Arsenal CCO Tom Fox Talks Transfers, Global Brand and Financial Fair PlayMay 15, 2014
It's "Inside Arsenal week" at Bleacher Report, and we continue on Thursday with insight from the man charged with generating the commercial revenue that funds the club's progress—Chief Commercial Officer Tom Fox.
Bleacher Report: You once described your role as, "to build and grow the multiple revenue streams at the club in order to maximise the money available for the board and the manager to spend on football matters." How would you assess the progress against this objective?
Tom Fox: When I arrived at the club five years ago, we set out a plan to try to grow the commercial revenues of the club, and we’re incredibly pleased with where we are.
In fact, we’re ahead of where we thought we’d be when we created that plan. From what we understand, our shirt sponsorship deal with Emirates is the second biggest in the game’s history. The kit deal with Puma we announced in January is the largest ever done in the game. So we’re ahead of schedule.
B/R: Did the signing of Mesut Ozil last summer feel like validation of the work you’ve been doing?
TF: I think the commercial team was very proud we could put the club in that position. The plan was for commercial revenue to pick up the burden, and it did.
B/R: Fans love big-name signings. Do they have a commercial benefit?
TF: Look, the story we’ve been telling people is: This is the history of our football club, this is the brave path we’ve chosen to tread, this is the decision our board made 11 years ago when everything was going our way, how it's created this really challenging period in our history—and we’re about to come out of it and compete and win. And when that story then plays out the way we’ve been telling it, that gives potential sponsors a lot of confidence.
It helps from that perspective. As a part of the story we’re telling it’s absolutely right and on message. It’s proof of concept. The worst thing that could happen is we tell people where we’re going to go and then don’t quite push on. We need to continue to move forward, and when we sign a player like that it shows that ambition and it shows we’re true to our word.
B/R: It’s well known that Arsenal were locked in to long-term agreements with both Nike and Emirates in order to facilitate the building of the stadium. Have you been waiting for this period and the opportunity to renew?
TF: One of the positives of the plan we set five years ago was that it afforded us the time to build capabilities within the club.
If, when I’d first arrived, our primary commercial deals were ending in the next 12 or 18 months, it would have been very difficult for us. It would have been tough to create our story and our sales materials, to staff up properly with the right people and approach all the brands we ended up speaking to about those deals.
So in reality, while in some ways those deals held us back, the fact that we had a few years in which to build our capability helped us greatly.
And yes, we have been waiting for those deals to expire. Of course, they were hugely important to the development of Emirates Stadium, which has in itself become a huge revenue-driver for the club. But the timing worked out really well for us.
B/R: When it comes to something like the stadium naming rights, is maintaining consistency ever a consideration?
TF: Our broader partnership strategy is about finding the right partners who believe in what we do and where we’re going and who want to be a part of that in the long term. We choose our partners very carefully. Our goal is not just to create one lucrative contract and then end the relationship. Our goal is to build that relationship’s strength over time, so that our partners are so satisfied that they renew the deal.
When it comes specifically to the naming rights relationship, I think it’s a really difficult decision to take a stadium where you play and put a sponsor’s name on it. We took it very seriously at the time. Because our stadium is a new build, and has always been known as the ‘Emirates Stadium’, I think it makes all the sense in the world that the name stays consistent. We’re trying to build a perception around that stadium that it’s home, and I think keeping that name is important.
Is any proportion of the new deals linked to playing success? (e.g. would the Emirates/Puma deals be reduced if Arsenal failed to qualify for the Champions League?)
TF: I can’t talk specifically about any of the clauses, but here’s an interesting way to look at it: Think about what happens to a club’s finances if they drop out of the top four. In the case of Manchester United, there will be a big hole in their budget without that Champions League revenue.
The time to penalise you and withdraw support is not when you have just created a £30 million hole in your budget. That’s when you need the money the most. We had that conversation with everyone we negotiated with.
It’s a slightly different way to think about it. Rather than a company saying, “if you don’t perform, we’ll take that money away,” we feel very confident that if the club were in need of funds because, for some reason, we don’t qualify for the top four, we’re still very well protected financially.
I think that speaks to our brands as being true partners. Emirates and Puma are very much invested in making sure we’re as successful as we can possibly be.
B/R: Given that, Emirates and Puma must be keen to see that money spent on the football side?
TF: I think both of them are motivated, as we are, to be successful and to win. Our objective as a football club is to win. Their objectives are obviously to be associated with a football brand that can add value to their own business, and winning is obviously hugely beneficial there. Emirates and Puma have an expectation—and I believe it’s the right one—that we’re going to invest that money and try to win.
However, I also think it’s important to those brands how Arsenal are viewed in the marketplace—what we represent. All those other values are important to them, as well as success.
B/R: What can Arsenal learn from clubs like Manchester United and Bayern Munich, whose commercial revenues are currently ahead of Arsenal’s?
TF: We constantly look at the broader peer group to try to understand if there are things we could do better.
However, in the process of doing that, we’ve learnt a few things. We’ve learnt that the German league may not be a great way to compare, because it’s funded to such a great extent by German companies.
Additionally, in the Spanish league, you’ve got some very powerful club brands at the top of La Liga, but the competition itself is weaker, as the top clubs take a massive share of the television revenue.
When it comes to the Premier League, it’s difficult to look at our peer group and try to figure out what we could learn. You’ve hit on the one example, which is Man United. Looking at what they’ve done gives us confidence that if you’ve got the commercial infrastructure and a club brand with strong values and an engaging story, and then you combine that with sustained success, there is a pathway to big commercial success and larger sponsorship deals. That’s clearly where we’ve tried to follow.
