Why American Sports Teams Should Say 'No' to Corporate Jersey Logos

General Motors is paying $70 million to put a logo on Manchester United's jerseys, but that kind of sponsorship is still far away in American sports.

Jul 14, 2014 at 10:07AM

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General Motors (NYSE:GM) will pay Manchester United (NYSE:MANU) $70 million this year alone to have its Chevrolet brand logo spread across the team's uniform as part of a $559 million sponsorship agreement spread over the next seven years.

That is a crazy amount of money and something that assuredly caught the attention of American sports franchises in the country's four major sports.

The problem is that teams in the United States -- even the most popular NFL squads -- are seen by an audience a fraction of that of Manchester United, perhaps the planet's most recognizable brand in its most popular sport. Based on those numbers, it's not lucrative enough yet to sell themselves further to corporate America in a move that won't be popular with fans.

Why Manchester United is worth it

Manchester United can command that kind of money for jersey sponsorship because it averages an insane average cumulative audience of 47 million people for each of its more than 50 matches each season.

To put that number in perspective, last season the average NFL contest -- easily this country's most popular spectator sport -- brought in 17.6 million viewers (37.4% of the total Manchester United gets). That total was second highest in the NFL's history trailing only the 2010 season, which got 17.9 million average viewers.

If GM or any other large advertiser was strictly going on eyeballs, the average NFL team could command about $26 million per team. Of course, more popular teams like the Dallas Cowboys and Pittsburgh Steelers could likely command more while lower-profile teams like the Jacksonville Jaguars less.

$100 million for the NBA

The NBA already seems to be heading down this road, but they are a perfect example of why it's not yet a viable option. League Commissioner Adam Silver said in March that advertising on jerseys -- through a small patch placed prominently -- could bring the league an additional $100 million in revenue per year.

That number sounds nice, but then do the math. Spread across the league's 30 teams that is just $3.3 million each per season, which falls below the salary of the average league player ($5.5 million).

In a vacuum, that money would be nice -- $3.3 million is nice for any organization -- but then you need to factor in fan reaction. The reality is American spectators simply do not want to see advertisements on jerseys.

NASCAR is one of the nation's more popular spectator sports and has had sponsor logos on the drivers' cars since the early 1970s, something the average car racing fan seems not to mind, partially because it's been the standard for so long.

The opposite is true for American sports with more traditional uniforms where sponsorships have never been part of outfitting players, at least for any sustained length of time. Instead, fans seem to hold those in higher regard as something sacred and not to be sold out to the highest bidder hawking its unrelated wares.

An ESPN poll found in 2012 that 71% of fans objected to the idea of the NBA putting small corporate patches on player uniforms. In the same poll, 78% of fans said they are less likely to buy a jersey with advertising on it. The Houston Chronicle and a NESN poll in Boston put the opposition to the ads closer to 85%.

That alone is enough to squash most thoughts about teams doing it -- the money brought in from uniform advertising would likely be offset by a decrease in jersey sales, not to mention the public relations hit.

Advantage for apparel makers?

Until the amount teams can bring in is worth the fan backlash, don't expect to see it anytime soon. What that might mean, though, is an increase in the apparel contracts for each of the sports.

In 2012, Nike (NYSE:NKE) agreed to pay the NFL $1.1 billion to become the official apparel provider for the league. That includes a Nike swoosh on the jersey along with players wearing Nike-branded gear on the sidelines. That deal was a big jump from the 10-year, $250-million deal the league had with Reebok.

The NBA is currently in the middle of a $400 million deal with Adidas, which can be expected to jump when it becomes time to negotiate again. Fans do not seem to mind seeing an ad on a jersey, but only if it's from the company that actually made the uniform. Otherwise, deals like the one Manchester United struck with General Motors are likely to stay over the pond.

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David Stegon has no position in any stocks mentioned. The Motley Fool recommends General Motors and Nike. The Motley Fool owns shares of Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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