Tag Archives: Nike

Arsenal set for “double your money” kit deal

In 2014, Arsenal announced a new, long term partnership, with Puma. A deal worth £150m, or £30m over 5 years. It was, at the time, one of the largest deals of its kind in football.

Arsenal had been with Nike for 20 years, but in the early 2010’s, had decided to seek a new kit manufacturing partner. Adidas were in prime spot and were expected to sign a deal, until Puma swooped in late, gazumping the money Adidas had put on the table.

At the time, Cardiff City and Newcastle United were the only Premier League clubs to have their kit made by Puma, so the Arsenal deal was a massive coup for the German company.

“Arsenal represents a major commercial and marketing opportunity to reinforce Puma’s credibility as a global sports brand,” chief executive Bjoern Gulden said in a statement.

The deal Arsenal signed with Puma back in 2014 was one of the largest in world football lat the time. But as with our shirt sponsors, we are always at the beginning of the new cycle of mega-deals, and it was soon gazumped by Manchester United and Adidas:

It is clear that Arsenal are getting well below from Puma than what they could command in the current market. Half the value of Chelsea, 40% of the monster Manchester United deal. Not much more than the likes of Liverpool and Tottenham; whom we sell significantly more shirts than.

One interesting thing to note is the Chelsea deal. It is massive. Worth £900m at the time. But it is also a deal signed until 2032.

Whilst they might be getting more than they would “naturally” command now, you have to think in 5 years time, that deal could be considered poor.

Clubs usually sign 5 or 6 year deals, to enable themselves to not be caught out if there is jump. Arsenal suffered when they signed a long term deal with Emirates to help finance the stadium, and found themselves receiving a lot less than other sides in commercial revenue.

The Chelsea deal will be judged in the course of time.

Despite being fairly average, Arsenal are still amongst the runners for most shirts sold. It is this that makes Arsenal such a good proposition for manufacturers, rather trophies won.

Reports are that Puma and Manchester City have entered negotiations. With Manchester City looking to cut their £18m a year Nike deal short, and sign a £45m one with Puma.

This rumour is interesting, as it shows that Puma are concerned about not sponsoring a top Premier League team. Were the Arsenal deal to end, they would not have a major club in England wearing their shirt.

It also highlights how poor Manchester City are still seen abroad.

Despite running away with the league this year, the deal with Puma will still be a lot less than the Chelsea and Manchester United ones.

Puma base what they are willing to pay on the shirts they can sell – and not on the trophies won. Manchester United outsell every team in the Premier League (and the world) hence where there deal is the biggest.

It should also be remember that clubs do not get a “cut of global sales”. The only extra money a club makes on top of the licensing and manufacturing agreement is when they sell the shirts in the club shop or online. “Buy Direct” as Arsenal say.

When it comes to selling shirts, Arsenal or Manchester United are no different to Sports Direct or JD Sports. They make their money on the difference between what Puma (or Nike) sell the shirts to them for, and what they sell them on to us, the consumer, for.

Sorry for digressing.

Despite not winning a league title since 2004, Arsenal will still be considered by the likes of Nike and Adidas as a premium band. Someone that they want to supply, and pay big bucks to supply. Only 5 clubs in world football sell more shirts.

Barcelona have recently signed a £150m deal with Nike. Manchester United’s is at £75m a season. Chelsea £60m a season.

Adidas pay Bayern Munich £65m a season.

It is the Bayern Munich deal that is most comparable.

Arsenal sell a similar amount of shirts as the German giants, and Adidas want a London Premier League club after losing Chelsea to Nike. The deal will be done between Arsenal and Adidas.

Munich is the jewel in the crown for Adidas. A German based company, German’s biggest team. It is a match made in heaven. Despite this, they get less from their deal than Manchester United. Ultimately it comes down to business. Manchester United sell more shirts, so get more money.

Personally, I can see Arsenal signing a deal with Adidas in the region of £60m a season, doubling our current Puma deal.

I also do not think we will join Chelsea in a 15 year long deal. We should look at the Manchester United deal, expiring in 2024, and look at an expiry date of around that time.

In 2024, Manchester United might double their deal again, taking themselves to £150m. That would dwarf every other side in the Premier League.

Arsenal would not want to be sitting there in 2024 on £60m a year with 8 years to run, whilst Manchester United have a £150m a year deal. That could create a long term deficit of £720m. A lot of money.

Arsenal need to close that commercial gap between themselves and Manchester United. House deals with Emirates and a new kit manufacturer need to be just the beginning.

Keenos

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The catch 22 of a new kit supplier for Arsenal

“I told you all that the Puma deal was not very good” is what GC said to me a few days ago when it was announced that Arsenal were considering pulling the plug on the deal with Puma that was agreed in 2014.

The Gunners agreed a £150m contract with the German firm in 2014, following a 20-year association with Nike.

At the time, the deal was widely hailed, with Puma confirming it was the biggest ever for both itself and Arsenal.

But the £30milllion-a-year deal has since been dwarfed by Premier League rivals.

To a point, GC is right. At the time, only Real Madrid and Barcelona earnt more from their kit supplier. But within a year, Manchester United had shown the Puma deal up, signing a £75m a year deal with Adidas.

We are earning over 50% less than Manchester United’s deal signed in 2015, and half of what the new Chelsea deal is worth. That £30m could go on new players (although we have plenty of money for new players) or could go on bringing Arsenal’s wage bill closer to the likes of Chelsea, enabling us to offer Alexis Sanchez and Mesut Ozil what they really want.

