Over the course of the next year Liverpool will start the process of engaging Nike over extending the existing partnership between the two.
Back in 2019 the Reds won a battle at the High Court in London to extricate themselves from their previous deal with New Balance after the Boston firm had sought to activate a clause that would allow them to extend the partnership should they match a rival offer.
In the end it was determined that while Nike were paying a lower guaranteed annual sum of around £30m it was the world’s largest sportswear company’s ability to deliver at scale, and the commitment to the Reds receiving 20 per cent of the proceeds of Liverpool/Nike branded merchandise that proved key. Throw into the mix the leverage that they had through a star client list that included the likes of rapper Drake, tennis star Serena Williams and basketball icon and Fenway Sports Group partner LeBron James and it was a deal that gave Liverpool huge options.
The contract is set to run until the end of the 2024/25 season but discussions will start over how to progress over the course of the coming season. There is a desire on both sides to extend the partnership well into the future to make it a long-standing one given how valuable it has been for the club thus far, and how the extensions to the deal, such as the LeBron x Liverpool collection and the link-up with Nike-owned Converse have been received and opened the club and Nike up to new markets.
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The commercial benefits for Liverpool are now being seen. While the individual breakdown of commercial revenues doesn’t itemise how much the Nike deal has made, when compared to 2019/20, the last season with New Balance, Liverpool’s commercial revenue has jumped by £30m to £247m in 2021/22, the most recent financial accounts. It is expected that a truer value of the partnership will be seen when the 2022/23 accounts are published early next year for the year ending May 2023. However, with the new collaborations with James and Converse only really starting in the 2023/24 accounting period it won’t be until then that the real value of it will be seen, with sums of £80m annual not beyond the realms of possibility.
There are simpatico relationships that exist between Liverpool and Nike. James is Nike’s most key client and someone who has an equity stake in FSG and who will have a more prominent role in the company’s future as they eye an NBA expansion franchise in Las Vegas in the coming years, which James is earmarked to helm. Then there is the investment made by FSG alongside Nike and RedBird Capital, 11 per cent stakeholders in FSG, into James’ SpringHill Entertainment Company in 2021.
Liverpool are one of the world’s biggest football clubs and most recognisable sporting brands, one that has a story to tell, and that is compelling for partners. Having the ability to connect relationships between the likes of James and the clubs is impactful for both, and as interest in the game grows, especially in the United States, so too will the potential for the relationship.
The view from inside Anfield is that the partnership so far has been one that is working extremely well, with record kit sales delivered and the club able to reach their global fan base more effectively through Nike’s major physical and online presence, with the company having made a hugely successful push with regards to their online direct to consumer offering during the pandemic. But the pandemic pumped the brakes on how much could be achieved given the shuttering of physical retail globally for so long, and that means that there has been an element of catch up and some of the initiatives may not have been as quick to arrive as initially planned.
“The relationship with Nike is a really good one,” Liverpool’s vice president of merchandising, Mike Cox, told the ECHO earlier this year.
“As time has passed we have got more used to working with one another and have a greater understanding of them as a brand and how they operate. Likewise, they have got to know us more as a club and how we operate and what the opportunity is.
“The launches we have had to date have been really successful. We have had record kit launches for home and away and, more recently, some of the third kits that we’ve launched with them. From a commercial perspective it’s been very successful.
“I think that there is a lot of opportunity moving forward, whether that is expanding what we do from a lifestyle perspective. Some of these things take time because the lead times from design to manufacture and getting to the fan can take up to 18 months in some cases. Over the next season or so you'll see some interesting more lifestyle oriented products coming through that maybe you wouldn’t have expected to see from a Nike, Liverpool or football club angle. There are some interesting things that I think will appeal to some who haven’t bought from us before as well as helping us attract new fans.
“There are more Converse ranges to come later this year and it will be interesting to see how they are received as we move them into more countries than we did with the initial launches. There is a lot more to come.”
It is difficult to envisage that Liverpool and Nike don’t extend their partnership beyond 2025. After all, when it comes to who could fill the shoes of Nike and deliver what the club now need in terms of scale and product offering there is really only the likes of Adidas who could come close, and given the long-standing relationships between the Reds and Nike it seems unlikely that a parting of ways would be seen.
But there will be some elements to be considered when negotiating just how much the next deal could be worth for Liverpool, and a fair chunk of that will come down to the Reds remaining a competitive force at the very highest level, able to compete for the biggest trophies and attracting players with global appeal. While the narrative around FSG among some sections of the supporter base has long been around a greater interest in the financial success as opposed to the competitive success, the reality that exists is one where the two are intrinsically linked. Without competitive success the financial success doesn’t come along to the extent that they would want it to.
Returning Liverpool to the top four this season will be important, as will how they approach their recruitment and retention. At a time when football is booming in key markets and reaching new eyeballs, being at the forefront of that conversation is of enormous importance to make sure the club continues to reach and engage the next generation of global fans.