Updated: Manchester United Seek to Close Reported $1.57 Billion Nike Kit Deal

Following one of the more disappointing transfer windows in recent history, Manchester United are seeking to at least improve the club’s financial position with a new Nike kit deal, rumored to be worth a record-breaking £1 billion ($1.57 billion) over 13 years beginning in the 2014/15 season.

To put this deal into perspective, the most expensive kit supplier sponsorship deal currently, according to TSM, is the Adidas/Real Madrid partnership, which is worth an annual $49 million. If United are able to close the new Nike deal for the reported price tag and length of contract, it would be worth an approximate £76.92 million ($121 million) annually. That is 247% more than the Adidas/Real madrid deal, and 295% (almost 3 x) more than United’s current contract with Nike.

READ: Manchester United, Adidas Suit Up Together in Record Deal 

Manchester United 2013/14 Nike Kit. Courtesy mirror.co.uk

Manchester United 2013/14 Nike Kit. Courtesy manchesterunited.com

Manchester United fans were left wanting after failing to acquire the talent the club sought during the summer transfer window, which closed last Monday, but this deal would be a way for the club to at least bolster its financial position and set itself up for fiscal prosperity for the near future. Though these are rumors, the public should expect an announcement in the very near future on the subject, as this decision is relatively time sensitive. As the Daily Mirror reported, it takes approximately 18 months advanced notice in order for potential kit suppliers to produce a range of new prospective kits for a team. Though Nike have probably had ideas in the works for United for next season for some time now, if the deal were to fall through and the partnership terminated, United would be in the market for a new kit supplier. The new sponsor would have less than a year to provide the same quality range of kits, so as the cliché goes, ‘the clock is ticking’.

While it is true that United are free to talk with other suppliers, it is most definitely Nike’s deal to lose. Of the BPL “big four” clubs, United is the last chance Nike has left to have its logo on one of these four kits. Arsenal (Puma), Chelsea (Adidas), and Liverpool (Warrior) have all recently signed new deals with their kit suppliers, taking them off the market and out of Nike’s reach, at least for now. A Nike spokeswoman was quoted in the Daily Mirror article saying,

We have a great partnership with Manchester United and are still talking to them.

United are too important for Nike to walk away because the price tag scares them.

This deal would not only represent a significant financial investment for the 2nd largest sporting goods company in the world (Adidas #1), but also a significant time investment as well. 13 years is a very long time to be under contract with a kit supplier. The average length of the current top 10 kit supplier partnerships is a little over 7 years, making the Manchester United/Nike potential deal almost 2x longer than average. A lot can happen in 13 years of football. Though United have won 7 of the last 13 premier league titles, there is no guarantee that this success rate will continue over the next decade and a half. However, BPL titles would not be the only measure of success for Nike and United. In fact, perhaps more noteworthy would be a top four finish in each of those seasons, which would ensure United a UEFA champions league berth and would thereby open the door for tournament specific kits and an opportunity to generate more sales for both parties.

Manchester United’s success has captured the attention of not just football fans, but businesses and sponsors across all sectors. The club’s recently enhanced brand bargaining power was made evident earlier this season when United signed a new shirt sponsorship deal with Chevrolet for a record $80 million a year (most expensive ever). Now the club is looking to break more records with its kit in this potential new deal with Nike. An agreement between the two football giants is all but certain, at least most would assume based on what is at stake for both parties. At this point it is just a matter of settling on a price and the terms of the arrangement. One thing is for certain – even if it is not quite £1 billion when an agreement is reached, Manchester United are inflating the sponsorship market, and they don’t appear to be slowing down. Adidas, Puma, Warrior and other kit suppliers can all but guarantee a fairly significant price increase on their current deals with other top world clubs if they want to keep pace and remain competitive with Nike moving forward.

Currency conversions via Google Finance ($1.00 = £0.64) as of 9/10/13

 


Update:  Manchester United released a statement on its Investor Relations site stating that the club had reached an agreement with sporting goods manufacturer Adidas “for a global technical sponsorship and dual branded licensing deal for a minimum guarantee of GBP 750 million, subject to certain adjustments, beginning with the 2015/2016 campaign.”


 

 

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Reporting on the business side of the world's game.