Friday, 27 April 2012
Can the UK survive as a major player in international sporting events without changes to the way events and competitors are taxed?
Monday, 21 February 2011
The announcement by UEFA of the ticket prices for this year’s Champions League final at Wembley brought an outcry that UEFA were exploiting fans, despite UEFA’s claims that the pricing was in line with comparable events such as the World Cup and European Championship finals.
It also brought into question again the issue of tax and major sporting events and, for the Champions League final, it has already been a key issue for the UK.
When the FA bid to host the final in 2010, tax was the reason given by UEFA as to why Wembley was not selected, but the decision was delayed over the naming of the 2011 host venue to give the FA a chance to address UEFA’s concerns. These concerns related to UEFA’s request that the participating players from non UK teams be exempt from any tax liabilities arising from their presence in the UK for the period of the match. Under UK tax rules, visiting overseas sports stars are taxed on that part of their income that is deemed to arise from their time here and covers appearance money, prize money and a proportion of sponsorship and other commercial income which HM Revenue & Customs (HMRC) deem to be earned during their time in the UK. While the issue of appearance or prize money has never really been in dispute, the allocation of an element of sponsorship and other commercial income has always been an issue as to how much, if any, relates to the time spent in the UK by the sports star, particularly when the majority of these deals are concluded overseas. This all came to a head in a case between HMRC and the tennis star, Andre Agassi, back in 2006 where HMRC won the right to levy tax against a proportion of Agassi’s commercial income wherever it arose, even though the deals that HMRC were looking at were between two US companies. Since then, the issue has been over how much of this income should be taxable. Initially it was looked at on a simple pro-rata of the time spent during a particular year in the UK but, over recent years, HMRC has sought to take a different approach by looking at it as a proportion of the key events that a sports person takes part in, with the overall effect of yielding a higher return for HMRC.
Therefore, for the 2011 Champions League final, specific legislation has been included in the UK tax system (Schedule 20, Finance Act 2010), to exempt any employee of the competing non-UK teams from any income tax that is related to the services or duties performed in the UK in connection with the final. There has already been a precedent for this as similar legislation was enacted for the 2012 Olympic Games in Finance Act 2006.
So that deals with the players, but what about UEFA itself? A question was asked about whether UEFA would have to pay tax in the UK on the income it would receive from the sales of the tickets for the final? The short answer is probably not as it is usual for the event holder to include as part of the conditions for the successful bidder to indemnify the event holder from any tax liabilities that may arise from holding the event. Given that there has not been any specific legislation needed for this area, it is assumed that the FA were comfortable about being able to provide these guarantees to UEFA and would have included any liabilities in their costs for hosting the event. The FA will receive a facility fee from UEFA for use of Wembley and also a share of the ticket income received by UEFA and this income will be subject to tax as part of the FA’s overall income. Given that UEFA will only be in the UK for a short period of time, they are unlikely to be regarded as having a permanent establishment in the UK which could render them liable for preparing tax returns and creating any potential tax liabilities. The ECB had similar issues with the ICC over the Twenty20 World Cup in 2009.
The length of time the event holder is expected to be in the UK is the key issue here. For the 2012 Olympic Games, specific legislation was enacted in Finance Act 2006 to exempt the International Olympic Committee (IOC) from any tax liabilities which provided certainty for the IOC that they would not be regarded as having a permanent establishment in the UK, which will also include the time spent prior to and after the Games in setting up and decommissioning. Similar legislation is likely to have been required for FIFA had England been successful in securing the bid for the 2018 World Cup.
So, as with all things in life, tax penetrates into areas where you would not normally expect to find it and can have a significant financial impact on a particular event.
