New Balance have provided Liverpool’s merchandise since 2013 and the deal ran out at the end of the 2019/20 season. It was no surprise that it was going to take a lucrative deal to secure Liverpool and that many companies wanted to be Liverpool’s new kit supplier.
New Balance were eager to continue their affiliation with Liverpool, this led to them putting forward a £45 million per year deal. Liverpool also talked to the three big suppliers (Adidas, Nike and Puma).
Adidas were out of the question as they had previously quit as Liverpool’s suppliers seven years earlier as they called the then five-time Champions League winners “overpriced”. Puma withdrew as they had just signed Man City for a reported £52.5 million a year which meant they simply did not have the finances to sign Liverpool. This left just New Balance and the market leader, Nike.
New Balance’s aforementioned bid of £45 million per year was strong, Nike however, came in with an interesting deal. It was a base £30 million per year but it came with more marketing and 20% of all sales from Liverpool merchandise. This meant Nike’s deal could be worth up to £70 million per year.
Although Nike’s deal looked to be significantly better, it wasn’t that simple. In New Balance’s contract with Liverpool there was a clause called “Matching Right” which meant New Balance had the option to match any bid by a competitor. This meant no matter what Nike offered, New Balance could match it and keep Liverpool.
However, Liverpool had doubts. When the New Balance representatives met with Liverpool’s representatives, Liverpool said New Balance couldn’t match all the terms Nike put forward. This led to the court case.
Liverpool were represented by Guy Morpuss. Mr Morpuss is most well known for being the leading counsel investigating the Lance Armstrong doping allegations.
Guy put forward that Nike had offered to use three non-football superstars in LeBron James, Serena Williams and Drake for marketing activity which would help push the brand out further. Whilst New Balance couldn’t match that because they don’t have global superstars of that calibre in their portfolio.
New Balance came back with that argument that the calibre of individual athletes was in fact “too vague to be a material, measurable and matchable” term. New Balance continued to argue that if you spend money on marketing, that is measurable, but you can’t measure individuals as marketing.
Against the odds, Nike won, they had secured Liverpool. The Judge released his statement that said “that LeBron James is the world’s most famous basketball player, that Serena Williams, having dominated women’s tennis for 20 years, is one of the most famous athletes in the world and that Drake was the top selling recording artist in 2016 and 2018” and “it would be unrealistic that their calibre can not be measured”. The judge ruled that New Balance’s marketing offer was less favourable to Liverpool than the one Nike had proposed which meant Liverpool weren’t obliged to continue with New Balance and they could go elsewhere.
This court case could be a turning point in future negotiations. If a deal doesn’t have specific figures or clauses that don’t specify precise metrics, a “Matching Right” will be open to a legal challenge but how is an influence measured? Many factors have to be considered such as their number of social media followers, expected revenue growth, their maximum added value to the deal but more than often, it will depend on the case. This means the question “How is an influence measured?” has no answer and in fact will be on a case by case basis. However, there is still one question that remains unanswered, why were Nike so desperate to get Liverpool?
Many thought LeBron James having a 2% share in the Premier League giants played a part, however, it was down to Nike seeing an opportunity and pouncing.
Around 1,130,000 Liverpool kits are sold every year. This means on average a Liverpool kit is sold every 28 seconds. The club’s recent success on the field has led to a 95% increase in sales compared to last season, which in turn has led to the Red’s home kit becoming the most sold of any kit in the UK. All of this combined as well as the club’s past success means that the Merseyside giants are one of the biggest sports brands in the world.
To put it simply, Nike wanted to be associated with the club’s success.