September 24, 2008 / 8:01 AM / 11 years ago

ANALYSIS-Soccer-Smaller European clubs to suffer from downturn

BRUSSELS/LONDON, Sept 24 (Reuters) - European soccer clubs that are not bankrolled by wealthy owners are feeling the pinch from the economic downturn and could suffer further, at least in the medium term, as sponsorship and ticket sales fall.

This season shirt sponsorship revenue in England’s Premier League fell for the first time in its 16-year history to 67 million pounds ($123.6 million) from about 75 million a year earlier ($138.3 million).

Advertising budgets have also been trimmed as companies cut back on spending, while rising ticket prices and pressure on consumer spending has led to some supporters staying at home.

“I don’t think we have ever had this situation before... it is indicative that the economy is in recession,” said Rory Miller from the sports business unit at Liverpool University.

Analysts believe the largest clubs, such as English champions Manchester United and Spanish title holders Real Madrid, will always attract sponsors and fans, but that smaller clubs should look closer to home for support.

“I don’t think Man United would have much trouble finding a new sponsor, likewise Chelsea, Arsenal and a handful of other top clubs,” said Gary Leih, the chairman and chief executive of advertising’s Ogilvy Group UK.

“But if you’re a team struggling in one of the lower leagues, sponsorship is going to be harder to come by.

LOCAL BRANDS

“What I think we will see here is sponsorship by local brands,” he said. “Brands coming together with a local football team can generate enormous amounts of goodwill.”

The English Premier League is Europe’s richest with revenues exceeding 1.5 billion pounds in 2007, but only eight of its 20 clubs turn an operating profit.

Question marks have been raised in recent weeks over the future of Manchester United’s British record 56.5 million pounds agreement with American International Group (AIG.N) after the insurance company’s bail-out by the U.S government.

Fellow Premier League club West Ham United are without a shirt sponsor following the collapse of tour operator XL Leisure Group and promoted West Bromwich Albion has also failed to find a replacement for Deutsche Telekom’s (DTEGn.DE) T-Mobile.

Newcastle United was close to losing its shirt deal with Northern Rock bank, which had to be rescued by the British government, and Lazio, traditionally Italy’s sixth-largest club, are also without a shirt sponsor.

“Where the problems may occur is for the clubs that are looking (for a sponsor) just at this very minute because everybody is a bit jumpy,” Karen Earl, chairman of the European Sponsorship Association, told Reuters.

GLOBAL APPEAL

If the U.S. government pulled the plug on AIG and European champions Manchester United had to find a new sponsor, analysts and experts said the club’s global appeal meant it was unlikely to have any problems getting a new deal.

“Manchester United is a great product, but in any market when there is a crunch, they shouldn’t be complacent. I would be working hard on finding possible replacements,” Pippa Collett, managing director of Sponsorship Consulting said.

She added that soccer sponsorship had “been overvalued for a long time and, like with property, there is now a correction in the market”.

Ticket prices have also shot up in recent years, leaving some teams to play in stadiums with rows of empty seats.

“The price of watching football has risen way beyond the rate of inflation and if clubs keep putting up prices they will be in for a nasty shock,” Malcolm Clarke, chairman of the English Football Supporters Federation said.

“Add to that the huge increase in petrol and travel costs and the football industry needs to watch carefully.”

Most analysts are confident the beautiful game can weather the storm, but agree the impact of the economic slowdown on television advertising revenues will be a key indicator.

“Sponsorship deals are planned in advance and usually last not less than three years. But if the actual crisis persists, we may have an impact in the long term,” Giovanni Palazzi, president of Italy-based StageUp sport business research said.

Additional reporting by Mark Meadows and Antonella Ciancio in Milan, editing by Mike Collett and Ken Ferris

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