Tel: +44(0)118 933 2588
Friday, 28 May 2010
I think what we have with these three brands are very interesting and clearly different approached to marketing their brands. In the case of adidas, it has clearly positioned itself in the mainstream in that they bid for the official rights to become an event partner and they deliberately seek to acquire the highest profile, most prestigious properties (such as the German and Spanish national teams). That the company is able to do this reflects their financial power, but is also a reflection of its history and its development as a company/brand in conjunction with football. The consequence of this in terms of marketing is that adidas tends to engage in high value communications campaigns that are globally targetted, although they tend not to be especially innovative. Rather, innovation tends to come in terms of product development and the continued acquisition of properties such as players and teams. Nike in many ways is the complete opposite of adidas; the brand has always had a non-conformist edge to it and so the company has made a deliberate strategic decision not to bid for official event partnerships. Hence, Nike is not an official partner at e.g. the World Cup or the Olympic Games. Instead, the company actively engages in activities that some might label as being deliberate ambush marketing. Alongside this, we have seen Nike increasingly using social media as the basis for engaging in such activities, and also what some might call viral and/or gureilla marketing around its sport sponsorship programmes. Indeed, one is inclined to say that Nike revels in its role as 'the outsider'. Clearly, two decades ago, Nike had no presence in the lucrative world of football and so targetted resources at building up partnerships with some of the higest profile national teams (e.g. Brazil) and players in the world (e.g. Ronaldo). But as I have explained, the company stopped short of bidding for official event partnerships. As for innovation, Nike is not only characterised by its product innovations, but also in the way it markets itself - for instance, the Joga Bonita campaign it used during Germany 2006. Puma is an interesting further case; much stronger as a brand and as a company than it was 10 years ago, but still not in the position to successfully go head-to-head in a battle with Nike and adidas. As a result, the company has adopted an interesting continentally-based strategy, with Africa as its focus. Countries such as Cameroon and Ivory Coast will both be equipped by Puma, and there are numerous other teams across the continent e.g. Senegal, that are equipped by Puma. In one sense, Puma's African strategy is tacit acknowledgement that it can't compete with Nike and adidas. In another sense, it is a very clever and very shrewd move because it provides a very strong CSR backdrop to the brand (in terms of promoting African football), it provides a strong and clear presence in several markets where there is a strong predisposition towards football, and it also raises awareness of the brand in markets where there is clearly some growth potential e.g. Egypt. As regards Italy, my sense is that this simply retains a foothold in the European market for Puma. Nike and adidas are far more powerful, Puma simply can't compete e.g. Puma recently lost the Polish national team contract to Nike. In terms of returns, Puma I think has a great opportunity to enhance its CSR credentials, as well as securing brand awareness and creating affinity in countries across Africa and elsewhere. I think Nike will enhance it's credentials as the brand for non-conformists, while taking marketing through social media to new heights. While adidas will continue to play the role of the 'orthodoxy' i.e. mainstream, mass market. In the case of all three organisations though, given the cost of investing in football rights deals (allied to the additional costs of activiating their deals), the bottom line will be: turning over units i.e. boots, training shoes, shirts, shorts etc...this is a once in four year selling showcase for everything that the three companies do well.
Friday, 15 January 2010
SPORT, BUSINESS AND MANAGEMENT: AN INTERNATIONAL JOURNAL
TO BE PUBLISHED BY EMERALD (http://www.emeraldinsight.com/)
Further to my recent message, I am able to confirm that the first edition of the above new journal will be published in Spring 2011.
People are therefore invited to submit papers for inclusion in the journal.
Further details of the paper format guidelines and the submission procedure will be issued in due course, although authors may wish to note that the journal will in both cases follow the conventions already used by other Emerald journals.
