Just Sign It: Liverpool choose Nike over New Balance
December 24, 2019
2 min read
What's going on here?
Current European Champions, Liverpool are free to enter an exclusive sponsorship deal with Nike after their current sponsor’s (New Balance) High Court appeal was rejected in late October.
What does this mean?
In 2015, Boston-based sportswear firm New Balance became the exclusive sponsor of Liverpool FC. The sponsorship agreement provided that New Balance could renew the agreement with priority over rivals if they matched “the material, measurable and matchable” terms of a third-party offer.
On the basis of this term, when Liverpool provisionally agreed a new sponsorship deal with Nike (to begin in the 2020/21 season) New Balance appealed to the High Court for enforcement. Lawyers for the football club claimed that it would be fanciful and mythical to assert that New Balance could (as they claimed to) match the terms an offer from Nike, who had far more retail outlets. The High Court found in their favour and clearly stated that Liverpool are not under an obligation to further renew their contract with New Balance.
What's the big picture effect?
Despite its inimical demise, the sponsorship deal between Liverpool and New Balance has proven to be fruitful for both parties. Liverpool received £40 million a year, which is £10 million more than the Nike deal will deliver. For New Balance, this agreement coincided with the company posting record revenues of $4.5 billion (2018). English football has a global audience that provides significant exposure, which is becoming ever more quantifiable as technology develops.
Liverpool’s new deal with Nike means that the club joins the likes of FC Barcelona, Chelsea, Paris-Saint Germain and other football and non-footballing icons in being sponsored by the retailer. The Merseyside club will hope that the unparalleled marketing and distribution capabilities of Nike serves to develop the club’s reputation in the coming years.
As a contractual dispute, the interpretation of the sponsorship agreement between Liverpool and New Balance turned on the matching clause. Such a clause gives the sponsor a right to match and defeat any superior proposal that the target company receives from a third-party. Although in this case, New Balance had triggered this provision of the contract, Liverpool FC chose not to extend their relationship. In a recent dispute between Rangers FC and Sports Direct, the court had held that the company would have multiple opportunities to match the offer given by the rival company and the club cannot abandon the sponsorship deal altogether. The judgement also hinged upon the fact that New Balance did not and currently cannot manage to get exclusive deals with superstars like LeBron James, Serena Williams and Drake. Thus, they aren’t able to match the offer tabled by Nike.
Ultimately, New Balance has the opportunity to provide multiple offers to better the deal offered by Nike. However, they do not seem keen to furnish another proposal or move forward with an appeal against the judgement.
Report written by Pratyush Chaturvedi
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