Loyalty Pffffft It Is Business

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I was reading an article today about Liverpool Football Club and their kit sponsor New Balance. The kit deal is about to expire at the end of this season and Nike have now come on board. The deal with New Balance was that they would match any competitors deal so would continue the partnership with the club. I thought at first that this was a bit rough on New Balance as they have been with the club and having the clause would protect them. New Balance have now walked away from the Liverpool deal as the club are adamant they are going with the better supplier for their club. Liverpool is a football club, but foremost they are a business and have to do what is right by their owners and shareholders.

I think there is more to this than what the article was stating as it doesn't make sense. Nike's new deal with Liverpool is rumored to be in the region of £30 Million and New Balance was offering £45 Million. It isn't as straight forward as that though. On paper the New Balance deal looks far superior so where is the issue.

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Liverpool are a global brand and with success over the last couple of seasons comes boosted sales. Liverpool are flying high at the moment and they need to stay at the top to literally cash in. The clause in the New Balance contract was an offer to match any deal offered to Liverpool so they could continue working together. Liverpool however stated that there is much more to the Nike deal than just matching numbers.

Nike are offering £30 Million for the Liverpool rights firstly and then another 20 Percent on royalty's from sales around the world. Liverpool has some big name minor shareholders such as Le Bron James and rapper Drake. these are some of the names that will get behind the Liverpool brand over the next few years.

New Balance promised as part of their deal to have the Liverpool kit on sale in around 43000 Outlets around the world and achieved less than 3000. Nike has now offered Liverpool a guaranteed 6000 outlets globally that could possibly rise to over 13 000 outlets.The accountancy firm Deloitte was bought in to do a kit review deal before any new deals were made and Deloitte said that no one could match the distribution strength of Nike.

You don't have to be a genius to work this one out as matching the deal is a thumb suck. If new balance had the 43 000 outlets how many Liverpool shirts would have been sold over the last year alone? Nike through their outlets and contacts will double if not triple the availability of what New Balance was doing plus their is a 20 Percent royalty on all goods sold with the LFC badge.

£15 Million will be a drop in the ocean compared to what Liverpool may earn every year for the next 5 years. 20 percent royalties is huge and with possible increased sales could easily turn into a £100 Million deal. Football shirts are not cheap and the last time I looked were in the £50 pound range and with a line of different casual wear with the LFC logo it puts the New balance deal in the shade.