July 1, 2017
Shirt manufacturer deals are big business, and highly topical with the new Chelsea Nike deal starting today, as indeed is the new Spurs’ Nike deal.
Everton are contracted to Umbro until the summer of 2019, having signed a five year deal back in 2014. As is usually the case, no official figures were released but it was hailed as our largest deal to date, doubling the previous Nike deal worth £3m a year, with an estimated value of £6m p.a.. It is thought that part of that revenue is shared with our distributors Fanatics (previously named Kitbag).
By comparison our competitors, the remaining members of the magnificent seven have the following deals:
|Manchester United||£75 m a year with Adidas, contracted to 2024|
|Chelsea||£60 m a year with Nike, reported as a 15 year contract to 2032|
|Arsenal||£30 m a year with Puma. Reportedly switching to Adidas in 2018, estimated £60-90 m a year|
|Liverpool||£28 m a year with New Balance, reported as a 10 year contract to 2027|
|Spurs||£25 m with Nike, “multi-year” contract|
|Manchester City||£20 m with Nike. Reportedly switching to Under Armour in 2018|
As I tweeted yesterday, we’ll earn circa £12 million in the next two years whilst Manchester United earn £150 million, and even Spurs will earn £50 million from their shirt manufacturer.
Now, one of the initial thoughts is that the deal values are tied to shirt sales. Whilst there’s an element of truth in this it is not the full story as I will explain in a few moments:
Average shirt sales per annum in last 5 years plus shirt sales in 2016:
|Team||Av. shirt sales pa over 5 yrs||Shirt sales in 2016|
It’s clear from the above shirt manufacturer deals aren’t just about the number of shirts sold – for example the value of the Manchester United/Adidas deal equates to over £26 per shirt sold in 2016, and in the case of Everton/Umbro equates to £75 a shirt because of our very low shirt sales number – more on that later.
Shirt manufacturer deals are about global exposure for global companies. Because of their knowledge of global sports’ markets it’s a fair assumption that Nike, Adidas, even Umbro know the value of association with leading sporting teams.
Thus, for the large part, the amount a club receives from a shirt manufacturer relates directly to the club’s global presence.
There are a number of factors that determine global presence. As we’ve discussed on Everton Business Matters, being a regular in European competition particularly the Champions League helps hugely, as does, of course, being in the Premier League. Participation in these competitions guarantees exposure.
However, there’s other factors too. If it was just being in the competitions then most regular participants would receive similar amounts and sell similar numbers of shirts.
The biggest factor must be the brand and reach of the club itself.
Take Manchester United, now I know they’ve won huge numbers of trophies over many years, but their commercial success is down to strategic thinking. United segment the market place, looking for global partners as their major sponsors – Adidas and Chevrolet for example, and then drilling down to regional and local levels with their other commercial partners. As a result they strike multiple deals, attract very strong brands to associate with, and offer potential sponsors multiple routes to multiple markets – a compelling proposition for anyone seeking football as a means of advertising and sponsorship.
In terms of what appeals to Adidas, United tick every box, a successful football club, a huge brand, enormous exposure and association with other premium brands in the sponsorship portfolio.
I’d suggest Chelsea follow a similar strategy and similar appeal to sponsors and shirt manufacturers. Arsenal and Liverpool to a lesser extent and this is reflected in their contract values. It will be interesting to see the value of the Manchester City deal in 2018.
The other factor must be the abilities of the clubs themselves to negotiate contracts and sell their own proposition. Spurs for example would score highly here, their commercial acumen is widely acknowledged and I’m sure has played no small part in the deal they have with Nike.
I’d imagine the Spurs/Nike deal is sold partially on where Spurs stand today, but most likely on their plans and expectations for the near future. I’m sure Spurs will have been able to convince Nike that with their new stadium and plans for improving performance on the pitch this potential should be reflected in the price of the Nike contract.
With long term sponsorship arrangements, you are not only selling where you are now (to the sponsor/shirt manufacturer) but where you anticipate being over the duration of the contract. These expectations have, of course, to be backed by evidence of the planning and investment in the future in order to meet the claims made. Assuming they are realistic and attainable then you can extract value even if your club is not yet at the level proposed or planned.
All the above is fine, but what about Everton?
We offer the exposure that the Premier League provides, and this year offer Europa League competition which will obviously increase our exposure and future attractiveness.
As we’ve discussed on Everton Business Matters, and in my last article on here relating to Everton, the brand – we offer so much more than I believe has previously been presented. I don’t propose to repeat the argument in the last article but we have many, many positive attributes and facets to our character and brand that is not reflected in the value of our commercial deals nor the identity of our commercial partners.
The case for breaking the existing relationship early is compelling in my book (as done by Chelsea, and potentially by Arsenal next year). I’ve obviously not had sight of contracts, but breaking in the final year of a 5 year deal shouldn’t be too expensive, and even if the terms were onerous, such should be the increase in value of a new contract that those costs should be covered.
Not only would breaking the deal create financial benefits, it would demonstrate a new confidence in the club itself. It would demonstrate that we were proactive, had the ability to promote ourselves attractively and have the substance behind the arguments to gain the support of major sporting companies.
Spurs, whilst ahead of our game in terms of development and recent achievement, have proved it possible to enormously increase the value of their commercial deals (the Under Armour deal was worth £10 m a year, Nike now £25 m), yet I don’t believe have as strong and attractive a brand as we have if presented properly.
Thus, if the executive of the club firmly believe, as I do, that the prospects of the club are now significantly more attractive, and that our global presence is about to expand hugely we should be calling in the executives of all the major manufacturers to name their price for being associated with our future success.
As the title of this article says, shirt manufacturer deals are a barometer of a club’s global appeal. The Everton barometer was last set back in 2014, it’s time to re-set it to reflect where we now are, and where we are going. In doing so the additional funds will help us on that journey, further closing the gap with our peers. By contrast to not do so is a wasted opportunity, allows our competitors to move further ahead and may suggest we are not as confident commercially as we should be.