Navigate Research

Industry Insights

As the industry leader in evaluating and measuring marketing investments, Navigate has a wealth of knowledge in the sponsorship and marketing space. This blog shares our knowledge and insights on current events in the sports business, marketing and sponsorship worlds.

Is Soccer Boring?

Navigate Research - Thursday, July 23, 2015

Written by Dr. Mark Friederich

After 16 long years, the US women’s national team has finally reached the pinnacle of women’s soccer for the third time. The 5:2 triumph over Japan in the Finals at BC Place in Vancouver, Canada was truly a magnificent sports spectacle on several levels. 

Just a few quick facts:

  • Total attendance over the four-weeks was nearly 1.4 M
    • 7 matches had over 50,000 fans in attendance
    • Canada 2015 set a new total attendance record for a FIFA competition other than the FIFA (Men’s) World Cup

Records were also broken for TV broadcast audiences, such as:

  • The Canadian viewing record for any FIFA Women’s World Cup match (quarter-final: average audience was 3.2 million)
  • Fox Sports in the USA had its biggest ever audience for a soccer match (semi-final: average audience was 8.4 million)
  • Fuji TV in Japan attracted more than twice the number of viewers for the semi-final than in 2011 (semi-final average audience was 9.3 million)
  • Broadcasters in Australia, Brazil, China, Korea Republic and Norway all beat the highest TV audience for any match in the 2011 FIFA Women’s World Cup

Waiting 16 years for a soccer World Cup trophy is actually not a long time. (Consider that the reigning men’s world cup champion Germany had to wait 24 years.) In those 16 years, the USA failed to secure the top spot only three times (2003: 3rd, 2007: 3rd, 2011: 2nd). Not shabby at all. Holding the tournament only every four years creates long time-spans during which very strong soccer nations fail to win the top prize. This rarity creates a level of tension that elevates the importance and joyfulness of the event that I believe cannot be matched by annual competitions.

Photo from US Soccer

The scarcity of soccer world cup championships mirrors the lack of scoring in soccer. Only about 3 goals are scored in an average professional soccer match. Most point to the lack of scoring as the main reason why soccer has not gained a greater audience in the United States. While common sense would lead most to agree that fewer goals results in less interesting matches. The opposite is actually true in the world of global soccer! This is quite different from sports that are dominated by and/or largely only played in a single country, think NFL, MLB, NBA – at least at the very top level. Let me try to explain. American major leagues have done an outstanding job of creating parity within each league. The NFL, for example, has a strict salary cap, a revenue-sharing plan to allow less affluent owners and smaller markets to compete, plus weaker teams receive higher draft picks and enjoy softer schedules. None of this exists in sports that would need to be regulated on a world-wide basis. How does one create financial parity across all countries? Broadcast revenue can’t possibly be shared by English Premier League teams with teams in the Spanish La Liga. And since international club competitions are extremely important in soccer, no single country would introduce a salary cap and thereby disadvantage itself in global competitions.

In a sport such as soccer, where disparity is common, parity is created by the fact that soccer matches result in so few goals. This may sound counter-intuitive. But, fewer goals increases the “luck” factor. A few lucky events can change the outcome of any game. Thus, the outcome of soccer matches are less predictable than in other sports with high disparity. Due to the luck factor, soccer is often described as a cruel game since the better team is far from guaranteed to win. In fact, an underdog facing a team that is twice as good has a 26% chance of winning. In high-scoring sports, the chance of beating a team that is twice as good is often less than 1%.* The importance to establish parity in high-scoring sports is thus clear. Better teams win too easily. Solution: Make sure teams do not continue to be better over long time spans.

An added benefit in soccer is that because so few goals are scored, each goal results in a giant release of tension and creates a joy that cannot be matched by sports with an abundance of scoring. Having just said that, the 7-goal bonanza put on by the USA and Japan was a TON of fun! And, luck had little to do with our dramatic win.

*Theory and statistics by Metin Tolan “Manchmal gewinnt der Bessere: Die Physik des Fussballspiels”. Loosely translated: “Sometimes the better team wins: The physics of soccer.”


Heineken Champions League Trophy Tour

Navigate Research - Wednesday, June 24, 2015

U.S. soccer Fans get to experience the iconic Champions league trophy in New York, Los Angeles, and Dallas sponsored by Heineken. 

Photo from Goal.com by Edelman

New Balance Dives into Soccer

Navigate Research - Friday, February 13, 2015
Written by Brandon Korody 

There’s a (somewhat) new player in the soccer apparel and equipment industry. New Balance, primarily known for its running brand, announced last week at several marquee events around the world that it was entering the soccer space. Considering the foothold Adidas and Nike (and to a lesser extent, Puma) have in the industry, it can be seen as a bold decision by New Balance. However, there are a few key metrics that show there is the potential for success. 

As mentioned before, New Balance is not technically “new” to the industry. Their subsidiary, Warrior Sports, has been the kit provider for Liverpool FC since the beginning of the 2012 season. Liverpool is currently the 6th highest selling club jersey in the world, with about 810,000 jerseys sold in 2014. Starting in 2015, New Balance will take over that contract, as well as add several teams to their portfolio. Stoke City, another Premier League club like Liverpool, will be added to the fold, along with Sevilla FC of La Liga in Spain and FC Porto of the Primeira Liga in Portugal. Having a decent position in the Premier League, which is the most watched league in the world reaching approximately 643 million homes and 4.7 billion viewers each season, allows New Balance to gain awareness in a top league. Sevilla and Porto are no slouches themselves, as Sevilla won the Europa League cup last year and Porto regularly appear in the UEFA Champions League. 

