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Nike and Manchester United: end of an era?
As explored in the MarketLine case study “NIKE, Inc.: Building a diverse business“, the US sportswear giant has established itself as a major provider of equipment and apparel in a number of sports including basketball, golf, soccer, and tennis. One of the strategies Nike has used to achieve its goal is to enter individual sports markets on the back of a highly successful individual (think Michael Jordan in basketball or Tiger Woods in golf), or team (Brazil national soccer team). In 2002, Nike furthered its interest in soccer by signing a 13-year, £303m ($480.1m) exclusive sports merchandising deal with Manchester United. That deal is however, set to expire next year and there are no signs of a renewal having been agreed. Is this the end of an era for Nike and Manchester United?
Yesterday (July, 8) Manchester United unveiled its new football kit. The kit, manufactured by Nike features a large Chevrolet logo on the club’s traditional red shirt, a privilege for which General Motors reportedly pays $70m a year, making it by far the largest sponsorship deal in world soccer. As analyzed in the MarketLine Case Study “Manchester United: Monetizing a successful football club“, such sponsorship deals are crucial to the club’s on-going financial viability in an era in which star players can command as much as £300,000 ($470,000) per week. The Chevrolet deal represents a more than two-fold increase on the club’s previous deal with US insurer AON, which was worth $31.7m a year over four years, and the club is looking for a significant uplift in the deal offered by any exclusive merchandising provider.
In February 2013, the two parties entered into negotiations to renew the agreement, with Nike entitled to a period of exclusive bidding. A figure of £600m ($938m) over 10 years has been quoted in the press, which would far exceed the reported £31m ($48.4m) a season that Real Madrid currently receives from Adidas. However, the period of exclusive bidding passed without an agreement being signed and so the way has been cleared for rival sportswear manufacturers to enter the fray and compete with Nike. Both Adidas and US-based Warrior are thought to be in the running, while Puma is considered an outsider.
The situation remains unresolved, but what is clear is that Manchester United will undoubtedly receive a major uplift on its current Nike deal, regardless of whether or not they choose to renew. A Nike spokesperson stated: “United is one of the greatest clubs in the world and we’re continuing discussions with them”, but the sums being quoted are forcing Nike to think commercially and carefully.
Only time will tell if the final whistle has been blown on Nike and Manchester United’s long-standing partnership.