Every 28 seconds somebody buys a Liverpool FC kit. The demand for Liverpool kits has doubled in the last years and is currently most popular in the UK. By the way, since we are talking Football, we will stick to British English. Therefore, we will stick to kits and Football, as opposed to jerseys and Soccer ;-)
Liverpool recently announced the new kit supplier will be Nike, starting 2020.
This post is about Nike’s revolutionizing negotiation tactics, perhaps changing the jersey sponsor landscape as we know it.
But what are the circumstances? How did Nike outmaneuver Adidas, Puma, and New Balance to become the sponsor of the ‘hottest’ Football team? And perhaps most importantly, what the heck do Lebron James and Drake have to do with it?
With Liverpool’s recent success, it is no surprise that brands bid to become the new kit supplier. In fact, surrounding star trainer Jurgen Klopp, the future of Liverpool looks brighter than ever. Thus, in 2019, before going into negotiations, the company’s value was on an all-time high.
Now, besides New Balance (obviously) wanting to renew the kit contract at any cost, Puma, Adidas, and Nike joined the competition. Four brands started out the race, but it quickly boiled down to two leading contenders. Puma apparently ran out of cash, having just offered Manchester City a deal of up to USD 650 million. Adidas had quit Liverpool’s sponsorship deal seven years ago while calling the club ‘overpriced.’ Adidas was, therefore, not seen as an actual candidate. The decision was to be made between Nike and New Balance.
However, New Balance, who has been the sponsor since 2013, had a trump card to play.
Due to a clause called Matching Right which is standard in the industry, New Balance could match any competitive offer. In short, anything that Nike offered, New Balance could match and be sure to retain Liverpool. That being said, it seemed impossible for Nike to sign Liverpool. After all, surely, New Balance will match any offer…
So, as expected, after Nike’s offer to came in, New Balance executives immediately matched the terms. No surprise here. Now, here comes the climax of the story!
Liverpool refused New Balance’s offer to match Nike. Liverpool claimed that New Balance is not in the position to properly match Nike.Wait, just how is this possible? New Balance matched Nike’s terms offering up to $40 million per year. Why did Liverpool reject the offers to be equal?
The case went to court. And Liverpool’s lawyers to work.
To take the club’s exposure to the next level, Liverpool desperately wanted to sign with Nike. Liverpool argued that New Balance can not match Nike’s superstar collaboration and marketing activities. With the recent success, the club had a greater vision, including campaigns with a global superstar effect. Similar to Nike’s ‘Dream Crazy’ campaign that we previously analyzed.
In court, Liverpool reasoned that New Balance does not have the caliber of superstars in its portfolio to match Nike’s marketing offer. Meanwhile, New Balance disputed that the caliber of ‘superstars’ is “too vague to be measurable and matchable.”
The case decision was to be revolutionizing. Is the already existing portfolio of superstars (artists or influencers) a valid point for negotiation? If so, will this allow a level playing field for future contracts? Does this feed into the already capitalistic society and let the rich get richer? The big companies grow bigger?Or perhaps, is it a legitimate argument that must be considered? These may have been some questions the court had to decide on.
The courts ruled in favor of Nike. New Balance would be unable to match Nike’s marketing offer using global superstar athletes such as LeBron James and Drake. The judge called “Lebron James, the world’s most famous Basketball player, while Drake was the world’s top-selling recording artist in 2016 and 2018,” concluding that this is realistic and measurable. Consequently, the judge ruled that the marketing offer from New Balance was less favorable than Nike’s.
To visualize this, LeBron could be used to model the jersey, participate in marketing campaigns, or just generally advocating the club within the scope of Nike’s sponsorship. Also, it’s not farfetched to see Drake, wearing a Liverpool Nike jersey in the near future. New Balance can not match this caliber of star power.
Moving on, what’s to come from the marriage of the most buzzed Football club and Nike?
With the Jordan Brand x PSG collections, Nike has already proven that it can turn a sports team into a global fashion icon. Rumors are heating up that Nike has a Converse/Jordan Brand collection planned for Liverpool, which would make sense as more football clubs are attempting to reinvent themselves as lifestyle brands.
Nevertheless, Nike won the Liverpool case not because of money but because of their iconic portfolio of superstars. Nike used a grander landscape linking sports and lifestyle while exploiting their star assemble to win yet another deal.
For the wider industry, this judgment will boost the influencer/superstar stock, making them even more valuable for brands. More so than ever, we will see brands battle to lock down their superstar portfolio. Subsequently, the value of the brand grows with additional star power. And ultimately, an existing star portfolio can secure a competitive advantage in negotiations — Nike demonstrated this.