The unparalleled financial growth in global soccer has been well documented in recent years, and has shown the power of the brands that some of the world’s top clubs carry. We’ve seen record breaking commercial partnership deals in the area TV broadcasting rights, player transfer values, and shirt and kit sponsorships broken again and again, sometimes within the same calendar year. The kit supplier landscape in particular has seen some real shake up, especially after the recent news that Manchester United will drop Nike after the 2014/15 season and will move to an extremely lucrative partnership with their rivals, Adidas. As these deals continue to unfold, many ask the question, ‘who’s next? While we don’t have a crystal ball, we can make some educated predictions based on the current landscape.
The timeline to the right depicts the forecasted landscape of contractual relationships between the top soccer clubs in the world (based on annual revenue during the 2012/2013 season) and their corresponding uniform sponsor. The forecast generally depicts the global soccer retail market, with Adidas (FRA: ADS), Nike (NYSE: NKE), and Puma (FRA: PUM) representing the three largest presences. In the timeframe noted above, the companies represent 60%, 30%, and 10% of the market’s biggest teams, respectively. These numbers are potentially indicative of each brand’s strategy towards generating soccer related revenue streams; by representing the largest clubs in the world, a brand might be concentrating on jersey and apparel sales as opposed to footwear and other products not directly associated with a club. Adidas is currently executing an extensive internal transition as competitive pressures mount from the likes of Nike and Under Armour; an increased focus on representing the world’s best clubs might be the key to reasserting themselves as the top brand in soccer.
Among the most notable clubs on the forecast is Manchester United (NYSE: MANU), who just finalized the largest sponsorship deal in the history of sports with Adidas (10 years, ~ $1.2B, £750M, €960M). The English club, currently in their final contracted year with Nike, will wear Adidas, through 2026. In a “rising tides” fashion, the record breaking deal is expected to set the pace for the other major clubs around the world.
In 2018, FC Barcelona will sign its largest contract in club history, bolstered by the overall trend within the market, as well as the club’s unparalleled success since its last contract agreement in 2006.
The Catalan club boasts one of the world’s top selling kits, fueled by regular superstar performances by the likes of Lionel Messi and Neymar. Barcelona’s dominance through the“tiki-taka” style of play, combined with a historic run of trophies in the past decade elevated its status and appeal to an all-time high. It’s unclear whether FC Barcelona will get a Manchester United/Adidas value deal when negotiations are finalized, but consistent with other top clubs, United’s deal will definitely be used as a bargaining chip or point of reference.
In 2020, Real Madrid, the top earning club in world soccer and defending European Champions, will look to upgrade their current deal, which is believed to earn the club an estimated US$50M per year. The Real Madrid negotiations with their prospective sponsor could prove to be the most interesting on the timeline above. The Spanish club has a long standing tenure with Adidas, as well as a front office that pursues the best and biggest of everything in the world of soccer. For the likes of club president, Florentino Pérez, anything other than the biggest sponsorship deal in sports might not be acceptable.. If anyone is to break the Adidas / Manchester United record agreement, it will probably be Real Madrid.
German club Bayern Munich is also due for a new contract in 2020, with a change in sponsor unlikely for a number of reasons. Different than most clubs in the world of soccer, Adidas owns a little less than 10% of Bayern Munich. They also hold the longest standing soccer outfitting contract, through which the company has represented the club since 1966 (a 54 year relationship once the current contract is fulfilled). It is a more than reasonable assumption, and widely believed, that the German champions will most likely continue with Adidas at the close of the current deal.
In England, occupying the latter half of the forecast along with Manchester United, is Chelsea. Considering the trend of record breaking agreements particularly in the Barclays Premier League, Chelsea will command a sizable sum of money in 2023. This should be largely influenced by the potential bidding wars over Arsenal and Manchester City in 2018/2019. Depending on which brands represent which club, a Chelsea contract could tip the scales in giving brands dominance in the Barclays Premier League. On the other hand, sponsorship costs continuing to rise make it harder for the biggest brands to cover all of the major teams; this could open the door for the likes of Under Armour, Warrior / New Balance, or Macron, and give them an opportunity to gain some market share.
Paris Saint-Germain has skyrocketed in both the sporting and financial spectrums since the Qatari Investment Authority purchased a majority interest in the club in 2011. Foreign investment has completely transformed the club’s identity both socially and economically, with revenue growing five-fold between the 2009/10 and 2012/13 campaigns. This sort of progress should naturally trend towards a major sponsorship agreement in 2021, especially if the Parisian club can continue to make a significant impact in the Champions League, and if they continue to garner some of the top names in world football, like Beckham, Ibrahimovic, Luiz, and Silva, to name a few in recent years.
While it’s unknown what exactly is to come in the world of kit sponsorship in soccer, the latest contractual agreements and trends, combined with major club contracts coming to a close, will continue to push overall club revenues to record levels.
Who has the best shot of breaking Manchester United’s record sponsorship deal with Adidas? Will a focus on representing the leaders in world soccer bring Adidas back to dominance? Let us know in the comments section below, or via Facebook or Twitter.