Arsenal are set to announce a new kit sponsorship deal with Adidas, 24 years after swapping the German sportswear giant for Nike.
The 5 year deal is reportedly going to be worth £300,000,000, or £60,000,000 a year.
It will see Arsenal bring in £114,000,000 a year from its 3 main sponsors – Adidas, Emirates and Visit Rwanda. This represents a huge increase on the £16.8million Arsenal received in 2013 from Nike and Emirates.
Here are my thoughts:
Ivan Gazidis showing his worth?
Some will point to the huge deals as highlighting what Ivan Gazidis does. That in his time at Arsenal he has bought in record revenues to the club.
But as the aphorism go’s; “a rising tide lifts all boats”.
Whilst Arsenal have broken club records in terms of revenues, it is in an era that all clubs are doing similar. In fact, according to Swiss Ramble only Liverpool have had slower commercial revenue growth than Arsenal since 2009.
Manchester City’s figure has to come with a pinch of salt – their huge growth has come from their mega-rich owners sponsoring themselves.
Back in 2009, Arsenal’s commercial revenue was 68% of Manchester United’s. 8 years later it is just 42%.
Liverpool, Arsenal, Chelsea & Tottenham have all increased their commercial revenue by a similar percentage, whilst Manchester United have pulled away from the other 4.
So is it a success that Ivan Gazidis has kept us on par with other clubs? Or would this additional revenue have come in regardless? IE everyone’s has risen, so it is only natural that Arsenal’s would have risen.
The new mega-record-breaking shirt deal highlights this.
Is it a success to shout about a new £60million a year shirt deal when Chelsea have the same deal? And Manchester City are set to sign a £50million deal with Puma. Everyone else’s deals have risen, so it is only natural that Arsenal’s has.
Meanwhile Manchester United recently signed a £75million deal with Adidas
The fact we have let Manchester United get away from us is a complete and utter failure of our commercial department. One that has held the club back for a decade, and why I am not too bothered if Gazidis leaves.
Double Edged Sword
Shirt deals are always a double edged sword in my opinion.
On one hand, the increased revenue coming into a club is much needed. It will allow for better players to be signed, which in turn should lead to a higher chance of success.
On the other hand, Adidas will want to see a return on their investment.
These huge kit deals we are now seeing throughout European football are the reason why we now get 3 its a year, at a cost of £60.
Back when I grew up, Arsenal would bring out one kit a year.
A home kit this year, away next year. The 3rd kit was basically the previous 2 seasons away kit, got out of storage, washed and ironed.
This meant every I got the newest kit, usually for my birthday from a grandparent.
One new kit a year, it was financially viable for all involved.
Now if you want a child to have the latest kits – and lets be realistic here, you do not want your kids to go to football training or school with an old kit – you have to buy two kits a year; or even 3 if you get them the away kit.
Regardless of rising kit costs, just buying the home and away shirt each year for your child double’s the costs from when I was a child getting 1 kit a year.
Now imagine you have 3 children. That is 6 kits a year minimum you will probably fork out for.
By the time you get a name and number on the back, you are looking at £45 a shirt. Add the shorts and socks and you are looking at £95 each. That is £190 for both the home and away, or £570 both your 3 children. For clothes which in a years time will be “out of date”.
A full kit for a 6 year old child with their favourite player on the back now costs £65. £130 for both home and away.
And these costs do not even take into account buying the 3rd kit.
Every time the new kit is released, I see fathers moaning about how much it is going to cost them to ensure their son or daughter has the latest kit. And they are right. But have they then also “celebrated” when Arsenal announce a new record kit deal?
Unfortunately, you can not have it both ways.
You can not have a £60,000,000 kit deal without 3 kits a year costing nearly £100 each.
Adidas will want to continue to see revenues increase, and the only way they can do this is by producing 3 kits a season, at high prices.
Bubble Bursting?
A final thought on this.
There will become a time when the bubble bursts on kit deals. When manufacturers are no longer selling the units to cover the cost of sponsoring the clubs.
In 2016/17 Arsenal sold 1.3 million shirts. It is actually fairly a low number considering the club has 13.7million Twitter followers. It probably highlights how many shirts get sold in foreign lands that are fake. But that is another article.
So lets say in that in the first year of the Adidas deal, 1.5million units are shifted, that Adidas have invested £40 for every shirt sold.
Now of course, Adidas do not profit 100% from every shirt sold.
They have manufacturing costs and the retailer (whether the Arsenal store, Sports Direct, JD Sports or any other retailer) also make a chunk of profit.
At current prices (£55 for the current Adidas Manchester United shirt), we are probably getting very close to the point where what Adidas are paying clubs, and what profit they are making are pretty much equal.
This will cause another rise in shirt prices as Adidas look to increase what they are charging retailers, which in turn will push the charge to consumers up. But this will only work if the consumer are still happy to buy the kit at the new price.
Like with the increasing football ticket prices, eventually you reach a point where the buyer is no longer buying, and the bubble bursts.
I wonder how much more kit manufacturers will be willing to pay the clubs until it no longer becomes financially beneficial? Or how much more kit costs can rise until families just stop buying?
So there we have it, the good, the bad and the ugly of Arsenal’s new £300million kit sponsorship deal…
Keenos
Follow @KeenosAFC
