I get an email newsletter called Huddle Up every weekday morning. The Huddle is a sports newsletter for business nerds. Or maybe it’s a business newsletter for sports nerds. I’m flexible when it comes to those two sections of life.
A couple of recent articles caught my eye.
The first was about how Spotify (you know, that app you claim to never use but actually have it on all the time) has bought the advertising rights to the FC Barcelona uniform, along with the naming rights to the Spanish team’s stadium which will now be called Spotify Camp Nou. The price for this deal is $307 million dollars.
Now that is a lot of money, especially for a team that is $1.5 billion dollars in debt. What is interesting though is that Spotify had initiated negotiations fully expecting to pay CONSIDERABLY more for these rights. Why? Because Barcelona has the second largest fan base in the world (to English soccer team Manchester United), somewhere around 350 million people, but they only have personal details (email address, location, phone number, age, etc.) for 1% of them.
And it was those personal details that Spotify really wanted to get their hands on. They would have paid more, CONSIDERABLY more, if Barcelona only had that information to give them. But I guess as popular as Barcelona is (especially in South America and the Mid East) their fans still have a bit of an issue with giving away even the most basic of personal information.
Good on them. But bad for the economics of their favorite team.
Welcome to the new world order where companies sponsor teams not to get their name out to the general populace (see Los Angeles’ Staples Center becoming Crypto.com Center later this year) but rather to get access to the team’s mailing list and all that sweet, sweet data to be mined. 350 million people who self identify as Barcelona fans is a population worth paying for. 3.5 million people, well it’s nice, but not quite the numbers that marketers will pay those big real world dollars to get their hands on.
The subtext of this story is that the modern version of being a fan and financially supporting your team allows you two options. You can buy a ticket to the match and a scarf and some of that Castilian beer. Or you can give them your digital footprint to sell off to the highest bidder. Two ways to pay, no waiting in line.
The other story I read was about Nike, you know, that sneaker…um…er…active lifestyle clothing manufacturer. It was mostly about how their business continues to grow apace despite pandemic, economic downturn, inflation, and oh yeah that pesky war between Russia and Ukraine.
Like most American companies Nike has exited the Russian market, closing their 100 stores throughout the country. Guess it’s back to three piece suits for Russian mobsters instead of track suits.
According to the article it turns out Nike leaving Russia isn’t that big a deal. That country only accounts for about 2% of Nike’s current sales or around $20 million in the third quarter financials recently released. That could be made up by a good performance by a Nike sponsored team in the NCAA tournament. Take your choice between North Carolina, Duke, or Villanova in the Final Four. Kansas is with Adidas.
The more interesting statistic has to do with China and how much Nike sells there. It’s enough to account for 20% of their worldwide sales. That’s $8.3 billion dollars. That swoosh should have a red glow to it.
Those huge differentials made me look at how much money other American companies make in those two respective countries. Knowing the reputations both countries have for healthy living, I looked at two companies that might give us some idea. McDonalds for instance reported sales of $2 billion in Russia. In China they reported sales of $4 billion. Philip Morris Cigarettes get 6% of their total revenue from Russia, nearly 11% from China.
Both of those companies refer to their China operations as “expanding”. Neither says anything about expanding sales in Russia. And this was before Tsar Vlad I started his version of a splendid little war.
So why should we care about how much companies make in China versus Russia? Because China is looking at how the rest of the world reacts to the Ukraine invasion as it licks it’s lips over Taiwan. It’s one thing to have an economic embargo of a country that accounts for sales that could be made up easily. It’s quite another to get companies to give up 20% of their revenue.
Another aspect is production. Were China to attack Taiwan and a similar economic embargo were to be attempted to be imposed, lots of companies might say, eh not so much. That iPhone you’re reading this on right now was made in China. More than likely so were the pants you have on or the blouse you’re wearing. Oh, those Nikes you have on? Well odds are they were made in Vietnam since 51% of their production is there. But a good 21% is still made in China, enough shoes that were sanctions implemented you might have to make do with another year of use from those Air Jordans.
The bottom line is that while economic forces are doing a pretty good job disrupting the Russian economy, China would be quite a different kettle of rice. Cutting off trade with the Chinese would be a lot more difficult than the Russians. Our economies are too intertwined, too many American companies depend on China both to sell to and to have as a manufacturing partner.
And that just might make China a little more willing to scratch that island itch of theirs.
One thing we know for sure, the bottom line is it’s gotta be the shoes
Shapiro Out