Chelsea's transfer ban will hurt more than fans think, as the 'negative impact on the brand' may hit sponsorship and future signings, an expert says
THE fallout from Chelsea's impending transfer ban is likely to have damaged their brand, a top industry expert says.
The Blues may have ended the Premier League season on a high, finishing in third place, winning the Europa League and securing Champions League football next season.
But off the pitch their brand has been tainted after the news that Fifa had rejected their appeal against a one-year transfer ban.
The embargo was imposed after Chelsea were found guilty of 29 breaches of regulations over transferring minors.
The Blues have appealed the decision to the Court of Arbitration for Sport in Lausanne.
But the effect of the developments on the club’s image and reputation means they now risk missing out on vital sponsorship income – which would hit future transfer budgets for new players once the ban is over.
Chelsea remain in seventh place in Football 50, an annual league table of the world’s most valuable football clubs produced by Brand Finance.
Being sanctioned itself has a negative impact on the [Chelsea] brand, not just through its effect on team performance.
However, their brand value declined by 1.8 per cent to £846million over the past year, according to the latest edition of the Football 50 report, which was released last month.
And Bryn Anderson, sports director at Brand Finance, told SunSport that Chelsea’s value and its attraction to sponsors could diminish further.
He says that regardless of how Chelsea perform during the period of their transfer ban, the punishment will damage the image of the club globally.
“Being sanctioned itself has a negative impact on the brand, not just through its effect on team performance,” he says.
The transfer ban could end up being a blessing in disguise if some of Chelsea’s young English players become established first-team stars.
But the embargo compounds a myriad of challenges facing the Blues behind the scenes, not least Roman Abramovich’s future with the club, which remains shrouded in uncertainty.
The Russian owner has not been to a single game at Stamford Bridge all season having been denied a new UK visa by the Government last May.
He was at the Blues’ friendly against New England Revolution in Boston and the Europa League final in Baku.
But speculation that he is looking to sell persists, something the club flatly denies.
Meanwhile, plans for a new stadium have been put on hold, and the club has become associated with incidents of racism, including racist chanting.
Why Chelsea could suffer more than Barcelona, Real Madrid and Atletico Madrid
CHELSEA are not the first big European club to suffer a transfer ban due to breaches around the signing of minors.
Barcelona, Real Madrid and Atletico Madrid have all been found guilty of similar offences in recent years.
However, Bryn Anderson, sports director at Brand Finance, told SunSport that Chelsea are more at risk now because none of their Premier League rivals are suffering any similar punishment.
He explains that the three Spanish clubs faced transfer bans over a similar period of time – between 2015 and 2017 – “so the effect of the bans was somewhat mitigated.”
“Being the top three clubs competing for Spanish honours this was still a somewhat level playing field,” he says.
“During the period of the ban Barcelona recorded back-to-back domestic doubles, as well as a Champions League title.
“Over the period of Real Madrid’s ban (and subsequently) the club recorded three straight Champions League wins.
“All three clubs reported record revenues during the same periods.”
“The general picture of the club is that it’s not the cleanest brand to associate yourself with, and this can reduce potential sponsorship opportunities and deal sizes,” says Anderson.
In 2017 Chelsea said they are aiming to double their total revenue in the next ten years, with a key focus getting new sponsorship deals with premium brands.
In the year to the end of June 2018, their total turnover was £443m.
That compares with £590m at Manchester United, who continue to generate the most income among Premier League clubs.
Over the past two years Chelsea’s commercial revenue has grown by 39 per cent to £170m.
The general picture of the club is that it’s not the cleanest brand to associate yourself with, and this can reduce potential sponsorship opportunities and deal sizes.
The club is now earning £110m per year from its kit and shirt sponsorship deals alone.
The Blues’ kit deal with Nike is worth £60m per year, while its shirt sponsor Yokohama is paying £40m per year, and shirt sleeve sponsor Hyundai £10m per year.
Anderson says that in a worst-case scenario all this income is now at risk.
“Given the length remaining on some of the deals it is highly unlikely that these sponsors will take action to terminate the contracts,” he says.
However, he adds that “there are usually various clauses in place around reputational damage that allow contracts to be terminated early.”
The shirt sleeve deal with Hyundai was agreed last year and runs up to 2022.