An online submission platform will be available in due course, but in the meantime all enquiries about papers should be directed to Professor Simon Chadwick (Simon.Chadwick@coventry.ac.uk)
In general terms, submissions to the journal will be expected to:
· Use sporting examples and concepts to illustrate management theory
· Use management theories and concepts to investigate sport
· Address management problems and issues in a sporting context
The objectives of the journal are:
· To provide an outlet for high quality research, insight and opinion in the linked and related areas of sport, business and management
· To provide an outlet for high quality research, insight and opinion written by researchers predominantly working in business and management schools
· To examine sport from a business and managerial perspective
· To advance understanding of sport, business and management
· To enhance the academic study and the practice of business and management in and around sport
· To provide opportunities for exploring the latest developments, challenges, issues and thinking in sport e.g. from the perspective of a team, a club or a governing body
· To provide opportunities for exploring the latest developments, challenges, issues and thinking related to sport e.g. from the perspective of a broadcaster, a sponsor, a government department
· To deliver sport business management research that is based on perceived need, robust foundations and strong methodologies
· To deliver sport business management research that is credible, meaningful and scientifically rigorous
Within the context of these objectives, it is anticipated that papers submitted to the journal will normally fall into categories which could include:
· Fans and customers
· Athletes and coaches
· Clubs and teams
· Leagues and competitions
· Events and tournaments
· Stadiums and venues
· Commercial and non-commercial partners
· Governing bodies and representative associations
· Intermediaries and athlete representatives
· Traditional and new media outlets
· Suppliers, retailers and other outlets for sport
· Places and spaces
· Local economic, social and other relevant projects/initiatives
As such, the journal will accept submissions drawn from the full-range of business and management disciplines (either individually or inter-disciplinary in nature) including:
· Corporate Social Responsibility
· Global management
· Human Resource Management
· Information Technology
· International Business
· Organisational Behaviour
· Supply-Chain Management
Professor Simon Chadwick
Sport, Business and Management: An International Journal
Centre for the International Business of Sport
Coventry University Business School
Coventry CV1 5FB
Friday, 8 January 2010
Sport in 2009 proved to be as enthralling off-the-field of play as it was exhilarating on it, with high profile cases of cheating, corruption and player transgression affecting a number of sports, accompanied by some crowd-pleasing, record-breaking performances.
At the same time, the business, organisation and politics of sport continued to excite and baffle many of us in equal measure, with talk of sports brands, “fit and proper people” and legacy constantly simmering in the background of the collective sporting psyche.
With the fragrance of CR9 still in our nostrils, and the taste of fake blood still in our mouths, what has gone before in 2009 therefore provides us with some isotonic sustenance for looking forward to ‘five things we might see in 2010’.
Marketing Mania at FIFA World Cup 2010
The football World Cup hits Africa for the very first in June 2010, as FIFA makes good on a promise that Africa should host the tournament for the very first time. There will no doubt be an ongoing collective debate about the positive (or, more likely, the lack of a positive) impact that South Africa’s World Cup will have on the communities in which it takes place, the country as a whole, and across Africa as a continent. However, watch out for some interesting sub-plots too: the anticipation of an African team winning the tournament; intense debate about the use of goal-line technology; accusations of kick-backs, bribes and, match-fixing etc. Watch out too for sport’s first major sporting competition for the “Twitter-generation”. Some of FIFA’s official partners have already made it clear that they will cease using traditional marketing techniques next summer and will instead adopt social networking as the basis for their World Cup marketing activities. Expect therefore a series of consumer-focused, viral campaigns in which Twitter, YouTube et al. are employed to spread the corporate word. Expect ambush marketers too to utilise new media to undermine the official sponsorships of FIFA’s partners, as rival brands seek to fool consumers into thinking they are the official sponsors of World Cup 2010.
Respectable in the 80s: Formula 1 reminisces
Back in the 1980s I was a huge fan of Formula 1 during an era when a Senna first entered the F1 World Championship, a legendary former World Champion made his comeback into F1, the Lotus team had two cars sat proudly on the grid, private teams in general outnumbered official manufacturer teams, Cosworth engines were used by a majority of cars, and a wind of change was starting to blow around the sport. It seems entirely appropriate therefore that, just as music and popular culture are already giving a collective nod to the 1980s, F1 should do likewise. In 2010, Ayrton’s nephew Bruno enters F1 for the first time; Michael Schumacher “does a Lauda” and comes back to a sport he doesn’t actually seem to have been away from; Lotus rises again, albeit in a somewhat different form to before; the big-guns have largely gone, replaced by the likes of Campos F1; Cosworth will find themselves in the majority once more; and we have a new guy in charge at the FIA – someone who was a ‘big-cheese’ in 1980s motorsport. The net outcome: a return to F1 1980s style? Not quite gentlemen racers in goggles and shirt-sleeves, but expect much greater competition, a more unpredictable sport, less of a corporate juggernaut than F1 has been over the last decade, more privateer involvement etc. Moreover, just as we witnessed the “youthful” Max Mosley and Bernie Ecclestone rocking the boat of hierarchical stability back in the 1980s, expect the FIA to come under similar such pressure in 2010…and do not discount a breakaway F1 World Championship just yet.
