Arsenal and Adidas have agreed to a new £60 million yearly contract, which Liverpool must beat
Liverpool chose to work with sportswear giant Nike back in 2019 with the intention of long-term revenue streams being greatly improved.
The Reds were so eager to partner with Nike that they went to the High Court to try and end their agreement with former kit partner New Balance. New Balance claimed that because of a clause in their contract that allowed them to extend if they matched competitors on the value of the deal, they were providing a better deal than Nike.
According to reports, New Balance’s contract with Liverpool was worth more than £40 million a year, whereas its agreement with Nike was worth only about £30 million. But what made the choice to favor Nike and start the deal at the start of the 2020–21 season? It was what Nike could offer that New Balance couldn’t.
The Reds’ position as a football team with a global brand, one that has continued to develop as success on the field has grown more common, provides Liverpool with a big opportunity. Nike’s capacity to distribute product to all markets on the planet, physically and digitally, is unmatched in sport.
The £30 million upfront payment is less than half of what Arsenal will now receive under their new, eight-year contract signed with longtime partner Adidas, with the Gunners expected to earn almost £60 million annually.
While Manchester United leads the Premier League in terms of the value of such a partnership with a £70 million per year deal with Adidas, the Gunners will undoubtedly view that as a success. Liverpool’s deal with Nike is predicted to be on par with United, despite the £40 million difference in the guaranteed sum.
Because of their agreement with Nike, Liverpool is able to monetise the consumer relationship to a much greater extent than its competitors and take advantage of marketing resources that others lack because they receive 20% of all Nike/Liverpool merchandise sales worldwide.
LeBron James, a basketball player, is Nike’s most well-known customer worldwide. Additionally, he owns a 1% share in the Fenway Sports Group, the owners of Liverpool. The Reds may be able to advertise Liverpool products to customers who may not necessarily be interested in Liverpool or football thanks to his positioning, particularly in the US, as an athlete who can transcend sport.
The five-year Nike and Liverpool partnership will begin in 2020, and it is a long-term one. Although Nike is an important part of Liverpool’s goal to increase its revenue sources, the five-year agreement calls for a review of the relationship so that market forces and the club’s international positioning can better assess the partnership’s true value from 2025 onward.
Arsenal is locked in to the agreement until 2030, despite the fact that it is a particularly strong one in the current market and gives them some longer-term revenue security. What may seem like a great deal now could result in them selling themselves short later on when clubs like Liverpool will be at the negotiating table in a market that will be providing top clubs with more income and exposure than ever due to the new TV deals that are in their cycles and the reform of the Champions League that will go into effect in 2024. This is because of the accelerating pace of sport and the exponential rise in everything from team values to commercial partnerships.
While Liverpool’s plan for Nike is probably one that lasts far longer than its original contract, having the option of renegotiating during a period when market conditions are likely to alter might be quite advantageous.