Chelsea’s deal with Nike, which began in 2016, is more long-term and expires in 2032.
“Realistically it is unlikely that Nike will drop them,” says Anderson.
He points out that Nike doesn’t tend to shy away from sports brands associated with controversy – it even stood by golfer Tiger Woods following the revelations about his private life.
However, Chelsea’s shirt sponsorship deal with Yokohama, agreed in 2015, runs up to the end of next season.
“This is at risk of not renewing should the issues around the Chelsea brand continue,” says Anderson.
He adds that while Chelsea will be able to find a new shirt sponsor, “negotiating a deal to compete with the likes of Manchester United and Manchester City becomes more difficult.”
United’s deal with Chevrolet is worth £47m per year, while City’s agreement with Etihad generates £45m per year.
Anderson also believes that with Chelsea unable to bring new star players to the club this may impact on other revenues such as shirt sales as well.
“The signing of marquee players often entices fans to spend on merchandise and further attracts commercial sponsors to the club,” he says.
“Chelsea’s ban disqualifies this source of potential revenue.”
But could new, younger stars emerge as a result of the transfer ban?
No Chelsea academy player has established himself as a regular in the club’s first-team since John Terry in 2000.
Towards the end of last season Callum Hudson-Odoi and Ruben Loftus-Cheek both featured in a run of games before suffering injuries.
Graham Starmer, managing director of Lincolnshire-based FCV International Football Academy, which develops players aged 16 to 18, believes Chelsea’s transfer ban could result in more chances for youngsters at the club.
FAITH IN YOUTH
Starmer picks out Hudson-Odoi as a prime example.
“He’s not been given many opportunities this season and has really not been happy,” he says.
Bayern Munich are still keen to sign the 18-year-old despite his Achilles injury.
But if he stayed at Stamford Bridge more chances could well open up for the forward due to Chelsea’s transfer embargo.
“If the ban resulted in him and other young players getting more time in the first-team that would be a positive impact,” says Starmer.
Chelsea face an identity crisis.
EVER since Roman Abramovich bought the West London club in 2003, it has been largely defined by its ability to spend big in the transfer market.
According to figures from Transfer League, which analyses club’s finances and transfer activity, Chelsea’s net spend since the 2003/04 season is £856m.
Incredibly, that’s more than double that of Manchester United and Arsenal combined.
Manchester City have caught up quickly, and their net spend during the same period is now the biggest at just over £1bn, with Chelsea’s the second largest.
The Blues’ spending has fallen over recent seasons, although in 2018/19 their net outlay was £133m, more than anyone else in the top flight.
The Blues’ presence in the transfer market will now come to a shuddering halt over the next year.
Unless their appeal to the Court of Arbitration for Sport is successful the club will be unable to sign players during two transfer windows.
He says that this will especially be the case if an emerging player like Hudson-Odoi steps into Eden Hazard’s shoes, with the Belgian moving to Real Madrid.
Anderson agrees that Chelsea’s transfer ban could bring some positives if more young players emerge.
“Youth team players may be promoted to the first-team and develop at a higher level either to perform in Chelsea colours or transfer for a higher fee to another club,” he says.
He adds: “More surety and stability amongst the current squad could potentially result in higher player confidence, better cohesion among players and ultimately better performances on the pitch.”
But he says that if the reverse happens and Chelsea suffer on the pitch it would only add to their difficulties off it.
That would especially be the case if Chelsea slip out of the top four next season and fail to qualify for the Champions League the following year.
More surety and stability amongst the current squad could potentially result in higher player confidence, better cohesion among players and ultimately better performances on the pitch.
“The difference in potential revenue between the Champions League and Europa league is drastic,” says Anderson.
In 2017/18, the average prize money for Champions League clubs was £39m, ranging from £16m to £79m.
However, the average in the Europa League was just £8m, ranging from £3.2m to £20m.
Anderson says that not being part of Europe’s premier club competition would also make it even more difficult for Chelsea to attract new commercial deals.
“It would negatively impact exposure and act as a deterrent to potential sponsors,” he explains.
“That would further compound the loss of revenue the club could suffer in the future, not to mention the potential foregoing of broadcasting revenues.”
He adds that sponsors may end up looking to other clubs instead.
“A lack of success could potentially result in commercial partners looking to associate themselves with more successful football brands,” he says.
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