Sanchez Deal To Pay For Itself?
I often read comments online and hear people at matches talking about signing players, specifically about how easy it would be or should be to sign a certain player and how that player will “pay for himself”.
Some people seem to be under the impression that a player will pay for himself in shirt sales and think that means big player deals are cash neutral. It’s quite an infuriatingly baffling point of view and one I just cannot believe people consider with any degree of rationality.
It would seem as though some believe Arsenal to be selling millions of shirts per season and is just another indication of how removed football fans are from the daily running of a club. They often talk about football as though it is a video game and show a startling lack of actual understand of how a sports business operates – and make no mistake, a football club is a business.
Worse though, some of these opinions show a shocking naivety when it comes to how business in general works. They seem to think a £50 shirt sale at the Armoury is £50 in Arsenal’s pocket and they should put that entire £50 towards buying new players. I can imagine these people walk around Tesco’s screaming about the price of bread and think it is all Tesco’s greed and Tesco are making £1.30 per loaf.
Things such as the cost of grain, the cost of living for the farmers and the people they employ to harvest the grain, the capital and maintenance costs of their machines, the transport costs including fuel, road tax, wages and insurances of the drivers, the warehouse costs, the processing facilities, the bakery and additional ingredients cost, the packaging, the staff wages (again), the transport costs (again), the storage costs at the supermarket, the staff wages (again), the cost of property because the sites have to be so huge because the consumer wants more choice, the marketing, and then, of course, taxes all adds up and puts the cost of bread up.
It’s not difficult to extrapolate and apply the same to football shirts. If Arsenal are lucky they are getting 9% of the retail value of shirts sold outside of the club and 12% of shirts sold by the club – which is then subject to club costs such as wages etc – so we’re really looking at around £5 a shirt.
It might not sound like a lot but this is why the manufacturers pay a sponsorship fee. It probably doesn’t make them a huge profit on what they put into it but it furthers their brand image which can be invaluable.
I have seen many people say Özil paid for himself and Sanchez will do the same but that’s just not true. Official Arsenal replica kits sell a rough total of 800,000 per year. Only two clubs sell in excess of 1,000,000 shirts and they just happen to be the most valuable clubs on the planet; Real Madrid and Manchester United.
Manchester United received around £38m (source: Reuters) in 2012-13 for their shirts which included the sponsorship fee and merchandise sales (shirts, balls and other apparel). The sponsorship deal was worth £23.5m which means they made £14.5m in total sales of shirts et al. Even if we said the total was purely from shirts, which it wasn’t, then at 1.1m shirts they made £13 a shirt. In reality it was probably more like £5-7 a shirt.
People have responded to these very points by saying “if they get so little why don’t they just make it themselves?”. To respond to that I go back to the bread. Tesco’s own bread, which they will make more on, sells for around £1.10 and Hovis sells for around £1.30. 80% of the pre-packaged bread Tesco sells is branded. In a nutshell, clubs don’t make their own kit for the same reason Tesco don’t just sell their own bread. The brand is too valuable. And they get an upfront fee every year.
At a realistic £5 a shirt Arsenal would have needed to sell 8.5m shirts. Over 10 fold of what they currently sell. No player on Earth has that sort of power.
At £13 a shirt Arsenal would have needed to sell 3.27m shirts. Four times what we currently sell.
Even at £50 a shirt, which we definitely do not get, Mesut’s fee is just about covered by the shirts we sold but for him to have paid for himself that would mean people only bought a shirt because of him.
Where money is made from shirts is from four distinct categories.
- People who want a shirt regardless
- People who want a shirt with a name on it
- People who are buying a shirt purely because of a new design they like but wouldn’t normally buy a shirt
- People who are buying a shirt just to have one with the new signing on it.
Extra money from big signings is made from groups 1 and 4. The club are hoping the new player will convince group one to pay extra for the name on the back and the player will tempt the group four people to buy the shirt. For example, group four only bought a shirt last season after we signed Özil, they didn’t buy one for Flamini.