B/R: Do you intend to follow United’s lead and take on more secondary & regional partners?
TF: In the past year, we’ve added quite a few secondary partnerships. For us, there’s always a balance—we try to choose our partners carefully. We want secondary partners and the revenue that comes with them, but we also want to make sure that we’re aligned with what they’re trying to do. Crucially, we want to know that in addition to the money they pay the club, they’re activating the relationship in key markets.
For example, it’s very important to us that Puma are going to activate our relationship in North America, which is a market which really seems like it’s ready to grow.
B/R: Would it be possible for Arsenal to have a separate deal for training ground/kit, as United have done?
TF: Clearly, with this deal if that was an option we would have announced it. We believe that, at this stage of our development, putting all our assets together was the best way to maximise the value. When it comes to the practice kit itself, that’s clearly something Puma owns for the next five years.
B/R: How important is U.S. market, potentially?
TF: I can remember speaking to the head of marketing at Emirates when we were planning our first tour a couple of years ago. I asked him, “Can you give me an idea of which markets you might like us to tour? Are there any markets that are particularly important to you?”. And he said, “Tom, at some point they’ll all be important markets for us. If we don’t fly there today, we’ll fly there at some point”.
It’s a bit the same way with Arsenal. The club has a following that’s truly global. No matter where we go, we find large, motivated and engaged fans. Equally, wherever we don’t go we have fans that are disappointed. Over the course of time, we’re going to try to make it to as many markets as we possibly can.
What we’ve found is that what people want is to connect. Obviously, they can’t all buy a season ticket, but what they want is to be recognised by the club. Everything we do is designed to let those fans know how important they are.
Going to the U.S. was obviously an inevitability, and I think it makes particular sense in a year where there’s a World Cup, because it’s a relatively short distance to travel. Asia is almost twice the flying time. You know when you get there it will be easy—the language is no barrier, the training facilities will be excellent and transport is easy to coordinate. That was certainly a consideration.
We’re excited because we know we have a big fanbase there. We know the Premier League is growing significantly on the back of the work of our partner NBC, and in a year where you’ve still got Thierry Henry playing it made particular sense to go and play his team in a big city like NYC.
B/R: Was the timing of the Puma deal also a consideration in touring the U.S.?
TF: We always knew the Puma relationship was going to start in July. The markets where we wanted to tour overlay very well with where Puma feels their business can grow. The US and North America is their largest market, so that made a lot of sense. It was a factor, no question.
B/R: What does Arsenal offer the U.S. in terms of philosophy and tradition?
TF: I think what our club stands for is universal, to be perfectly honest. What we stand for is wanting to achieve success through hard work. We want to win to make our fans proud and we feel we’ll generate the most pride by doing it in the right way. That means building our business in a sustainable way, always acting with class, treating other people with respect, developing young talent, not taking short cuts.
Not only are these things universal values—they’re universal sport values. Think about an Olympian—how much work, time and effort they put in. There are no short cuts. And when they succeed only they and their support group know what they’ve put in to get that medal. That feeling that comes with knowing you’ve toiled for four years for that one moment is an incredible feeling. And I think that’s similar to what we’re trying to achieve.
Success is what we all want. But achieving that success on the back of revenue that’s generated by our own efforts, and because we are a globally loved and supported brand, is going to be incredibly powerful. It will be a moment of immense pride for our fans around the world.
The Far East tours have had a positive legacy with the expansion of Arsenal Soccer Schools etc in Japan. Have they had a positive commercial impact yet?
TF: Clearly when we negotiated our primary sponsorship deals, the fact that we had travelled to international markets and reinforced that we have huge popularity out there went a long way towards giving Emirates and Puma the confidence they needed to invest.
You cannot think of it as only linear. It’s not as simple as going to Vietnam and measuring how many Vietnamese partners you end up with. We’re trying to create a global marketing platform for sponsors to choose. Our tours reinforce that we are relevant and powerful in many, many places around the world.
We are very proud that, having put a focus on China, we now have Huawei as our first partner in that territory. But really it’s more about representing that we are truly a global brand.
B/R: With the advent of Financial Fair Play, do you feel under any more pressure to grow commercial revenue to ensure that the club has enough funds to remain competitive?
TF: I don’t think we feel any additional pressure. If you’re going to walk the path we’re walking and be self-sustainable, there’s a tremendous amount of pressure just in that journey. It’s not the easiest path to tread and it’s one we’re committed to. My team feels pressure because we know our success as a football club is predicated on providing the necessary resources to compete.
It’s obviously more difficult when you’re competing against organisations that have unlimited funds, but we’ve always said that no matter what system football introduces, we’re confident we can succeed. There’s never been FFP until now, and we’ve always found a way to succeed and consistently stay at the top of the game.
However, we’re hopeful FFP will begin to create an environment that creates a more level playing field, possibly lowering player salaries and transfer fees. Fundamentally, we hope it begins to create a more rational market place. That would certainly help us, but we’re confident we’ll find a way to compete regardless.
B/R: Are Arsenal approaching a point where, financially at least, you feel you can compete with anyone?
TF: If you look at the top five clubs in world football in terms of self-generated revenue, we’re there along with Manchester United, Real Madrid, Barcelona and Bayern.
As I said before, Bayern and the German league are heavily funded by German companies. Audi and Adidas even own part of the club. Real and Barca take around 50 percent of all TV revenues from their league. Comparing those clubs with ours is difficult.
In terms of the revenue we generate, we are second to United in the most successful league in the world. That’s where we need to be and we need to keep pushing.
This interview was conducted by Bleacher Report UK in partnership with Arsenal FC.
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