Football shirt sponsorships: SEGA Europe and Arsenal FC. (Research Paper).(Brief Article)

Abstract: The process by which a new shirt sponsorship was struck between SEGA Europe and Arsenal FC is described through a case study. The circumstances leading both organizations to seek out a sponsorship partner are identified. SEGA Europe was preparing to launch its new Dreamcast video console in Europe and wished to create a high-impact marketing program. Arsenal was looking for a company to replace its former shirt sponsor JVC. The case study also provides information about the sponsorship deal, the first 18 months of the partnership, and draws out some some more general lessons.

Keywords: football, Premier League, shirt sponsorship, electronics, market launch

Executive Summary

Commercial sponsorships have become an important element in most sports. This is certainly true in English football where, since the early 1980s, shirt and kit sponsorships have generated important revenues for clubs at all levels. This article describes the development of a shirt sponsorship in the Premier League. In 1999, the European subsidiary of the Japanese electronics company SEGA Enterprises, announced that it had entered into a shirt sponsorship arrangement with Arsenal FC, one of the top English clubs. The circumstances that led to the partnership are detailed in the case study below.

The arrangement helped to relieve pressures felt by both parties. SEGA was about to launch its new video gaming console in European markets and needed to come up with a high-impact marketing program if its Dreamcast system was to seriously challenge Sony's market-leading PlayStation. SEGA's executives believed that football could play a significant promotional role for the Dreamcast and wished to partner with leading clubs in important European markets. SEGA's interest was timely for Arsenal FO, which needed to find a new shirt sponsor following JVC's decision to end its 18-year relationship with the club.

As well as describing specific organizational factors leading to the sponsorship decision, the case study identifies commercial developments in football of a more general kind, These have helped to create an environment conducive to shirt and kit sponsorship deals.

The case study provides information on developments over the first 18 months of the relationship, including SEGA's decision to get out of the video console business. The paper ends on a more general note. Five lessons for practitioners are identified and discussed: (1) the sponsorship decision process; (2) partner selection; (3) timing; (4) pricing; and (5) sponsorship results.

Although the lessons are examined in the context of football sponsorships, these almost certainly apply more generally to sports marketing.

The case study was prepared using materials drawn from documentary sources and interviews with key informants in football and sports marketing organizations, and football researchers. (1)

Football Shirt Sponsorships: SEGA Europe and Arsenal FC

SEGA Enterprises, a Tokyo-based video game company, launched its new Dreamcast console in the Japanese market on November 27, 1998. North American and European introductions were planned for September 1999. SEGA had high expectations for the Dreamcast console, envisaging that it would challenge Sony's PlayStation for market leadership. Management at SEGA's European subsidiary was developing its launch plan and considering football shirt sponsorships as one element in its marketing strategy. Why football? Because it was the number one sport in Europe and its fans demographics increasingly mirrored those for video gainers. In addition, television (TV) was broadcasting more and more football games -- often on a pan-European basis -- providing valuable exposure for companies and their brands. The UK was particularly strong for video gaming and, in late 1998, SEGA Europe management was giving active consideration to partnering with a top English football club via a shirt sponsorship arrangement. There was about a six-month window before a sponsorship deal would come into effect, and the Dreamcast launch was nine months away. In other words, there was some pressure for a decision to be made.

London's Arsenal FC was a logical football club for SEGA to consider as a sponsorship partner. Arsenal has had a long and rich history. Founded as the Royal Arsenal FC in Woolwich, Kent, in 1886, the club's name (and its nickname 'the Gunners') reflects its historical association with Woolwich, which at the turn of the 20th century was the single most important military town in England. The club moved to its present location at Highbury in North London in 1913 (Soar and Tyler, 1989). It is one of a handful of English football teams that is well known and supported around the world and in the last decade, after Manchester United, has had the single best record of English clubs. During this period it won the Football League Championship three times, the Football Association Cup twice, and the League Cup and European Cup-Winners Cup once each.

In December 1998, it was announced that Japanese electronics giant JVC would end its long-standing shirt sponsorship with Arsenal, effective June 30, 1999. This meant that Arsenal would have to seek another shirt sponsor for the 1999-2000 season, which kicked-off in late August.

The case study that follows examines SEGA and Arsenal in turn. Each organization is situated in its industry environment before attention turns to the factors that are directly related to a shirt sponsorship arrangement. The case study describes the shirt sponsorship deal that was struck as well as developments in the first 18 months of the relationship. The paper ends with a number of lessons for practitioners.