Driving problems in golf (and other sports)
Poor old Tiger Woods: he has struggled to keep his balls on the fairway over the last year or two; he has had difficulty with his driving (balls and cars); plus, it would appear, he has also had some extra-marital difficulties too. Let’s not forget too that in 2009, he lost a string of major sponsorships and endorsement deals both before and after what has now come to be known as his “transgressions”. Yet Woods is not the first person or team to encounter driving problems in 2009; Nelson Piquet Junior, Flavio Briatore and the Benetton F1 team have all had their fair-share of problems in keeping it on the straight and narrow. So too previously has the T-Online professional cycling team, which effectively disintegrated in the wake of a doping scandal a couple of years back. The common denominator in each of these high profile cases has been the role that sponsors, endorsement contracts and commercial partners have had in regulating the athlete behaviour i.e. the “transgressions” displayed by athletes which have resulted in major partners withdrawing their financial support from an athlete or a team.
In the coming year, we should therefore expect to see contractual terms relating to transgression being “beefed-up” as big brands seek to protect their multi-million pound investments from the kind of “driving” problems we have recently witnessed. It is also likely that we will see the emergence of a new, market-driven morality governing athlete/team behaviour. This will not necessarily be driven by what is broadly considered to be socially or morally right or wrong, rather it will be defined by what is thought of as commercially acceptable or unacceptable.
End of the line for secret agents
For the first time in late 2009, English football’s Premier League released figures to show how much each club had paid to agents for transfer dealings in which they had been involved.
The media and the general public were aghast at the suns of money being paid out, but to no great effect as the surprise and criticism has rapidly petered out. Expect several of the contentious issues surrounding agents to keep coming back though, especially as the Premier League’s disclosure of information will become an annual occurrence. More significantly is the fact that we are still waiting for a European Union study of sports agents to be published. Initially commissioned in the last quarter of 2008, the study’s findings should have been released around mid-2009….but there has been nothing yet. Publication of the report is therefore imminent and it could spread shockwaves in 2010 through the agency business, as it could lead to the introduction of European Union sports agents’ regulations, and possibly even legislation that will govern and rule the agency business across the continent. For an industrial sector that has been simultaneously praised for the valuable role it plays and derided for its exploitative nature, the times they could well be changing.
East is East
Remember a time when European sport ruled the world? This was a time grounded in the 19th century socio-cultural development of sport when some of the world’s most popular games were codified, stratified and professionalised. And then came a new, 20th century sporting model, straight out of the United States, in which business, commerce, sponsorship, television and competitive balance took prominence. But now, in the 21st century, both of these models appear to be subsiding into the background as a third age of sport emerges from Asia where “the nation”, public/private sector cooperation and a more holistic sense of the role that sport can play, are beginning to dominate. We have already witnessed the emergence and growth of Indian Premier League cricket, the “Asianisation” of F1’s race calendar, and the strident ambitions of numerous Asian countries as they have sought to secure the right to host major international sporting events from the Olympic Games to the FIFA World Cup to F1 races. What more of a barometer does one need of the changing international balance in sport than the re-emergence of the proudly iconic British F1 team – Lotus (see above). Except that Lotus is now Malaysian owned and will shift its operations to Malaysia once the 2010 season is over.
