Comment & analysis – Milan’s kit deal

La Gazzetta dello Sport caused a little bit of confusion earlier in the week with their report on Inter renewing their kit deal with Nike for another eight years – it’s now due to expire in 2024 and is apparently worth around €18m a year.

The part about Inter was completely accurate. The confusion came from a claim in the same report that Milan are still the kit deal leaders in Italy, with their Adidas agreement netting them €20m a year, which La Gazzetta stated was a figure that included bonuses for the amount of merchandise sold on top of the basic agreement. Unhelpfully, they also put this amount in a tweet with no explanation that their estimate includes bonuses, leaving the impression that Milan have a €20m arrangement with the German company.

The first thing to clarify is that Milan do not earn €20m a season from Adidas. In fact, since the kit deal was extended in 2008, Milan have never earned €20m from Adidas, even if you include the various bonus payments that they receive each year.

The most the club have earned in a single year from the kit deal since it was renewed in 2008 is €17.495m, a figure which included a €1m bonus for “the achievement of specific sporting results.” That amount featured in the 2011 accounts – in 2012 the deal generated €16.726m.

The basic agreement – the one which most news outlets will report when you read about kit deals – is around €14m a season. That was enough to see them as the market leader in Italy before stories of Inter’s new deal with Nike.

The figures reported for Inter’s deal say that it will earn the Nerazzurri a total of around €200m over the course of the contract. La Gazzetta report the value is over 11 years because the renewal was in effect from 1 July 2013 – meaning the basic agreement is worth €18m a season, and not the €20m that some outlets are reporting.

But La Gazzetta’s article then compares Inter’s new basic agreement with Milan’s basic plus bonuses, which is not only inaccurate due to the misreporting of the bonuses received, but also a skewed comparison given the two variables are not identical.

It is safe to say that the new Nike agreement means Inter are the market leaders in Italy. Milan are second with around €14m from Adidas, and Juventus are third with €13.1m (from Nike).

It is an impressive financial boost for Inter – the old deal was worth €14m a season – but if you look outside of Italy, you see that those figures are still behind other clubs. Chelsea’s new deal with Adidas, signed this year, nets them €35m a season. Bayern’s deal with the same company is worth €25m, while Real Madrid earns €38m.

It’s no better if you restrict it to comparisons with other Nike-supplied clubs – Man Utd gets €27.5m as part of their deal, one they are looking to renegotiate upwards ahead of its expiry in 2015. Barcelona’s deal with the Americans, signed in 2006 and extended again in 2007, is worth €30m a season.

The only club they better are Arsenal – their Nike contract is worth €14m a season. But that expires in 2014, and they have just negotiated a deal with Puma for the start of the 2014-15 campaign that will be worth €39.5m a season.

Naturally, the value placed on a contract by a kit supplier will be based largely on the global brand and the ability to sell shirts. A report from PR Marketing in 2012 had Inter as Nike’s fourth biggest seller of shirts, on average, over the preceding five seasons. Man Utd, Barcelona, Arsenal and Juventus all sold more [Nike] shirts on average over the five year study period, and will factor into any contract Nike offer.

Brand power is a separate area that is too long to discuss in this particular article, but it is safe to say that at least three of those clubs sitting above Inter have a stronger global brand, and gives them greater bargaining power when it comes to either renewing existing deals, or looking for a new supplier to offer more money.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s