Moin KhanA Football Ethusiast and Management Student
Liverpool FC, well known to all football fans, is a professional football club in Liverpool, England. Liverpool FC, who compete in the premier league and are known for their European domination, recently won the Premier League season of 2019-2020.
However, this wasn’t the only highlight of the season for these champions who were crowned after 30 years post their last triumph in 1990 in the same league.
Liverpool FC has managed to secure a deal for its 2020-2021 jersey that would generate the club a revenue of over 70 million pounds a year. Nike, the world’s leading footwear and apparel company, will become Liverpool Football Club’s official kit provider beginning in the 2020-21 season as per the signed multi-year agreement.
Liverpool FC, known for its loyal fanbase, sell one jersey every 28 seconds amounting to more than a million jerseys in a year. The 2018 Runner-up and 2019 Champions of Europe have seen a growth of 95% in their jersey sales year on year which makes it a lucrative proposition for any sportswear giant to associate with them.
So how did Nike beat the existing sponsors for Liverpool jersey, New Balance, in a record deal that involves £30 million base price and 20% royalties on the sale of all merchandise?
The New Balance (NB) contract was set to expire this year. The company had been associated with the Liverpool Club for the last 5 years with a contract signed in 2015 for £40 million, annually. It is interesting to note that the base price of NB was more than what was offered by Nike for the 2020-2021 deal.
When Fenway Sports Group, a part-owner of Liverpool FC, highlighted the additional benefits of the Nike deal, despite the higher base valuation, NB decided to match the offer with a clause in their contract called the Matching Rights. The Matching Rights clause allows the existing sponsor of any sporting club to match the competitor’s bid and steal the deal from their rival bidders.
However, Liverpool FC argued that NB could not match Nike’s potential marketing and distribution powers consequently taking the case to the court. Guy Morphuss argued, in a three-day trial, that Nike offered more brand value and goodwill to the enterprise because of their iconic portfolios of athletes and artists like LeBron James, Selena Williams, and Drake, something NB as a sportswear brand cannot match.
NB countered the argument by stating that the offer was, “too vague to be material, measurable and matchable” as they believed that the terms offered by Nike could not be expressed in monetary terms and hence rendered invaluable. However, the UK high court disagreed and ruled the case in favour of Nike and Liverpool FC stating, “LeBron James is the world’s most famous basketball player, Serena Williams, having dominated women’s tennis for 20 years, is one of the most famous female athletes of all time and that, Drake, was the world’s top-selling recording artist in 2016 and 2018 and it would be unrealistic that their calibres cannot be measured.”
The verdict ruled that the NB contract was less favourable for the English giants, setting a precedent for sportswear brands to focus more resources on portfolios of athletes & artists, as it can be the very essence that seals a major sports deal in future. Gus Morphuss was later named The Times’ Lawyer of the Week for his role in Liverpool’s court case victory over New Balance.
It is imperative for brands to focus on their brand positioning through their campaigns, collaborations and endorsements as they are seen as a direct measure of their stature in the market, even to a point that they determine the capabilities of a brand to take on bigger and more challenging projects. Nike, as we all know it, stands for as an iconic brand not only for the athletes but the youth in accord. Hence, their association with Liverpool FC stands as an extraordinary example of how strategic associations can help two brands grow mutually, if chosen wisely.
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