Manchester United has the prospect of renewing its merchandising and sponsorship deal with Nike on very lucrative terms. It could be the most valuable sponsorship deal in sporting history. Nike are likely to be keen to keep the deal as there are very few sporting franchises with genuinely global appeal.
Manchester United has the prospect of renewing its merchandising and sponsorship deal with Nike on very lucrative terms. It could be the most valuable sponsorship deal in sporting history. Nike are likely to be keen to keep the deal as there are very few sporting franchises with genuinely global appeal.
The existing contract does not end until 2015, but Nike and United have just entered a six month exclusive renegotiating period. If the two sides fail to agree, United can spend six months talking to other suppliers such as adidas, but Nike would still have the option to trump any deal with a competitor. Nike is likely to try and complete a deal in the exclusivity period.
United signed a 13 year deal with Nike in 2002 that was worth £303m plus 50 per cent of profits on merchandise sold. These can be substantial as merchandise such as shirts can be produced relatively cheaply. The deal is thought to bring in £38m a season.
It was suggested last year that United were looking for a ten year deal worth £1 billion, but that may not be achievable. Investment bank Jefferies International estimates it could be worth £61m to United next year while Nomura believes it could be worth £74m. The final value may be depend on what is left out of the new contract, with United likely to hold on to its online sales and its soccer school, which are part of the current deal.
Michael Nathanson of Nomura Securities commented that these long-term commercial contracts are likely an annuity because the income is not dependent on results on the pitch. Last week’s defeat to Real Madrid led to downgraded forecasts on Wall Street.
There are suggestions that United’s merchandising revenue has lagged behind other European clubs, with Barcelona and Real Madrid recording higher revenues. That could impact on the negotiations.