Arsenal recently celebrated a big sponsorship renewal with Emirates
Last week, in the middle of a difficult season that has seen them drop way off the pace in England’s Premier League, Arsenal announced a five-year renewal of their long-running shirt sponsorship deal with Emirates.
The new contract is worth a reported UK£200 million overall – a club record – but by freeing themselves up to pursue a sleeve sponsor for the first time, the north Londoners hope to create a significant new stream of commercial revenue. Will it be enough to close the gap to the country’s biggest earners, like Manchester United?
What is the new shirt sponsorship deal?
Arsenal’s renewed agreement with Emirates sees the Dubai-based airline retain its logo placement on the front of their playing shirts for an additional five years until the end of 2023/24, continuing a partnership which dates back to 2006.
Emirates separately holds the naming rights to Arsenal’s stadium until 2028 – a position it has also held since 2006, when the 60,000-seater venue opened. That stream was separated from the shirt sponsorship when the Gunners signed their last five-year extension back in 2012.
The latest agreement, reported by The Telegraph to be worth UK£40 million per year, represents a UK£10 million annual increase on Emirates’ previous commitment, and is Arsenal’s largest-ever sponsorship deal. Crucially, this time the club have retained the right to pursue a new sleeve sponsor, taking advantage of a new piece of commercial inventory that was not available to Premier League teams when the last deal was completed. However, Emirates will continue to be the sponsor of Arsenal’s training kit.
Arsenal's training kit is also sponsored by Emirates
Where does this put Arsenal commercially?
Despite benefitting considerably from their move to the Emirates Stadium – revenues from the venue reached UK£100 million in 2016/17, according to the latest edition of the Deloitte Money League – as well as the Premier League’s collective increase in broadcast revenue, Arsenal still lag behind four of the five teams above them in the table in England’s top flight: Manchester United, Manchester City, Chelsea and Liverpool.
United are unlikely to be caught in the sponsorship market any time soon, boasting a kit sponsorship deal with car manufacturer Chevrolet worth UK£50 million a year until 2021, as well as a separate training ground and kit agreement with Aon worth around UK£15 million per year, and a UK£750 million, ten-year kit supply deal with Adidas.
Chelsea and Liverpool have also generated additional revenue from having separate training kit sponsorship deals, something which Arsenal’s Emirates agreement precludes.
Meanwhile, City benefit from their ownership by the Abu Dhabi government, which also owns partners like shirt sponsor Etihad Airways, as well as their place at the heart of a network of clubs around the world in the City Football Group, which includes the likes of New York City FC and Melbourne City FC.
Arsenal will close some of that gap as they extend existing deals in their portfolio. For example, their kit supply deal is due for renewal in the coming months. The club entered a new commercial era when they confirmed a five-year, UK£150 million deal with Puma in 2014. Since then, however, others have completed their own new agreements, with Chelsea signing a ten-year deal with Nike in 2016 worth a reported UK£60 million a year.
Arsenal have widened their commercial base this season, becoming the first club to partner with a cryptocurrency when they partnered with CashBet Coin in January, and have now acquired 26 partners as part of a longer-term drive across multiple categories and regions. However, their prospects could be further boosted by properly exploiting the Premier League’s relatively new sleeve sponsorship opportunity.
What about sleeve sponsorship?
Sleeve sponsorship was authorised for the Premier League ahead of the 2017/18 season following years of lobbying from clubs. It allows branding on the left sleeve of each team’s playing shirt to a maximum area of 100cm2.
Some clubs are tied into long-term deals where a sponsor has exclusivity over the whole shirt, meaning they have to wait until renewal, buy their way out of the clause in their contract, or ask the partner to allow them the right to help the club grow financially.
Among those clubs to have taken advantage of the rule change, Chelsea and Manchester City have been the most successful so far. Both of them are reported to earn UK£8 million per year from their sleeve sponsorship deals with Alliance Tyres and Nexen Tire respectively.
Manchester City's Ilkay Gundogan and Gabriel Jesus wearing their shirts featuring Nexen Tire sleeve sponsorship
Meanwhile, the Gunners’ renewed deal with Emirates has seen them negotiate the freedom from next year to secure their first sleeve sponsor, which is expected to be worth annually between UK£5 million and UK£10 million.
At this stage, those deals represent the upper end of what is possible in the space but Arsenal may have set their sights higher. Commercial income is set to become increasingly important for the club in the immediate term. In January, they completed the record UK£54 million signing of Pierre-Emerick Aubameyang and made Mesut Ozil the best-paid player in their history with a contract worth a reported UK£350,000 a week.
Talks are ongoing for new deals for the likes of Aaron Ramsey and Jack Wilshere, while the playing squad will likely require major surgery, particularly in defensive and midfield areas, with or without the input of long-serving, under-pressure manager Arsene Wenger.
Arsenal look certain to miss out on Uefa Champions League qualification for the second successive year, unless they can improve enough on recent performances to win the Uefa Europa League, which would put further pressure on revenues and make them a harder commercial sell.
The club’s sponsorship sales team will be leaning hard on their history, network and international appeal to help redress the balance off the pitch, while they wait for the first team to recover from their current slide.