Wonga and Newcastle United: Is it worth it?
Posted on October 14th, 2012 | 48 Comments |
“And how the poverty of these unfortunates, among whom even thieves find nothing to steal, is exploited by the property-holding class in lawful ways.” – Frederick Engels, The Condition of the Working Class in England.
It is no longer news that Internet loan shark “Wonga” will be the club’s sponsors from next season for a period of four years.
I was going to write this piece a few days ago, but on reflection, I decided to leave it for a short while to see what emerged in terms of further details about the deal itself, and also the level of opprobrium which was inevitably going to follow the announcement. The exact amount is still shrouded in secrecy, though a figure of £24 million for the four years (£6 million per year) was bandied around in the media after the announcement was made, then the Telegraph claimed that the figure is more like £8 million per year (£32 million over four years). When this was put to the Managing Director, Derek Llambias, he suggested that the £8 million figure was “not far off.” As it’s Llambias though, this may not be true, but it is all we have to go on. As well as this, it is also been claimed that Wonga will be investing a further £1.5 million in the club’s Academy.
Llambias had the following to say on the new deal:
“There’s three parts to the deal. One part is investment in the Academy, one part is the shirt deal, and the third part is naming rights. I think you’ve got to look at the whole package – the shirt deal’s big for us, the Academy deal and then the naming rights, not necessarily in that order.”
If the figures above are anywhere close to the actual sum and include the naming rights, they are hardly spectacular. The mean figure for all 20 Premiership shirt sponsorship deals is now £7.36 million and that figure is just for shirt sponsorship only. This is especially true when you consider the further disrepute brought on the club, and the further damage to NUFC’s brand value brought by the new clients. Llambias once bragged that that selling the name of stadium alone would bring in as much as £10 million. More on that later though…
Another key part of the deal is a cynical but seemingly highly effective move to buy off fans concerned about being sponsored by loan sharks moving in to target the region which has the country’s highest personal insolvency rate. This of course is the decision to revert the name of the club’s stadium back to “St James’ Park,” though still with the infuriatingly absent “s” after the possessive apostrophe when it should be “St James’s Park.” Perhaps Mike Ashley could find another sponsor to finance that final “s”? Anyway, those of you who might be intending to name their next child “Wonga” as a gesture of your deep gratitude for this move, please consider that if they are indeed paying only £8 million for the whole shooting match, that would only be a fairly average deal for them on the shirts alone, and as is usual with the club under Ashley and Llambias, there seems to be a considerable amount of “smoke and mirrors” involved with this latest stadium naming development. It was only on Tuesday morning, after Ashley, Llambias and Wonga realised the extent of the opposition they’d face to the deal after the story was deliberately leaked before it’s official announcement that they hastily cobbled together the naming rights story.
Coming to the third part of the deal, a £1.5 million investment in the club’s Academy, with prominent Wonga signs erected at the Academy’s Benton base soon after the announcement. As well as this there will be a rather dubious involvement with the Newcastle United Foundation Enterprise Scheme for “disadvantaged children, young children and families”, which, as you will see below, is a bit like putting Gary Glitter in charge of a Primary school. Like the stadium renaming, this overt involvement with youngsters may seem to be a standard ploy to offset the distasteful nature of the company, and hopefully it isn’t another way of drumming up a bit of future business. On this aspect, the manager of the Newcastle Citizens Advice Bureau, Shona Alexander, had this to say:
“Our workload has increased remarkably in the past 12 months and more and more people get into trouble by taking out payday loans. The lenders seem to target young people which is why it’s worrying that the Wonga deal includes funding for the football club’s academy. They’re exactly the kind of people that payday lenders want to get their grips into. Our workload has increased remarkably in the past 12 months and more and more people get into trouble by taking out payday loans.”
Indeed, in the most recent of the many controversies surrounding Wonga they got themselves into hot water very reccently for having loan ads (alongside others for casinos) on a smartphone app, “Talking Ginger,” which teaches very young children how to get ready for bed. In order to get rid of the ads, the children had to pay 69p for “virtual toothpaste.” Moving up the age scale, the company has been known for it’s aggressive targeting of students, and was forced to remove a piece on it’s website in January of this year offering 4000%+ Wonga Loans as an alternative to Government backed 5% Student loans. Though not a student, the first “Wonga suicide” victim, IT Apprentice Oliver Scott, was only 18 years old when he took his own life over debts to Wonga, Cash Genie and Tooth Fairy finance. Getting back to Wonga’s advice for students though (which they were subsequently forced to remove from their website), they wrote this:
“Student loans are usually far cheaper than your standard personal loan. But there can be a downside – you potentially end up borrowing more than you need, while a nasty debt accumulates for your graduation that could take years to repay. With a Wonga loan, the interest rate is much higher, but you only borrow it for a month and pay the loan back on a date that suits.”
In further “advice” it also warned students in a statement which beggars belief:
“Student loans potentially encourage you to live beyond your means.”
The NUS’s Vice President of student welfare, Pete Mercer, remarked on that piece:
“It is highly irresponsible of any company to suggest to students that high-cost short-term loans be a part of their everyday financial planning. Wonga should immediately withdraw this predatory material, which contains information that appears to be inaccurate, and is aimed at financially vulnerable young people.”
Perhaps the most disturbing thing of all however are Wonga’s plans to educate children on their “credit alternatives.” On this, their founder and Chief Executive Officer, Errol Damelin, had this to say:
“Kids need to know what all the credit alternatives are and equally they should know about saving.”
As to whether Wonga’s “innovative and educational” children’s project will be a part of their involvement with the Newcastle United Foundation’s work with deprived young people remains to be seen, but it would be extremely alarming if it did.
Finally, besides the moral concerns, there is also the question of damage to the “brand value” of Newcastle United Football Club, which has already taken a significant hit due to it’s association with Sports Direct. Though it is undoubtedly a highly profitable organisation, negative associations with it’s junk image acts as a huge deterrent to premium brands who may have wanted to become involved with the far more desirable Newcastle United brand, and does have financial implications for the club. On that, marketing consultant Chris J. Reed writing in “Brand Republic” had this to say:
“Newcastle have also missed a trick again with a UK only sponsor and not a global one. Or have they just realised that despite the popularity of the English Premier League (EPL) in Asia they will never be considered by global brands? They certainly won’t after this deal. Can you see any blue chip brand wishing to be associated with Newcastle after they have both Wonga and down-market sports discount retailer Sports Direct as sponsors?”
Fellow marketing expert and Newcastle United fan, Dr Joanna Berry of Newcastle University Business School, agreed with Reed (and practically everyone else in the marketing industry) when she said:
“If you were the Emirates, Virgin, British Airways or any of the global, creditable brands, would you want to follow Wonga? From a marketing perspective, the reputational risk is significant.”
Quite so, though as I mentioned above, there was already a problem attracting premium sponsors to follow on Sports Direct. Virgin Money were the exception which proved the rule, as they had special regional considerations in mind after taking over from North East bank, Northern Rock, both as owners of the company and as shirt sponsors of the club.
So, though this current sponsorship may be a slight improvement on the old one in overall financial terms, it also comes at a considerable cost too, both in moral and financial terms, with the club’s reputation and brand value sustaining even more damage.
Is it worth it?