The increase in shirt sales or additional cash from lettering isn’t going to cover the transfer costs of a player like Sanchez.
So in short – no; the Sanchez deal will not pay for itself but the player’s ability will negate any financial outlay.
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All this might be true – but the Sanchez shirt with the new Puma design – will outsell every Arsenal shirt in history and sales will definitely top the million mark this season with the new makers. And this is huge profit. Shirt sales are free advertising. A kid that runs in the street wearing a shirt is an advert to the guy that drives past him in his car. it plants seeds globally. Its like when you go on holiday on a remote Greek Island and suddenly see a guy with an Arsenal shirt on. It triggers an emotion the way an ad does on TV – and if you were thinking about buying a shirt, or thinking about buying a shirt for someone, it adds persuasion to your thought the same way watching an advert for pepsi affects you if you’re thirsty. Sanchez shirts/posters/mugs/t-shirts etc., will make Arsenal a HUGE amount of cash over the next 3 years and will in effect pay for his wages comfortably! Debuchy’s cost will come out of Arsenal’s pocket entirely. Sanchez’s will be co-funded by the merchandise without question.
His shirt may take us to the 1m mark but that’s only 200k additional shirts. That won’t pay for the £50m he will cost over 4 years. His performances and his merchandise will cover his cost.
Sadly, you are only looking at one side of the equation. Shirt sales are one part of “paying for himself,” but what about something which is not easily quantifiable as bringing out the best in his teammates? Everyone plays better and the team progresses further in competitions which have certain monetary values attatched to them. Narrowing such massive signings to “only shirt sales” in this matter is severely undervaluing their true contribution…. Hell, if he manages to score several key goals in the champ. league that get us to the semis, finals etc wouldn’t he have paid for himself?
I think you are extrapolating a bit and turning this into a complete narrative on player contribution when it was purely about shirts and nothing more.
Performances, improvements within the squad and future success aren’t relevant to shirt sales in the immediate future because whether we sell 5 shirts or 5m shirts when he joins those things would have come any way. The point was names on the back of shirts don’t balance the books. Over a period of time his contributions will have a financial impact but that is where the phrase ‘return on investment’ comes into play.
What I am commenting on is people assuming that before he has contributed and started to realise a ROI he will be a cash neutral deal. Ie, £30m out and £30m back in before the season starts.
To repeat, this is not a narrative on his ability or his contribution or worth to the team should he join.
To be honest, if you re-read your opening and closing comments that is what you seemed to be alluding to: The ability of a player to “pay for himself,” while then going on to try to justify that in terms of shirt sales only. That’s what I got from it.
I don’t think it is misleading in any way or alluding to anything other than shirt sales as I mention shirt sales immediately after the first paragraph however I have added a little something to my closing statement for clarity.
I think a better title would have been more like, “the nativity of sports fans when it comes to shirt sales.” Or something like that… Players pay for themselves in a lot of different ways.
That’s a pretty long title 😉
Nonetheless, I appreciate your comment and agree that his contribution will determine his value.
You are welcome! I am just glad that the club in on the cusp of delivering another major coup!!! Exciting times for all gooners 🙂
Hopefully all goes well with that transfer, and everything else that is in the pipeline.
This is a brilliant article. You both make valid points in the comments.
There is no way Sanchez will pay for himself over the first year of this deal. If you assume he costs £30m and has a wage of c.£100k a week, his first year cost is c£35m (that’s before any bonuses or agent payments!). This will NOT be covered through shirt sales or progression through competitions.
However as others have mentioned, over the long term this could be a strategy that works. As long as you don’t go down the man city/Chelsea model of buying an entire team and just buy ‘stars’ to help your home grown talent.
Also rumor has it we are still owed money from the cesc deal…the bank still has money in it.
This could be an epic summer! COYG!!
Exciting times! Can’t wait for the new season to begin, hopefully good things are to come!