“Nothing lasts forever under the moon,” wrote the great English playwright in the 16th century. In this regard, the football world is no exception. Like the development of public life in a country, the struggle of European clubs is also undergoing significant changes. Moreover, in recent years, the controversy is not at all limited to the framework of the field. The world’s leading clothing brands are likewise battling for the right to offer a better product to teams in the Old World. In the central match of the 12th round of the English Premier League, the championship leaders met, who often resorted to changing technical sponsors. Liverpool confidently dealt with Manchester City at Anfield, winning 3-1. The weekly Football decided to analyze one of the most high-profile cases of recent times,
Foggy Albion traditionally sets the tone for the rest of the championships in terms of third-party income teams, whether it is the phenomenal profits from television sales of broadcast matches to long-term contracts with firms that outfit English clubs.
In the Premier League, as usual, the leading positions have been held recently by such technical sponsors as the American Nike and the German heavyweight Adidas. Moreover, the local company Umbro remained in the shadows for a long time, giving way to relatively new players from the New World (New Balance and Under Armor).
The media headliner was the recent legal duel between two giants of the apparel industry for the right to dress the vice-champions of England – Liverpool. Before the start of the Premier League season, New Balance offered the Merseyside club to renew its sponsorship, which ends in summer 2020.
However, the team of Jurgen Klopp, unexpectedly for many, refused the tempting offer, deciding to listen to offers from direct competitors of the company – American Nike. New Balance decided not to over-dramatize the situation, using one of the options in the existing contractual obligations.
In reality, everything turned out to be far from simple. The fact is that by agreement, in the event of an interruption of sponsorship terms from another firm, Balance could have required the management of Liverpool to disclose the details of the rival firm’s improved offer. But the bosses of the “red” flatly refused from this point, deciding to bet on the financial difference in the capabilities of the two firms.
In fact, the team’s choice in favor of Nike was due to the virtual impossibility of repeating their proposals. That is, in truth, one giant of the industry outwitted a more modest company, not giving it the slightest chance to continue cooperation with the English top club.
With an annual capitalization of over 30 billion euros, Nike, for example, is ahead of Adidas by almost 20 billion (about 13 billion euros in profits from the Germans).
Unsurprisingly, the £ 30 million offered to Merseyside per season and 20% profit on merchandising sales (at the standard UK rate of 7.5%) around the world is unlikely to be matched by the more modest New Balance in terms of revenue
Add to this another option with six thousand branded stores with Liverpool uniforms on the shelves (with a possible increase in the future to thirteen thousand points) – and we will get almost unlimited opportunities to popularize the brand of the English top club abroad.
Against this background, the proposal “Balance” in 3.5 thousand official representations abroad seems nothing more than a fiction. There is another solid advantage Nike has over its competitors. The ambassadors of the American company are such world stars of the sports world as tennis player Serena Williams or basketball legend LeBron James.
By the way, the latter is one of the shareholders of Liverpool with two percent of the shares in the amount of 6.5 million dollars. Thus, by supporting Nike in the sponsorship dispute, the “reds” will take into account the wishes of the “owners” of the club (and the auctioneers of the team are considered as such).
And this, in turn, will be an additional plus to the image component of the team and the option of promoting the brand in America, whose market today is one of the most promising for football in Europe.
Initially, this trial left no doubt that one of the opposing sides would have to incur significant image losses. As a result, New Balance found itself in this position.
The main argument in their defense, the firm’s lawyers called the pre-biased attitude of the management of Liverpool to their application. For example, Daniel Audkerk (defender) said that the Reds, long before the trial, preferred to change the club sponsor, constantly pushing on the volume of the retail network, which, however, is at odds with the real state of affairs.
In the 2018/19 season, the company sold a total of 2.9 million T-shirts, which is exactly the same as Nike’s initial partnership offer. However, the ratio of retail products, according to the club, leaves much to be desired.
So, Lersisides reproached New Balance for “ghostly” points (where not a single paraphernalia was sold) and in an excessive emphasis on a wide range of products (sneakers, etc.) for the sake of T-shirts (this applies primarily to Asian points, in particular China and Japan) … While in Serbia (12 stores) or Ecuador (six points of sale), the profit turned out to be completely zero. The bosses of the “red” believe that the American heavyweight in this regard will be able to qualitatively raise the level of sales to a qualitatively new level
But the Achilles’ heel in the “Balance” strategy is still the volume of trade. The production capacities of competitors are incomparable. If Nike can offer an increase in sales markets for products from the initial three thousand to 13 over several years of cooperation, then New Balance never came up with the promise made in 2011.
The company was never able to increase the number of points to the application option of forty-three thousand. Which, frankly, seemed impossible in advance. At the same time, another claim of the losing side to Liverpool is the ambiguous position of the team at the beginning of the joint cooperation.
Recall, before that, Adidas terminated its partnership with the team, tired of waiting for the club to return to the Champions League. “Liverpool’s requests and return on contractual obligations do not correlate with each other. It all depends on success in the field, popularity, TV coverage and merchandising revenue. Everything should be closely related – what you give and what you want to receive. We felt that Liverpool’s requests were wrong. So it’s over, ”said then the representative of the company, Herbert Heiner.
In view of this, lawyers say the Lersisides did not respond properly to New Balance for providing assistance at a difficult time. At the beginning of the joint cooperation, the technical sponsor of Liverpool was a subsidiary of the company – Warrior Sports, specializing primarily in hockey paraphernalia.
After spending a couple of seasons in this outfit, only then the team passed into the hands of the parent company. At the same time, the amount of the contract increased from 25 to 45 million pounds per year, which ultimately turned out to be insufficient profit for the vice-champions of England.
One of the peculiarities of English justice, and with it the office work of the whole of Great Britain and the United States, is the so-called precedent. According to this logic, judges are guided by human nature, which does not always fit into the established framework of legislation.
Based on this, due to specific life circumstances, a particular decision is made that would correspond to the current situation. Much of this has happened in the trial of the incumbent Champions League winner and two competing sportswear giants.
According to the judges, comparing the existing proposals and the claims of the club itself, the judges sided with Liverpool, allowing the team’s management to decide for themselves how the further development of the English top club will take place. From the point of view of justice, this decision fits into the framework of justice.
You can blame the disproportionate capabilities of the opposing firms as much as you want, but one thing is certain. In our time, in most cases, the truth is on the side of a stronger organization (this happens in any area). If you can offer more, you will get your piece of profit, and if you find yourself, relatively speaking, in a puddle, you will count the losses incurred.
Thus, Nike has simply proved to be more competitive in the services market, and is already developing home and away kits for the next season. The American giant has already invested about six million dollars in the production of equipment and, it seems, is not going to stop there.
According to British media reports, the American company has already agreed on a long-term contract for a period of five years, according to which Merseysiders will earn between 60 and 70 million pounds annually.
In total, the Reds will make a profit of about 300 million, which is by no means a record for the Premier League. For example, the same “Manchester United” in cooperation with “Adidas” receives 75 million, their city neighbors (“Man City”) in partnership with “Puma” – 50, and the London giants (“Arsenal” and “Chelsea”) – 60 each (“Adidas” and “Nike”, respectively).
In turn, Liverpool, having benefited from the sponsorship reshuffle, can still significantly lose in the image component. Neither in the case of parting with Adidas, nor even more so in the current situation with New Balance, the club behaved far from its best side.
Therefore, it is too early to congratulate Nike on the victory, because it is far from clear how the same Liverpool will behave in the event of a better offer on the market. In this situation, the Americans have acquired a kind of “pig in a poke”, which can, if something happens, and sharply scratch if he does not like something in the future.