Will Carling famously referred to the game in England as being run by ’57 old farts’ back in 1995 when he was national captain. However, English rugby (union) has come a long way since then. Admittedly results haven’t been entirely awe inspiring following the 2003 World Cup triumph – but in commercial terms the future looks rosy.

According to SportsPro magazine, in 2009 “games at Twickenham generated £29.2 million for the RFU, accounting for a quarter of their £118 million turnover. The union’s gate receipts have actually increased by £4.1 million since the 2006-2007 season.” Last season in the 6 nations “England could have sold out its 82,000 capacity Twickenham stadium twice over for each of its two home games”.  Additionally, “England received the largest economic boost from the tournament, with a total of US $132.82 million spent by fans on match tickets, transport, food and beverage sales, accommodation, merchandising, and at city attractions, and by sponsors on marketing”.

Hospitality and marketing have been important aspects of the increased commercialisation of rugby in the country where Webb Ellis first picked up the ball. In terms of sponsorship, England’s involvement with O2, its principal sponsor since 1995 when it was known as BT Cellnet, has been both beneficial and lucrative for rugby. England’s mixed broadcasting package, unique to the home unions, with both Sky and the BBC ensures strong annual TV revenue. The BBC covers home games in the 6 nations while Sky covers the autumn internationals and much more – from U20 internationals to the Army and Navy game. Looking to the future, England will also host the 8^th Rugby World Cup in 2015. The Rugby World Cup is the third largest sporting event after the football world cup and the Olympics. When staged in France, in 2007, it delivered “a total economic impact estimated at up to £2.1 billion” for the host nation.

Domestically the picture looks bright too. Aviva, the fifth largest insurer in the world, has recently replaced Guinness as the official title sponsor of England’s premier club rugby competition. In a 4 year deal, Aviva will pump £20 million into the renamed Aviva Premiership. In another exciting move, JP Morgan Asset Management earlier this year launched a Sevens tournament for the 12 premiership clubs. This is a bold move which aims to build on the momentum that entry into the 2016 Olympics has given the shortened version of the rugby game.

There are, however, some small dark clouds for rugby in England. The so-called ‘Bloodgate’ scandal has left a bad taste in the mouth (quite literally). The affair has tarnished the image and reputation of both Harlequins (one of the oldest clubs in the game) and the sport in general. It would certainly have been scrutinised by sponsors even though Etihad Airways has signed a one year extension to its sponsorship with the Harlequins club.

The relationship between the Premiership clubs and the national squad is not always a comfortable one. Like in football, there are arguably too many overseas stars in the domestic game. If selection of these players curtails the long-term playing development of home grown talent the results of the national side may suffer in years to come. Some players in the national side are also plying their trade overseas and this has led to friction between their respective clubs and Martin Johnson’s national squad. This was notably the case when the French club Toulon refused to release Jonny Wilkinson for a recent England squad summer camp. To keep revenues coming in, the RFU needs to carefully manage these issues to ensure that its strongest side runs out at Twickenham in order to attract sponsors, broadcasters and keep fans streaming through the turnstiles.

The upcoming season promises to be an exciting one as the rugby community looks forward to the 2011 Rugby World Cup in New Zealand. Whether Martin Johnson and his England team will get their hands on the Webb Ellis Trophy again remains to be seen.

One thing we do know for sure – on the commercial front English rugby is in great health.

Text books will tell you that sport should be one of the few businesses to be recession proof. The argument you’ll read is that sport has legions of loyal fans and players who will remain committed and contribute financially even in difficult times. Such people will not be prepared to compromise on sport and will instead cut back on other items in the weekly spend.

Is there any substance to this argument?  A recent study by Sheffield Halam University for Sport England would seem to suggest that the answer is yes.  “Sport now plays a bigger part in England’s economy than at any time for the last 25 years”. Sport is boosting the wider economy and “accounts for 2.3% of all consumer spending and 1.8% of employment”. The study reveals that ”Consumer spending on sport was up by 138% in real terms between 1985 and 2008 to £17.3bn.”

Unsurprisingly, football has been an important catalyst in transforming UK sport to what it is today – a sophisticated, multi-million pound business.  Integral to all this is the “explosion of media rights” where the Premier League has played a significant role. Sportswear sales are up and shirt sponsorship deals for football clubs are bringing in large revenue streams too. This year the Premier League clubs have grossed £99.75 million for their shirt sponsorship deals. Liverpool and Manchester United both signed £20 million deals per year with Standard Chartered and AON respectively. The Old Trafford club switched to a more profitable deal after its previous one with AIG for £14m.

