So yesterday (or was it the day before?) it was announced that Chelsea had signed a new £900m shirt deal. An astronomical amount outstripping anything seen in English football. Or that is what the media would have liked you to believe.
“Chelsea announce new 15-year £900m kit deal from next season with Nike after ending adidas partnership”
Exact same article. But a changed headline after the original was found to be lie by its own article.
Anyway, no matter if it is the biggest, or 2nd biggest, on paper it is a massive deal. £30m more than Arsenal’s current deal.
But this is a massive overreaction. Let’s actually break it down.
In 2013, Arsenal agreed a £30m-a-year 5 year deal with Puma. At the time it was the most lucrative kit deal in the British game. A year later Man U signed a 10 year £75m-a-year deal with Adidas. That pushed Arsenal into a distant 2nd. Also in 2013, Chelsea signed a new 10 year £30m-a-year deal, also with Adidas.
So up until yesterday, Arsenal had the 2nd best deal in English football. We now have the 3rd.
Now we do not know what makes up all of these deals. When Man U signed there’s, it was announced that they would no longer be getting a percentage of global kit sales. Instead they would merely get the profit on the mark up on their own shop sales that any sportswear retailer would get.
I would imagine that the new Chelsea deal follows similar lines. Big upfront money, but no share of the global profits.
What this immediately does is bring a mockery to the headlines that “Ibrahimovic will pay his salary in short sales”, and similar headlines when Pogba signed, and other top players. Because ultimately the main profiteers from shirt sales will now be Adidas (or in Chelsea’s case Nike). The reality is clubs will make little from actually selling the shirts now.
It is unknown if Arsenal make a percentage on shirt sales. They do have their “buy direct” campaign so they may well not make anything.
On top of this, for Chelsea, Nike will be putting their tick on all the usually football club merchandise. Training tops, polos, track bottoms. Once again Chelsea will no longer receive a portion of the global sales. Just a profit on what they sell in their own club shops.
But it is still an astronomical deal. And one which does blow Arsenal’s out of the water. Until you do the maths.
Firstly, Chelsea have had to pay £40m to Adidas to buy themselves out of their current deal. Over the 15 year deal, it doesn’t do much. The £900m deal is now worth £860m. But the key is that £40m won’t be spread out over the deal. It will be an upfront payment.
So next year, rather than Chelsea having a £60m positive from sponsorship in their accounts, yeh will have to offset £40n leaving them with just £20m from th 1st year of the deal. It’s all about the net (see what I did there?).
Now Arsenal have 2 seasons left on the current deal. So let’s compare the deals over the next 2 seasons.
Over the next 2 seasons, Arsenal will receive £60m from Puma – £30m-a-year.
In the same period, Chelsea will pocket £120m from Nike. But also have to pay Adidas £40m. This leaves them with £80m income from kit sponsorship deals over the next 2 seasons.
So Chelsea are set to make £80m, Arsenal £60m. A difference of £10m-a-year. Suddenly the eyewatering differing of £30m-a-year has been blown out of the warer.
So the Chelsea deal is £20m more over the next 2 seasons than Arsenal’s 3 year old deal. And then in 2018, Arsenal will have an opportunity to negoatiate a new deal, that you would expect to be a lot closer, or even more than, Chelsea’s current one.
The 2013 deal was not a bad deal. Let’s put it into normal life. In 2013, I got my flat revalued. It was valued at £180,000. Had I sold them, I would have made a nice £40,000 profit on what I bought it for in 2008.
Last week I accepted an offer on my flat (1 bedroom new-ish build in Walthamstow). £320,000. Now had my neighbour sold 3 years ago, at the time people might have said “good deal, good profit”. But then I sell mine this year, for nearly twice as much. Was my neighbours deal a good deal or a poor deal?
Well at the time it was a good deal. But market forces pushed house prices in Walthamstow up dramatically. Now it looks like a bad deal. But that simply isn’t the case.
The other key factor with Chcelsea’s deal is the length of time. 15 years is a long time in football.
We saw this when Arsenal signed a deal with Emirates in 2004, starting in 2006. A £100m for shirt sponsorship and stadium naming rights. It was a huge sum of money which enabled us access to the finance needed to complete the Emirates Stadium.
At the time, clubs were happy if they got £1m a year for stadium naming rights.
But as time went on, thee deal looked poor. It was massively front loaded. Other clubs started to get more money for shirt sponsorships. More for stadium naming. But Arsenal were in a long term 15 year deal for he stadium (less for the shirts.) In 2012 Arsenal renegotiated the deals. £150m, extend day the shirt deal to the end of the 2018/19 season and the stadium naming rights to 2028.
Football and football finances are moving quickly. Remember, just 3 years ago Chelsea increased their deal with Adidas to £30m. And now it is at £60m with Nike.
Te deal with Nike looks good in 2016, but how will it look in 2031? The way things are going, it’ll probably start to look a bad deal in around 2020-2022. It will still have 10ish years to run. They have just paid £40m to buy out the Adidas deal, and have a history of doing it with buying out Samsung to get in a Japanese tyre company. The contractual punishment for breaking the Nike deal will be as astronomical as the Nike deal itself. That is, of course, if the football bubble doesn’t burst. It’s a bit like getting a fixed term mortgage!
So over the next 2 seasons, Chelsea will make £10m more a season than Arsenal. Then Arsenal will sign a new deal. So before people throw their toys out the prams, the is he difference between the 2 clubs is not that much.
Let’s see what the new deal Arsenal agree before we complain / bitch / winge / moan. We may end up making Chelsea’s deal look very poor indeed.