In addition to taking over team kit contracts, New Balance has acquired several key players to promote their brand, adding to the overall exposure in the soccer world. Aaron Ramsey, Samir Nasri, Vincent Kompany, Maroune Fellaini, and Tim Cahill are just a few of the top players they have on their roster. Some of these players top 2 million twitter followers, so that alone gives New Balance access to plenty of soccer fans. Aaron Ramsey’s current Twitter cover photo features New Balance, and the athletes have played a large role in the opening push to promote the brand. With players from Wales, France, Belgium, Australia, and Spain to name a few, they are also able to penetrate different markets.  


One look at New Balance’s recent financials reveals a greater understanding of why they entered this market. According to Forbes, New Balance’s revenues have grown 17 percent annually since 2010, topping out at $3.3 billion last year. A deeper look into that reveals that their international sales alone have increased 25 percent a year over that time period. They have clearly identified that as a good strategy to expand and grow, so choosing the world’s most popular sport makes sense. It is a tough market though, as Adidas had $2.7 billion in revenue from soccer alone last year, and Nike tallied $2.4 billion. If New Balance is able to grab even a tiny piece of that, it will boost their revenue quite a bit. It will also help increase the sales of their running shoes if they are able to grow awareness of their brand in new markets, as they compete with Nike and Adidas in that realm as well. 

It will be interesting to see how New Balance fares in soccer, as they have a lot of ground to make up. But if their success in baseball since 2010 is any indicator, where they now have 25 percent of players in MLB wearing their cleats, then it’s safe to assume they will achieve some level of success in soccer as well.

Forever Faster – Puma, the fastest sports brand in the world

Navigate Research - Wednesday, December 10, 2014

As a youth player, young coach and semi-professional in Germany in the 1970s, I knew of only two soccer brands one should wear on one’s feet: Adidas and Puma. If you think that’s limiting, consider that I only had one choice of color: black (decorated with either the three Adidas stripes or the Puma form stripe). I was always keenly aware of the history between these two German soccer brands – perhaps because I grew up with three soccer-playing brothers. Adi and Rudi Dassler were brothers and partners in their shoe company Gebrüder Dassler Schuhfabrik. They became rivals in 1948, founding Adidas and Puma, respectively. Ever since I was a child I have found this history fascinating. To this day, both companies are still headquartered in the same small town near Nuremberg in southern Germany (Herzogenaurach). 
 

I didn’t pay any attention to Nike cleats until the 1990s. But sometime after the mid-90s, or later, there was a turning point where I personally believed their design and technology had caught up to Puma and Adidas. 

Today, consumers can choose from a multitude of brands and cleat colors. Puma was always a major player in the soccer footwear and apparel industry but has now fallen well behind giants Nike and Adidas. Adidas and Nike share over 80% of annual sales, depending on specific soccer product categories. 

The high school where I now coach the women’s and men’s soccer programs uses Puma balls for both programs and kits for the men. But, how does a smaller brand, like Puma, keep pace in the global soccer market? After all, Puma is the third biggest soccer sponsor behind Nike and Adidas. 

During the 2014 FIFA World Cup, Nike sponsored the jerseys of 10 of the 32 participating nations and Adidas sponsored nine. Even though Puma, with eight nations, looked like it kept pace, Nike and Adidas featured prestigious soccer nations such as Argentina and Spain (Nike) and Germany, England and Argentina (Adidas). Puma instead focused on smaller (and less expensive) national teams, such as African and smaller South American countries. (Its big gun is the Italy national team.) In addition, Adidas’ crown jewel in the soccer sponsorship world is the FIFA World Cup (and Nike runs heavy guerilla marketing campaigns around each World Cup). Puma largely refrained from participating in expensive World Cup marketing campaigns in 2014. This is hardly surprising since the most expensive event sponsorships at the World Cup in Brazil demanded fees of $75 million. 


 
What Puma has done in the past is to define who and what they are, with a heavy focus on soccer and a differentiation on brightly colored and fashionable footwear and apparel (collaborating with major design brands such as Alexander McQueen and Mihara Yauhiro). With its Forever Faster campaign Puma is now focusing its efforts on being a sports performance brand foremost instead of a sports fashion brand (although that perception remains and may indeed still be useful). The new tag line and brand platform are intended to return Puma to its sports roots and positively impact the bottom line. According to Puma’s press release, its new campaign “embraces the thrill of being first, the swagger of being the best, and the fun of being able to adapt...It signifies the desire to quickly identify product designs and innovation, trends and style and bring them into the marketplace in a more dynamic manner.” 

On September 16 of this year, Puma acquired a five percent stake in German Bundesliga club Borussia Dortmund (a club steeped in history and tradition), who continue to sport Puma jerseys. (In case you’ve always wondered, “Borussia” is Latin for Prussia.) And in one of the largest kit contracts in the world, Puma this year also landed perennial top four Barkleys Premier League club, Arsenal F.C., which boasts one of the highest selling club jerseys in the world. 

Puma offers an alternative to those athletes who do not like to run with the usual crowd. (One of Puma’s major endorsers, Mario Balotelli, controversial Liverpool FC and Italy star, is certainly one such individual.) In the coming years, will Puma be able to bridge the perceived performance gap to its colossal soccer rivals and justify its relatively high stock price?