Winner takes all in mega soccer shirt deals
By Emma Thomasson
BERLIN (Reuters) - A battle between Adidas and Nike for dominance of the global soccer gear market is driving a steep rise in sponsorship payments to elite clubs - and cutting into the two manufacturers' profits.
Shirt deal inflation is reinforcing the advantage of about a dozen clubs with a global fan base - among them Barcelona and Real Madrid, the two Manchester clubs and Paris Saint Germain. These same clubs benefit from bigger revenues from broadcast rights, helping them pay for the best players.
The clubs' gain comes at Adidas and Nike's expense.
Nike stock dropped this week after Morgan Stanley downgraded it to "equal weight", primarily on concerns the firm is losing U.S. market share to Adidas and Under Armour, but also citing a profit squeeze from the rising cost of sponsorships.
"At the top, it is a pure power struggle between Nike and Adidas," said Peter Rohlmann, a marketing consultant who advises clubs and federations on such deals. "The costs don't play a role. They want to keep their competitor out."
Under the terms of sponsorship deals, the brand pays the clubs for the license to sell replica jerseys and other merchandise. The clubs usually receive a fixed fee, kit for the team, plus royalties of some 10-15 percent of the merchandise sold and performance bonuses if the team wins major trophies.
Only the highest-profile clubs, and a few national sides like Brazil and Germany, can shift the millions of shirts that justify deals now worth as much as 100 million euros ($111.58 million) a year.
Spanish champions Barcelona are market leaders, selling 3.6 million shirts last season, according to Euromericas agency, followed by Bayern Munich, Chelsea and Manchester United. Continued...