However, if you look beneath the surface there are signs that the recession may be having an impact. Going back to Old Trafford, Manchester United released an extra 4,000 season tickets on general sale in July this year. For a club that is typically many times over-subscribed, this is a rare step. The club issued a statement insisting that their sales are “healthy in a time of recession” and pointed out that late renewals for 2009-10 ticket holders are being dealt with. A similar story is developing on the other side of the pond. The new $1.6 billion Meadowlands stadium in New Jersey, joint home of the New York Jets and New York Giants NFL football teams, with a capacity of 82,500, is having difficulty selling its seats. Back in June, the Jets was forced to make dramatic price reductions in personal seat licenses (season-tickets) as a measure to prevent vacant seats as the season starts.

Sport is a business like any other, but it does have its own unique characteristics. Sport should be competitive, tribal and co-operative (especially in the US at the team level). Like all other businesses, however, there are certain disciplines to follow. Without being too simplistic, clubs should focus on the product (performance and results), grow revenue streams, smartly manage expenses,  closely monitor its competitors (of which there are many in the entertainment industry) and listen to its customers. If sport can emphasise such business disciplines, there is every reason to believe it can achieve one very important victory – beating the recession.

Customer relationship marketing or CRM is often described as a journey and not a destination. However, all too often the CRM journey is plagued by long delays at check-in, turbulence on take-off, poor in-flight service and a bumpy landing. Indeed, research suggests that more than 50% of all CRM installations fail. Even the minority that are successful carry a high risk of unfulfilled expectations in terms of:-

• Costing more than anticipated
• Taking longer to implement than planned
• Delivering less functionality than specified

So given the unhappy history of CRM installations in this country, why are so many progressive sports marketing organisations eager to risk their finances and their reputations on another expensive CRM disappointment? One of the major factors in explaining the current state of play with CRM is the general lack of understanding among marketers and non-marketers alike of what exactly CRM is and just as importantly, what it can and cannot do.

CRM is not a marketing technique like one of the ubiquitous 4Ps that can be applied to leverage a business. It is a process that encompasses the management and organisation of legitimately held customer information and its intelligent use in order to present the right offer to the right prospect via the right channel at the right time.

Another common misunderstanding about CRM is that it requires only the most sophisticated and expensive computer technology. Certainly for businesses with many products distributing to customers in several countries and communicating through a variety of marketing channels, some form of IT system is required (but it need not be costly). The trick is to have a good understanding of your CRM ambitions and needs before you hand over your cash to the slick IT salesman.

The system used by Tesco with a footfall of 25m and a product inventory of 1000 stock units or by Amazon with call-centres primed to handle 50m customer orders on 4 continents are certainly at the leading and cash-hungry edge of technology, but is unlikely to be necessary or appropriate for a local sports club or merchandiser.

Even one of the most forward thinking, enlightened and professionally managed of our Premier League football clubs has fallen headlong into the CRM IT money pit. So from personal and bitter experience, I offer a check-list of dos and don’ts to sports clubs contemplating the lemming-like leap from the CRM cliffs of uncertainty into the IT sea of despair and disappointment

1. Prepare well. Set out your strategic objectives for CRM in terms of the end result(s) you wish to achieve and the budget you are prepared to commit.
2. Ensure that your effort is optimised across your business and that a company-wide perspective and consensus is achieved among key staff.
3. Clearly define your business going forward in terms of the scale of your marketing effort and the volume of data you are prepared to collect.
4. Set rules to govern the use of your customer data in terms of primacy, recency and frequency and apply them to each of your marketing channels.
5. Take professional advice to ensure your data management regime complies with data protection law in all of the territories you operate in.
6. Consider an IT solution only once all the above steps have been completed and you have developed a comprehensive business requirements schedule.
7. Use a tender process, request proof of concept and never, ever agree to adopt an untried big box IT solution in lieu of a sponsorship fee! 

Debt is the single most problematic issue facing football today. Or so you would think if you read the newspapers. The media are in a frenzy about Portsmouth entering voluntary administration, the Glazer family jousting with the Red Knights and the rival warring partners at Anfield briefing their respective PRs against each other. These stories make good copy and bring new readers to those sections of the papers traditionally turned two pages at a time by sports fans. However, they do so on a false premise. Debt is not necessarily a bad thing in itself. The key questions to be answered when assessing the long term viability of a sports club are not how much debt is carried in the balance sheet, but:-

• what is the cause of the debt and
• how much cash can be generated to service it

Compare the relative positions of Portsmouth FC and Manchester United. Although many of the players at the club are on loan and so have incurred no transfer fees, Portsmouth has borrowed over £60m to pay the salaries of these players who otherwise could not have been added to the team. In the case of Manchester United, the club can easily accommodate their player wage bill from record revenues of £271m in 2009. Their debt is a consequence of their owners using club assets as security on loans raised to purchase the club in the first place. The key to both situations is cash. That is, whether the cash generated is enough to service the debt. For Manchester United with their global fan base and average gate of 75,000 and Portsmouth with its ground capacity of 20,000, the answers are very different.