Avid sport watchers should therefore keep a very close eye over the next year on growing “Asianisation” across all sports, whether it be Asian ownership of English football clubs and US sporting franchises or the relocation of governing bodies and teams to Asia – the sport that many Europeans and Americans know is going to be changing very soon.
Tuesday, 15 December 2009
The other day I popped into my local Ladbrokes, not because I thought I could back a winner, you understand, but because I thought I’d see if there were any bargains on offer, in much the same way I’d pop into Marks and Spencer’s or British Home Stores. Unusually for a Tuesday dinner time, there were no bargains but I did spot a ‘customer’ having a snooze. I took this to be a natural reaction to the low quality racing being transmitted but that turned out to be a mistake on my part. The fearsome shop manageress had already spotted this soporific regular and had decided she was having no more of that type of behaviour in her establishment. ‘Nobody sleeps in my shop!’ she belted out full blast, in a deliberate attempt to disturb the snoozing punter, whilst at the same time signalling to the rest of us she wouldn’t be the first lady you’d want to go to with a query about your payout.
He took a while to come round, this punter, as one does when one has been unexpectedly awoken from one’s slumbers, but, once fully awake, a torrent of abuse issued forth from his lips; the abuse probably caused plenty of embarrassment to customers in the Ann Summers shop next door. As he made his winding way towards the exit, he picked up a stool, held it high above his head and told the aforementioned manageress what he was going to do with that stool if she wasn’t careful. He then left quietly enough, probably to continue his snooze in the public library.
A typical tale from a bookmaker’s shop, you may think, but these days bookmakers’ shops are markedly different from a few years ago. They’re different because Fixed Odds Betting Terminals (FOBTs) – those machines on which punters play games such as roulette and the like - take pride of place in many establishments and the reason for that is simple enough – those machines generate lots of cash. A reader’s comment on my blog last November summed up the situation perfectly, ‘…bookies have become virtual arcades, with some horses and greyhounds running in the background.’
Here are some selective points from the Mintel report on Betting Shops – UK –August 2009 by way of illustration…
In some shops FOBTs generate half of all profit;
Horse racing’s share of betting shop turnover has halved in a little over a decade;
Ladbrokes reported its machine win in 2008 averaging £676 per cabinet per week, up 16% on 2007's £583 figure;In the mid-1990s, racing typically accounted for 80% of an average shop’s turnover. Today, trade sources put that figure as down in the 40s;In 2008, FOBTs became the first product to earn more for Ladbrokes than horse racing in the company’s entire 122-year existence.
If the live product is undeniably under attack from FOBTs on the one front, it’s coming under attack from virtual horse racing (‘cartoon racing’ is the term used by the blog reader to refer to such offerings) on a second front. Not that long ago I heard a punter in a shop telling anyone who’d listen they were better off punting on the virtual stuff “because it couldn’t be fixed.”
All of which should provide ample food for thought for those in charge of racing and appears to spell trouble for the transmission of the live product in the future.
Thursday, 10 December 2009
It seems that the rivalry between Australia and England when it comes to sport pales into insignificance when Australia’s three icon ‘football’ codes engage in a turf war. Australia’s bid (http://www.australia2018-2022.com.au/) to host in 2022 (2018 seems like a lost cause) has been handsomely supported by the Federal government to the tune of AUD46 million. Part of the FIFA edict to host the event is twelve, 40 000 plus seater stadia and a basic shut down of competing major events prior to and for the duration of the greatest show on Earth. This has led to both the Australian Football League (AFL) and National Rugby League (NRL) being asked to suspend their respective competitions for reportedly up to ten weeks. In addition, some venues would be off limits including the Melbourne Cricket Ground and possibly Etihad Stadium both of which are pivotal to the effective running of the AFL competition. There are many aspects to be played out, including of course whether Australia will indeed get to host the event but some interesting questions could be posed… Should government support for one code over another be so blatant? Are there inherent dangers for a Government sport policy such as this?Can the needs of all three codes be catered for? If seasons are suspended should those affected (which could include rights holders, leagues, clubs, sponsors etc) be compensated? If so, by whom?