There was a reason why Liverpool were willing to head to the High Court in order to make sure they got their deal with Nike sorted.
Before their partnership with the US sportswear giant was rubber stamped the Reds had to face a legal battle with another US firm, New Balance, who had been Liverpool’s kit supplier since 2015.
The footwear firm had sought to activate a clause in the deal that allowed them to extend their partnership with Liverpool if they matched the offer from a rival firm, New Balance paying £45m per year for their deal with the Reds.
Nike’s annual flat rate offered was £30m, but it was the other aspects of the deal that made it far more lucrative that the partnership with New Balance could ever be, prompting the High Court to reject the claims and allow Liverpool to press ahead with the biggest commercial deal of FSG’s reign at Anfield.
The headline figure may suggest a £15m per year reduction is nothing to crow about, but when you factor in Nike kicking back 20 per cent of royalties to Liverpool on the sale of licensed club merchandise, and access to their stellar client list that includes rapper Drake, tennis ace Serena Williams and basketball icon and minority Liverpool shareholder LeBron James, the true value of the deal is in the detail.
Liverpool’s motivation for getting the Nike deal done was born from a need to rise commercially to try and make some ground on how the likes of Manchester United were able to monetise their brand through their incredibly lucrative kit deal with Adidas.
The £30m per year is fine, but it is the 20 per cent and vast potential marketing opportunities through Nike that made this so appealing to the Liverpool hierarchy.
With the extension of the 2019/20 Premier League campaign last year, the Nike deal began in August in time for the current Premier League season.
The impact of the deal likely won’t be seen in the current set of financial accounts, due from Anfield in the coming months, although the potential of the partnership is already starting to be seen.
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Swapping Instagram pictures with another user may hardly seem earth-shattering news in the normal circumstances, but when two of the world’s most recognisable sports stars do it to an audience of millions, both of them Nike athletes, one of them a Liverpool shareholder and the other a potential Liverpool transfer target, the impact is greater.
NBA megastar James and Paris Saint Germain striker Kylian Mbappe engaged in just that last week. While it may well have been a harmless ploy and a fairly easy marketing opportunity it created plenty of global interest in both men, as well as the teasing prospect of Mbappe in a Liverpool shirt.
It was the first display of how Liverpool can tap into the almost unparalleled marketing opportunities afforded to them by Nike, having arguably the planet’s biggest sporting superstar in their corner in the shape of James.
“There’s no such thing as bad PR sometimes,” explained Dr Dan Plumley, a football finance expert and senior lecturer at Sheffield Hallam University.
“It is that stuff that it can generate, and it is very tough to measure that financially until you get figures from the accounts.
“It is the synergy between LeBron James, who has a stake in Liverpool, and lining that up with Nike and him and giving you access to these things, and the other superstars in their client list.
“The 20 per cent of all merchandise is what Liverpool based this deal on. The overall deal is less but look at what they can generate, they estimate that this will benchmark them against some of the biggest deals in English football, such as the one Manchester United have with Adidas. That deal is £75m per year and Liverpool reckon this deal will get them closer to that figure.
“The benchmark remains Manchester United at £75m, Manchester City’s with Puma is about £60m per year. That is where Liverpool look at and where they think they need to be. New Balance wasn’t going to get them there but this deal should put them close to that, or even possibly beyond that.”
One avenue that could open up for Liverpool is the one that PSG have travelled down with Nike.
The French side have partnered with Air Jordan, part of the Nike brand, with the famous Michael Jordan ‘jumpman’ logo appaering on their shirts and apparel.
The club and Nike have been savvy in using Paris’ position as a global destination city to market their PSG products as fashion items as opposed to just traditional football apparel of shirts, tracksuit tops and coats. This kind of approach could well be followed by Liverpool moving forward, opening up revenue streams with markets that may have little interest in the club itself but who like to align themselves with what the likes of Drake and James are wearing.
“You are tapping into a very different market, but a very lucrative one,” said Dr Plumley.
“It’s a different cultural market and it is a younger generation that might have no interest in football but might have interest in purchasing items that are associated with LeBron James and Drake.
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“PSG have done this really well. They’ve got a merchandise line that is all about Paris Saint Germain as a brand and not just a football club. They have been selling basketball related merchandise, just clothing but it appeals to people through their links with Air Jordan. This is potentially very lucrative.
“LeBron James will be acutely aware of how much something like this can be worth owing to the amount of money he has made through his endorsements. It all helps and this is the way that it is going more generally. There is potential to grow commercially, and there is no limit on that. I think this is what clubs will be looking to do.
“Nike bring everything that comes around the edges and the bigger clubs want to align themselves with those brands. New Balance is not a small company but is nowhere near Nike’s level and you can see why Liverpool were willing to go to court and made sure that they got this Nike deal done as it could be so lucrative with all the add-ons, potentially.”
Then there is the ability to offer Liverpool merchandise across the globe with ease.
In representations made at the High Court hearing it was said that Nike would be able to place Liverpool products in ‘6,000 stores worldwide, 500 of which Nike-owned’.
New Balance had countered that argument and provided a potential 40,000 outlets, something that was dismissed as ‘fanciful’.
The truth is that Nike and Adidas are easier to market around the world owing to enhanced production, supply chains and points of sale. It is yet another reason why the Reds bosses were so keen to make sure the deal was signed.
“If you look at stores worldwide, Nike and Adidas will outstrip any other sporting goods manufacturer by a considerable margin,” said Dr Plumley.
“It is the placing of your club in certain places around the world, and if you have that 20 per cent in royalties on licensed products sold in those stores then the potential is enormous.
“You see how big the Premier League is worldwide and the amount of fans in Asian markets, particularly in relation to the bigger clubs.
“We know Africa, the Middle East and America is a growing market, and if you tie it all together you can see the benefit. The bigger picture is access to markets across the world.”