So what should sports clubs do to make sure they don’t fall into the debt trap? They should follow the advice of their grannies and not gamble on future success or spend more than they earn. Specifically, they should set a reasonable ratio of players’ wages as a proportion of club revenue (50% seems a reasonable figure) and manage within that budget. “But if we do that, we won’t be able to compete in our league”, chant the recalcitrant chairmen. Again, the answer is simple. Increase your revenue. Not every club has a global fan base to exploit, but then again how many clubs can claim to have genuinely worked their local fan base to its full potential?

There are several key revenue generating opportunities outside of the traditional ticket and hospitality activity that seems to occupy many clubs to the exclusion of all other commercial initiatives. These are:-

• sponsorship activation – many clubs have sponsors, but how many work with them in a true spirit of partnership to ensure that both sides get real added value from the relationship? This approach will reap rewards at renewal time.
• affinity marketing – most football clubs offer a branded credit card but how many really understand the key profit drivers of acquisition cost, cross-sell and retention. These can be leveraged to deliver incremental revenue.
• CRM – well-managed customer data has a value. This can be unlocked through attracting more lucrative sponsorship opportunities or by using it sensibly to promote products and services to fans in a timely manner.  
• membership and loyalty programmes – most clubs pay lip-service to loyalty and heir fans resent being taken for granted. A well executed membership and loyalty programme can help solve both problems.

 Increasing revenues is the best way to protect sports clubs against the dangers of debt.

There’s been something reaching media hysteria over the idea that a group of Red Knights led by Jim O’Neill, chief economist at Goldman Sachs, will sweep into Manchester in something akin to a boardroom coup and snatch the world’s most famous football club from the grasp of the Glazer family.

And create a healthy return on investment for the secretive US family firm in the process!

Suggested valuations on the club swing ever more wildly from week to week– the latest was at the weekend when a value of £1.25 billion was being mooted by The Sunday Times.

All this conjecture is the stuff of great sports journalism, but does it make good business sense?

There is a lot of discussion on the level of debt that the club is currently carrying and how this will be removed by the Red Knights.

But have these well-endowed individuals agreed on what the Man Utd brand is actually worth?

I doubt it.

How much of the £1.25 billion is for the intangibles that the Glazers own and how much of it is wrapped up in the tangibles like Old Trafford stadium?

The reason I raise this is because in essence the Red Knights will be expected to pay a premium price for the brand, rather than the computer system or quality of the dressing rooms at Old Trafford.

So brand valuation will be a key issue.

And it’s one area that traditionally accountants love to hate as there’s never been an agreed method of measuring this value with some clarity.

Which is why 1^st April 2010 could be a turning point in the Man Utd saga as the International Organization for Standardisation (ISO) publishes the long-awaited standard on the thorny issue of brand valuation.

Aimed at both brand consultants and finance and marketing professionals, the general requirements of the new standard will include greater transparency of the process of brand valuation in deals like the one being contemplated by the Red Knights.

There are likely to be enshrined within the standard – and adopted here in the UK by the British Standards Institution (BSI) – three distinct approaches to brand valuation:

1. The Income Approach – which measures the value of the brand by reference to the present value of economic benefits
2. The Market Approach – which measures the value of the brand based on what other purchasers in the market paid for similar assets
3. The Cost Approach – which measures the value of the brand based on the cost invested in it.

Valuation inputs include assessments of market data, brand strength – based on factors such as awareness and loyalty, brand relevance in its specific market and legal aspects such as intellectual property rights (IPRs).

It will be the application of these standards that are likely to become a major area of contention in any potential sale involving a global brand like Man Utd.

Each side will claim that its workings achieve the right financial outturn for each measure – except they are unlikely to agree!

Which could mean that the Red Knights pay less for the club than is currently being mooted.

Alternatively, the Glazers may decide that this isn’t the right time to sell and put this off until the club is likely to have increased in brand value relative to the size of other English Premier League Clubs.

In which case the asking price could be double what’s on the table today.