An astute move would be to develop not only a kit, but also a campaign around this for Hummel and Everton. Ideally an entire range dedicated to Alan Ball would probably be well received and give both Hummel and Everton an opportunity to tell a fantastic story on a timeline anniversary of one the great England midfielders who played for one of the great English sides in the Everton 1970 team. While Everton fans are very proud of their history, this is a great opportunity to share it and in the process monetise it.

Cazoo is a positive move because it is neither a betting company, nor linked to alcohol or finance, which in general have reputations and value sets that would seem difficult to square with a more positive image. Cazoo seem an interesting, innovative business that would seemingly benefit from the exposure Everton could bring. Like Hummel (and perhaps more so) they would fit under the “challenger brand” categorisation and therefore share similar aspirations to Everton. In general businesses that share similar profiles tend to work best together, so there are some cautious rooms for optimism. The necessity for the club now, is to begin to improve performance to justify heightened commercial deals.

This news has been accompanied with the statement from the club the players have agreed to defer 50% of their wages over the last 3 months. This news- potentially saving the club £20million pounds was positive and the statement made from CEO was well presented and has generated a wider discussion in the football public about how well Everton had done. Everyone involved in these negotiations should be praised. While the wages will need to be paid back at some point, in a moment where cash flow is going to be very tight, a saving of £20million pounds will certainly help the club as it heads into the summer.

So the overall picture is a little more positive than it may have been 3-4 weeks ago, where it looked relatively shaky. I do wonder if some teams get “caught out” by the incoming recession and are left with porous options come July/August? At this stage a bird in the hand is a small positive. However the size and scale of the rebuild both on and in this case off the field remains sizeable, not just in navigating our way through the Covid difficulties but also addressing the long term structural under-performance. It has been my view for some time that greater expertise and excellence is needed at board level to help push the club forward, and hopefully accelerate what small momentum has been generated over recent months in the signing of these deals.