The Video Gaming Industry

In the late 1990s, three Japanese companies fought for dominance of the global video game industry. Despite its late entrance, Sony was the market leader. Nintendo and SEGA had at various times occupied the top spot but these longstanding rivals currently trailed in Sony's wake. In an industry where technology advanced rapidly, SEGA had launched its new Dreamcast video console in Japan late in 1998, and planned North American and European introductions in September 1999. Nintendo was also expected to launch a new product although no formal announcement had been made. Through new product launches, both companies expected to gain substantial ground on Sony and its extremely successful PlayStation. However, Sony itself would be launching a new product -- the PlayStation 2 -- in 2000. Product and game technology, market timing, and marketing flair were all critical to company success in this industry.

History

The video game industry started in the 1980s, when Atari machines and the PacMan game became household words. Like many industries, it has gone through several cycles of boom and bust, with shakeouts of marginal companies and the arrival of newcomers. The industry grew in the late 1980s when Nintendo and SEGA used 16-bit technology to develop much faster and more sophisticated games. Another period of depressed sales occurred in the early 1990s when PC technology played leapfrog and drew users away from video game companies. In late 1994, video gaming broke back when an industry outsider introduced an innovative product -- the Sony Playstation. This development changed the industry dramatically. The quality of images and sounds made possible by the technology meant that the industry was seen as selling something more than a toy. For the first time, large numbers of adult users were attracted to video gaming. Nintendo launched the N64 in 1997 in an attempt to regain some ground lost to Sony. In late 1998, all eyes were watching as the once pre-eminent SEGA launched its own innovative Dreamcast game system in Japan, based on 128-bit technology. The games industry is substantial. By the end of 1999, it was forecast that the installed base would number more than 100 million Sony PlayStations, Nintendo N64s, and Sega Saturns and Dreamcasts globally. Household penetration levels in three key markets were 50 per cent in Japan, 33 per cent in America, and 20 per cent in the UK. The value of industry sales (consoles and games) was about US$20 billion in 1999 ([pounds sterling]12.2bn) (2) -- larger than Hollywood box-office revenues for the first time ("Business", 1999)

Competitors

Sony was the competitor to beat, dominating almost everywhere with market shares in the 60 to 70 per cent range. Launched late in 1994, Sony's PlayStation had proven to be a star product for the company. It was estimated that 50 million homes owned the gaming console in 1999, and that in the fourth quarter of 1998, it provided 16 percent of Sony's sales and 44 per cent of profits (Fulford, 1999) However, after four years of booming PlayStation sales, Sony saw change on the horizon. Global sales of the console for the year to March 2000 were forecast to be 17 million units, down from 21.6 million the year before ("Sony", 1999).

Sony was planning to introduce its PlayStation 2 to the Japanese market in time for Christmas 1999. Early reports suggested the new console would be a formidable competitor. Technically, the console would be able to outperform PCs and workstations. The new player would also be "backwards compatible," i.e. old game libraries would not be made obsolete by the console. This was a benefit for users, software producers and resellers alike.

Nintendo was second in most countries, accounting for much of the rest of the market. It entered video gaming in 1983 and the 8-bit Nintendo Entertainment System (NES) dominated the second generation of consoles. Nintendo also pioneered handheld games and still leads that market with the GameBoy. Its success with the NES made it slow to develop a successor and the 16-bit Super NES (and later N64) failed to meet profit expectations. Although it had not publicly announced plans for a successor to the N64, Nintendo was rumoured to be working on a console to be launched in Japan in time for the important Christmas 2000 holiday.

Convergence in entertainment

Video gaming was fast becoming a "mainstream activity", appealing to a more mature user. In the early 1990s, video consoles were primarily owned by eight- to 16-year-old males. Following the release of the PlayStation, consoles sold across a wider age range (eight to 29 years), with the average owner being 17 years old (Littlewood, 1999). The broadening in the appeal of video gaming meant that close parallels existed between the prime market segments for gaming products and football. A Sony developer in the UK described the PlayStation (and other video consoles) as follows. "It's become a lifestyle accessory. It's bought by people who've got their own disposable income, and it's installed next to the video and hi-fi, not just in kids' bedrooms" (Schofield, 1999). Reflecting this fact, in the UK (1) video game sales now exceeded rentals, (2) many major football …