- Newcastle United is rumoured to have signed a new £5m kit deal with Castore from next season although neither club nor manufacturer has yet confirmed.
Never heard of them? Ask Rangers fans who bought their tat this season. Castore were forced to make an apology as a result of “quality control issues” with replica kits. But that’s not what we’re looking at here. We’re going to look at the financial implications.
What conclusions can we draw from the deal? What does it say about Newcastle United under the stewardship of Mike Ashley? And does it have any bearing on a potential takeover?
Firstly, how does it compare with previous kit deals? The current deal with Puma is worth about£5.5m per season so at first glance, the new deal with Castore would seem to be a backwards step. The devil, as always, will be in the detail.
There will no doubt be two elements to the deal. There’s the upfront price and there’s the commission. So, for example, Manchester United earn £75m per year from their deal with Adidas, but purportedly get a 7% commission on each sale. Liverpool have a lower fee but they’re on 20% commission with Nike.
Whilst the deal looks poor in comparison to Southampton (£9m per year with Under Armour) or Everton (£9m with Hummel), it may pay a higher commission.
But in terms of the upfront price, the table below shows how the deal compares against other clubs in the Premier League.
Prior to Newcastle’s deal with Puma, the kit manufacturers were Adidas. Newcastle received an estimated £4-5m per season. That was in 2005. 15 years later and we are generating broadly the same income from our kit suppliers.
Whilst it would be deluded to expect our new deal to threaten the silly money received by the ‘Big Six’, it seems extraordinary that Newcastle can’t even negotiate a deal comparable to Southampton’s despite a much bigger fanbase both in the UK and abroad.
But this new kit deal is just the latest in a long running catalogue of catastrophic business failures to grow the club commercially under Ashley. For those of you who think that Mike Ashley is a business genius, the table below may no doubt come as a surprise. But it’s certainly no surprise to us at True Faith. We’ve been banging on about it for years. It shows total Commercial income which includes KIT deals, sponsorship, advertising etc.
07 to 19
To be absolutely clear, this failure to grow Commercial Income lies solely with the Newcastle owner. It’s the one revenue stream which Ashley can directly influence and negotiate. And his own personal battles with the major kit manufacturers, Adidas and Nike has hardly helped the club.
I can’t help but think that it must be a source of acute embarrassment to Ashley that the club’s commercial income has stagnated so miserably. And this isn’t over a single year or two. It’s over the entire duration of Ashley’s tenure. Football Finance expert, Kieran Maguire, has called Ashley’s tenure at NUFC as the “lost decade” and the statistics bear this out.
Every other club has managed to at least double their commercial income over the 12 year period shown in the table.
At a time when the Premier League has enjoyed spectacular worldwide coverage with global corporations falling over themselves to promote their brands through sponsorship and advertising, it seems extraordinary that Newcastle have been unable to increase their commercial income even marginally. If we had Gerald Ratner as Commercial Director, it’s difficult to envisage that he could have done a worse job.
Aside from the collapse in on-field performance since 2007, Ashley’s failure to grow Newcastle’s revenue base is, in my opinion, the biggest reason why the club is crying out to be taken over. It’s why we don’t compete.
When Ashley took over, Newcastle were generating the 13th highest total revenues in the world. For context, Tottenham were 15th highest (with 15% lower overall income than Newcastle). And it wasn’t too longbefore (1998) that when we actually had the 5th highest income ahead of the likes of Barcelona, AC Milan and Liverpool!
And this income was not distorted by the massive centrally negotiated TV deals that came later with the Premier League(which has been Newcastle’s only income growth under Ashley). It was money generated by the club the hard way through their Commercial and Match Day activities.
Now Newcastle don’t even make the top 30 highest income list. They’ve been overtaken by the likes of Everton, Wolves, West Ham, Leicester and Crystal Palace. Spurs are now on a different planet to Newcastle in terms of generating income.
It’s often stated that Ashley ‘saved’ Newcastle when he bought them in 2007. The truth was he bought a club which had so many inherent business advantages at that time.
In 2007, the club had already undertaken a massive ground redevelopment, at a relatively low cost, which gave themthe 3rd highest capacity in England. Newcastle should have enjoyed a comparative advantage against other clubs who were still to undertake their expansions. Since then, like our Commercial Revenue under Ashley, other clubs have caught up and overtaken us. Newcastle now have the 8th biggest stadium in England.
Commercially, we were generating incomes that were not too far behind the “big 6”. We were an established PL club regularly competing in Europe. Sponsors and advertisers still wanted to be associated with our “brand”. Our commercial revenue made up 32% of our total income.
Under Ashley our “brand” has become toxic. That’s why we generate so little commercial revenue. Commercial revenue now makes up less than 16% of our total revenue. Sponsors know that there will be little or no excitement at St. James’. Zero ambition. A club used purely as a vehicle to advertise the owner’s high street store. A higher likelihood of relegation than Europe. A zombie club. Who wants to be associated with that?
If a new owner was to buy the club, the cloud being lifted from the club would automatically generate higher revenue. But this kit deal has led to speculation that it could jeopardise any future buy-outs.P rospective buyers could be put off if they’re tied into such an awful deal preventing them from increasing future income.
We can but hope that there could be a break or renegotiation clause that can be called upon in the event of a takeover. Otherwise, we will still suffer from Ashley’s incompetence even after he’s left. What a legacy!