adidas and Manchester United £750m Deal: A Can of Worms?

Manchester United Old Trafford

Hi everyone,
That’s it. Today, adidas announced a record 10 year partnership deal with Manchester United worth £750 million ($1.28bn). It was to be expected after Nike recently ended negotiations with the Red Devils. Let’s have a look at how things rolled out and the outcome.

Until now, the world record sponsorship deal was held by Puma’s £150 million with Arsenal over 6 years. Manchester United and adidas did better (or worse) by inking a sponsorship deal with Manchester United. 

The deal, kicks off at the start of the 2015/2016 season. It will include a dual branded licensing deal and is considered the biggest kit sponsorship deal in the world.

“We are excited to team up with Manchester United, one of the most successful and most loved football clubs globally,” said adidas Group CEO Herbert Hainer.

“Our new partnership with Manchester United clearly underlines our leadership in football and will help us to further strengthen our position in key markets around the world.“

“At the same time, this collaboration marks a milestone for us when it comes to merchandising potential. We expect total sales to reach £1.5bn during the duration of our partnership.”

Nike, who has been a partner since 2002, said: “Manchester United is a great club with passionate fans. We are proud to have partnered with them for the last 12 years and will continue to sponsor the club until the end of the 2014/15 season.

“Any partnership with a club or federation has to be mutually beneficial and the terms that were on offer for a renewed contract did not represent good value for Nike’s shareholders. We look forward to a successful final season with the club.”

But how things rolled out?:
Back in October 2012, Manchester United put pressure on Nike for a better sponsorship deal. Warrior and Under Armour signing more valued deals with respectively Liverpool and Tottenham which was a triggering factor.

Indeed, Under Armour, inked a deal with the Spurs for $80 million over 5 years starting season 2012-2013 while Liverpool FC partnered with Warrior, a 6 year agreement starting June 1 , 2012 costing $41 million a season. This deal beats Manchester United’s previous Premier League kit record of $38m with Nike.

The Red Devils felt that they were losing not only on sponsorship value, but that the Manchester United brand was not “rewarded” as it should by its kit manufacturer especially after reporting record financial figures and signing a ground breaking shirt deal with Chevrolet.

In January 2013, Manchester United became the first football team valued at $3 Billion by Forbes. Another significant leverage tool to expect a better sponsorship deal from Nike. 

In May 2014 (perhaps earlier), adidas and Warrior stepped in although Nike had the right to match any offer made by their competitors. Finally, last week the Swoosh officially announced having ended the sponsorship deal with Manchester United.

The adidas – Manchester United deal is significant for Van Gall’s club. However, can this deal be an “invitation” for other adidas clubs to renegotiate their deals? Check out the current key adidas sponsored teams.

Real Madrid – From 2013 until 2021 – £31 million per year
Chelsea – From 2013 until 2023 – £30 million per year 
Bayern Munich – From 2013 until 2020 – £34.4 million per year

[Source: Sport Business]

So, will the Manchester deal open a “can of worms” and urge adidas partnered clubs to rethink their sponsorship deals? Time will tell.

Karl Lusbec

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