£30m is a big chunk of cash.

It feels with Arsenal’s deals, we are always behind the curve. The Puma deal was the 2nd time we had signed a big money deal, one of the best in the world at the time, only for it to be dwarfed by other clubs within a year. The same happened with the Emirates deal when it was resigned.

It feels like we are always at the end of the cycle of deals. We are the last to get the deal agreed before everyone re-agrees new deals on even bigger money. And we are losing out big time.

Over the two years Manchester United have had their deal, they have earnt £90m more than Arsenal. This season will take it over £135m. That is a big chunk of cash.

But then we come to the catch 22.

We all moan about our kits:

  1. 3 kits every season
  2. The cost of the kits
  3. The design of the kits

But all 3 of these are linked to the deal.

3 kits every season – With a deal at £30m a year, or in Manchester United’s case, £75m a year, the supplier is going to want to maximise their profits. It is them, not Arsenal, who insist on 3 kits a year. If Arsenal wanted to play hardball, and demand only 1 kit change a year; which most fans want – then they would have to accept a vastly reduced sponsorship deal. You can not on one hand demand more from Puma (or Nike or Adidas), but then restrict them to one kit a year. That equates to less sells which in turn returns less profits.

Cost of the kits – The manufacturer, not Arsenal, sets the cost of the kits. They sell kits to Arsenal, and other retailers, who then mark up the kits accordingly.

The kit suppliers need to make back the money they have spent on sponsoring the individual club. If they have spent £30m a year to supply Arsenal with their kits, they are going to need to make that money back in sales. And remember, they have costs to design and manufacture the its. Even if they are using a Chinese Sweatshop.

The cost of the kits to fans is linked to what it has cost the supplier to sponsor and manufacture the kits. A Leyton Orient kit is half the price of an Arsenal kit – although an Orient kit is still way to expensive.

Like with the 3 kits a year, you can not wish for Arsenal to increase their income from kit sponsorship, whilst also moaning about the price of the kits.

Kit design – our kits this season are wank. Even though I believe if you have no plan to buy one, have not bought one for decades, and mock adults for wearing them, you should not really moan about the design, I still have the opinion that they are awful.

The problem once more is the more you demand in £££, the less editorial control you have.

The majority of kits supplied by manufacturers follow just a couple of designs. Note how the Spurs and Chelsea Nike kits are identical bar the colour.

Manufacturers are not going to design 3,000 kits for the 1,000 teams they sponsor world wide. They keep it simple, using a few different designs and just change the colours.


Whilst I am on about kits, here is some education for you all. Some fans believe that when you sign a new player, they pay for themselves in shirt sales. We saw this with Puma. But it is stupidity.

PSG sold 10,000 Neymar on the first day at €140 a piece. Some fans then did the math and worked out that PSG had made €1.4m from shirt sales on the first day, and that if that rate continued, they would have paid for the Neymar deal within the first year.

Utter stupidity.

Firstly, the sales rate will not continue for a year. Most shirt sales will happen on the day the shirt is released, or when a new player is bought. Then they dwindle. Secondly the majority of people only buy one shirt. So whilst 10,000 Neymar shirts were bought, it will mean less di Maria, Draxler, Cavani, etc shirts will be purchased. That is the basics.

We then come to costs. The shirts were not free. A club does not get 10,000 Neymar shirts from Nike or Adidas (or whoever the sponsor is) for free. They have to buy them from the supplier.

When it comes to selling shirts, a club outlet store is no different to Sports Direct, Soccer Scene or whoever. They purchase shirts from the manufacturer, and then sell for a marked up price. They then make the profit on the bit in the middle. It is simple. Not hard to understand.

Infact, the likes of Sports Direct probably get the shirts from the supplier for cheaper as they buy a lot more than a single club. They might not buy as many Nike shirts of Adidas than Manchester United, but by the time you add the shirts manufactured by Adidas from every other club, they will lend up purchasing more.

It would not surprise me if there is a 100% mark up on kits. Therefore, PSG bought the kits off the supplier for €70. That means they will make €70 a kit. Still a decent profit. So in the first day of sales, PSG made £700,000. Just about enough to cover Neymar’s wages for a week.

Kit suppliers pay clubs a big upfront lump sum for the kit license to manufacture and distribute the kits. This is where the majority of the profit from clubs come from when it comes to selling kits. Club shop sales are negligible in comparison. Not player has ever had his transfer fee paid for by kit sales. It is an internet myth.

 

So it is a bit of a catch 22, we want the club to maximise its commercial deals, but in doing so, we open ourselves up to more kit changes and higher kit costs.

Keenos

Is Chelsea’s shirt deal that much better than Arsenal’s

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Before I start, let me apologise for any errors in this blog. I am writing it on a phone on the way to Sudbury for a long weekend away for my birthday (32 on Monday thanks for asking).

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.


That was the original Daily Mail headline. It was one of those situations where the headline writers hadn’t actually read the article.


So a deal that outstrips United which is less than what Manchester United receive from Adidas on a yearly basis. The Daily Mail very quickly changed their headline to:

“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.


This lead many an Arsenal fan to point to how poor our current deal is. That it was an awful deal. At half the value of Chelsea’s, who are a smaller club (yet incidentally sell more shirts.)

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.

Keenos

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