Liverpool and Nike will start talking in the aim of getting back £80 million, as the time for the kit deal is running out.
Liverpool will begin the process of talking to Nike about extending their current agreement over the course of the upcoming year.
Back in 2019, after the Boston company attempted to activate a clause that would have allowed them to extend the alliance should they match a competing offer, the Reds won a battle in the High Court of London to free themselves from their previous agreement with New Balance.
The ability of the largest sportswear company in the world to deliver on scale and the Reds’ commitment to receiving 20% of the proceeds from Liverpool/Nike branded merchandise ultimately proved crucial, despite Nike paying a lower guaranteed annual sum of around £30m. With the added leverage of having A-list clients like rapper Drake, tennis champion Serena Williams, and basketball legend and Fenway Sports Group partner LeBron James, the arrangement gave Liverpool a lot of alternatives.
There will be discussions about how to move forward over the course of the upcoming season even though the contract is scheduled to last until the end of the 2024–2025 season. Given how beneficial the partnership has been for the club thus far and how the extensions to the agreement, like the LeBron x Liverpool collection and the affiliation with Nike-owned Converse, have been received and opened the club and Nike up to new markets, there is a desire on both sides to extend the partnership well into the future to make it a long-standing one.
Liverpool is finally seeing the economic benefits. Liverpool’s commercial revenue increased by £30 million to £247 million in 2021/22, the most current financial accounts, compared to 2019/20, the last season with New Balance, despite the fact that the individual breakdown of commercial revenues does not quantify how much the Nike deal has produced. When the 2022–23 accounts are released early in the following year for the year ending May 2023, it is anticipated that a more accurate assessment of the partnership’s value will be made. The new partnerships with Converse and James won’t actually begin until the 2023–24 accounting year, so it won’t be until then that their true worth will become apparent. Amounts of £80 million per year are not out of the question.
Liverpool and Nike have friendly business partnerships. James is one of Nike’s most important customers, and he owns stock in FSG. He will play a bigger part in the company’s future as they pursue an NBA expansion club in Las Vegas, which James is expected to lead. Then there is the 2021 investment by FSG into James’ SpringHill Entertainment Company along with Nike and RedBird Capital, 11% shareholders in FSG.
One of the biggest football clubs in the world and one of the most recognizable sporting brands is Liverpool. This brand has a compelling narrative for partners and is one of the biggest in the world. It benefits both parties to be able to establish connections between players like James and the clubs, and as interest in the sport increases, particularly in the United States, so too will the possibility of the connection.
From inside Anfield, it appears that the partnership is going very well. Record kit sales have been delivered, and the club is better able to connect with its global fan base thanks to Nike’s significant physical and online presence. In fact, the company made a huge push for its online direct-to-consumer offering during the pandemic. Given the long-term global closure of physical retail, the pandemic put a brake on how much could be accomplished, therefore there has been some catching up to do and some of the efforts may not have been as swiftly implemented as originally anticipated.
According to Liverpool’s vice president of merchandise, Mike Cox, “the relationship with Nike is a really good one,” he told the ECHO earlier this year.
“As time has gone on, we’ve grown accustomed to working together and have a better knowledge of their business model and brand. They have also learned more about our club, how we function, and what the opportunity is.
“Up to this point, our launches have been incredibly successful. We have launched record-breaking kits both at home and abroad, as well as several third kits more lately. Commercially speaking, it has been a huge success.
Moving forward, I believe there is a ton of opportunities, whether it be to broaden our lifestyle activities. The lead periods from design to manufacture and getting to the fan can often take up to 18 months, so some of these things take time. You’ll see some intriguing, more lifestyle-focused products emerge over the course of the upcoming season that you might not have anticipated to see from a Nike, Liverpool, or football club perspective. There are some intriguing items that, in my opinion, will draw customers who haven’t previously purchased from us as well as help us win over new followers.
Later this year, new Converse ranges will be released, and it will be interesting to watch how they are received as we expand their distribution beyond the first releases into more nations. There will be a lot more.
It’s tough to imagine Liverpool and Nike not extending their affiliation past 2025. Given the long-standing relationships between the Reds and Nike, it seems unlikely that a breakup would occur. After all, only companies like Adidas could truly fill the shoes of Nike and provide what the club currently needs in terms of scale and product offering.
But there will be factors to take into account when determining the potential value of Liverpool’s next deal, and a significant portion of that will depend on the Reds continuing to be a force to be reckoned with at the very top, capable of competing for the biggest trophies and luring players with international appeal. While there has long been a myth surrounding FSG among some supporters that the organization is more interested in financial success than competitive achievement, the truth is that the two are inextricably linked. Financial success doesn’t come around as quickly as they would like it to without competitive success.
It will be crucial for Liverpool to finish in the top four this season, as well as how they handle hiring and retaining players. Being at the forefront of that discourse is crucial to ensuring that the club continues to reach and engage the next generation of global fans at a time when football is booming in important markets and reaching new eyes.
