Editorial: Building a Dream

It’s been a few days now since Birmingham City have announced the naming rights deal agreed with Knighthead. Although touted as the largest commercial deal the club has done in its history, the deal is more than just about money. It gives us an insight into the true potential of the Tom Wagner-led ownership regime and just how big things might get.

We are Birmingham

While the headline figures were huge, it’s clear from reading the questions of some Blues fans on social media that some of the underlying detail needs to be talked about.

Having money in the bank (and wiggle room in our Profit and Sustainability rules calculation) might make for a more exciting conclusion to the winter transfer window, but this deal is more than just about this season.

Indeed, there is potential hinted at in this deal which could help build the club over the next decade or longer.

With this in mind I thought it was an idea to have a deeper dive into the detail.

Fair Market Value

One of the things I’ve noticed about Blues fans is that despite the change in ownership and the investment we’ve seen in the club, there remains a deep-seated fear in some that things could go wrong.

It’s almost like the last decade or so of being a Blues fan has given some fans PTSD when confronted with financial news.

One can understand it.

Having seen the club go out on a trolley dash at the beginning of the Trillion Trophy Asia ownership only to be docked nine points for smashing FFP limits, one is always going to be wary that we might fall foul of the rules again.

However, as I’ve said before, the one big change in this ownership regime is that the club is now being led by people who are competent.

Competency is huge, because while it can cost a little extra money up front doing things properly, in the longer term it prevents all kinds of problems.

The partnership with Oak View Group (OVG) is a huge example of this.

When that deal was announced the buzz around social media was that this was all about a potential new stadium, but people had missed another vital service that Blues could receive from OVG.

As I talked about on the Fat Lads Go In Goal podcast, OVG are well-known for their ability to help companies secure naming rights for stadiums and arenas.

By appointing OVG to ensure that the deal was “fair market value”, it ensured that the deal would be ratified by the EFL without an issue.

Having OVG on board also helped to ensure that deal is the size it is.

I spent a short amount of time looking on Google for comparative deals in the division to see just how impressive the club deal is and the two I found quickly only go to show the Knighthead deal is massive in comparison to what other clubs have managed to get.

In September 2022 Swansea City signed a ten year deal with Swansea.com which “guaranteed a seven-figure sum” to the Swans, while in October 2023 QPR announced a £1.2M deal with Matrade to rename Loftus Road.

The difference between this deal and the previous one that Blues agreed with an ownership regime is even more stark.

Although Blues have since deleted the announcement from their website for the Trillion Trophy Asia naming rights deal, this report on the Business Live website confirms that no figures were announced; indeed, the announcement only came around six months after the deal was signed.

Part of the way the club has managed to get such a great deal is the way it is broken down.

The Social Media bonus part of the deal is a smart way to show the EFL that the club are doing what it can to raise the profile of Knighthead as part of the deal.

The terms of the deal – £100k per 20 million “verified impressions” is apparently cheap in industry terms yet should make it easy for the club to achieve.

Based on my back-of-an-envelope calculation of the tweet views statistic shown on Twitter, on the day of the announcement alone the club received more than 1M views of its posts just on that website.

Throw in the impressions on Facebook, Instagram, TikTok, LinkedIn etc and it all mounts up very quickly.

The possibility of Blues Apps could only add to the juggernaut that Blues have created and it’s my impression that Blues should smash their targets on that with ease.

So where does all this extra money leave us in the short term?

Profit and Sustainability Rules

For me, the best news in all this is that in the short term any worries about P&S rules should be put to bed.

While the figures the club can receive are somewhat pro-rated, the boost to revenues should be enough to help ensure that Blues comply with the rules without having to worry about selling players at discounted prices.

The announcement made by ZO Future Group (what was BSHL) to the Hong Kong Stock Exchange goes into further detail than the one made by the club and confirms when payments will be made as part of the deal.

They confirm not only that the base naming rights payments will be made this financial year (which ensures that they can be booked in this years accounts), that payment based on league position should be paid within 60 days of the end of the season, and that the social media bonus will be paid within 10 business days of Knighthead receiving an invoice confirming that 20M social media impressions have been hit.

Assuming Blues do smash their social media targets, the club will receive around £5.3M in payments as part of the deal without taking the league position payment into account.

When compared to the revenue from the last available club accounts for the period ending June 2022, that is a 30% hike in money coming into the business.

What that means in real terms is that this deal alone is worth as much as – or maybe even more than – than all ticketing revenue the club receives in a season.

That in turn should give the club a little more wiggle room to consider ticket pricing levels for next season without having to worry as much as revenues being brought in.

As I’ve said before, this ownership regime has shifted the paradigm when it comes to dealing with remaining within profit and sustainability limits.

Under the previous regime, there was always a thrust to cut costs to try to ensure the club lost less money, which sadly sparked a vicious cycle of reduced ticket sales forcing futher cuts etc

Knighthead’s approach has always been to maximise the amount of money to come in to allow the club to spend more.

This investment is slowly sparking a virtuous cycle into life, where more money and investment is coming in as the club is seen as one on the rise.

This has positive long-term implications and for me is the most exciting part of the deal.

The Future

As famous Brummie and probable Bluenose William Shakespeare wrote in Romeo and Juliet

A rose by any other name would smell as sweet.

This made reference to the fact that a name doesn’t change what an object or person actually is.

In the same way, while those being accurate are going to have to write “St Andrew’s @ Knighthead Park” every time, I don’t think the name of the stadium is going to change in the vernacular of supporters.

However, I’ve given a lot of thought to the name that was chosen.

My first impression was that it was a clever American-style name to ensure that the original name of the stadium stays at the forefront.

However, the more I think about it, the more I wonder if this name is an indicator of what is to come.

In the announcement made by the club, there were references to this being the first stage in building a “Sports Quarter” in the city of Birmingham.

What if Knighthead Park isn’t the new name for the stadium, but the name for this intended Sports Quarter, and the new name of the stadium reflects that the ground is part of the first iteration of this project?

This is me dreaming a little bit, but bear with me; I don’t get much chance to feel this positive and I want to take you on a journey.

The current stadium and the new fan zone are probably going to be the first iteration of how they think this will work.

As we’ve already seen, there will be kinks to work out. Mistakes to be made, ideas to be tried out that don’t quite succeed.

We’ve already seen that Knighthead can learn from mistakes made and I have no doubt that as things progress, they’ll take forward the successes and build upon them.

The club will grow and with a bit of luck the stadium area will be seen as a destination for more than just a couple of hours while the match is on.

Further down the line, it’s clear there are possibilities for a much larger campus for the club to be based upon.

Imagine a huge area which isn’t just a stadium, but features training pitches which can be used by the community; other facilities for sport and recreation.

This is what Manchester City have achieved with the Etihad Campus, and I see no reason why Blues can’t do it too – especially given the change the city is going through currently.

We’re a self-deprecating bunch and it’s fashionable to knock the city but the truth is Birmingham is on the rise. As much as there are issues such as the bankruptcy of the city council, like with the club it means that there are also opportunities for someone with the balls to grasp them.

As much as people are excited that we might be able to spend money in this and the next transfer windows, I’m more excited about what the longer-term future might hold.

For once, the stars appear to be aligning in our favour. We’ve got an ownership who apparently not only have the wherewithal but also the intelligence to see it through.

There will be pressure with such a high bar, but I’m excited to see what can be achieved.