Adidas extend Bayern Munich deal 10 years for reported €900m

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Photo credit: The 12elfth Man (12elfthman.com)

Bayern Munich and Adidas have extended their kit partnership for another 10 years in a bit of Bavarian Bundesliga business.  The sportswear maker will pay the club a reported $992m (€900m, £645m) to secure exclusive kit supply rights through 2030. The previous agreement, an 8 year extension signed in 2011, secured the rights through 2020 and was worth a reported $289m (€200m, £176m) at the time.

The two giants of German sports have been partners since the 1960s when Adidas’ trademark three stripes were first worn by the club.

Adidas’ extension is a significant increase over their previous sponsorship rate with Bayern. The 2011 renewal was worth $36m (€25m, £22m) per season, by contrast yesterday’s extension will bring in $66m (€60m, £43m) annually or an 83% increase in the kit supply revenue.

It’s unclear whether Adidas has only paid for 10 additional years or an entirely new 15 year deal which replaces the existing agreement. Regardless, Bayern’s new deal places them squarely in the elite of club branding, although Manchester United still reigns at the top with their £75m a year agreement with Adidas and Real Madrid finishing close behind with their deal.

Adidas extend Bayern Munich deal 10 years for reported €900m

Manchester United kit deal depends on Champions League

Earlier this month Manchester United announced the largest kit supplier contract in history, with the club receiving a massive £75m (~$125m) annually from soccer giant Adidas.

Today Mark Ogden of The Telegraph reports on some of the more intricate details of the partnership related to the club’s UEFA Champions League status. United must find their way back to the Champions League by the end of the 2016-17 season or face a 30% reduction in the Adidas payments. Specifically, the clause will be triggered if the club fail to qualify for the CL in two consecutive seasons beginning from the 2015-16 season.

In a situation where the club is unable to secure a spot in the competition Adidas’ annual payments would be reduced from £75m to  £52.5m. Other clauses contained in the contract include a £4m payout for any win of the Premier League, FA Cup or Champions League and a 50% reduction in the contract should relegation occur.

The lucrative contract shows the extent to which Adidas is willing to pay for a global brand like United, but also how it does so in a way that controls for volatile league and tournament performances from its club partners. Given the increasing sophistication of branding partners it seems likely that performance based contingencies are going to be increasingly common in licensing agreements.

Manchester United kit deal depends on Champions League

Manchester United’s New Deal Era

Manchester United have announced a new kit partnership with soccer sportswear behemoth Adidas, ending their association with Nike. The new relationship will see United receive a staggering £75m (~$125m) annually, a sum that far eclipses the £23.5m per annum from the previous deal. In exchange Adidas will hold the exclusive right to distribute United branded products worldwide.

To put the economic impact of United’s new shirt deal into perspective consider that  Wigan Athletic’s gross revenues in the 2012/13 season were £58m. Manchester United’s shirt brings in considerably more money than an entire club playing (at the time) in the same tier. The figure is still stunning compared to the £126m in revenue made by an average EPL club.

Kit Deal ComparisonSo how does the shirt deal stack up to other clubs with comparable branding?

The new kit more than doubles the next closest deal, Real Madrid’s  £31m a year kit (also Adidas). Arsenal’s newly minted Puma agreement hints at higher values to be had in the coming years but the gulf between United and the rest of the pack  speaks to the depth of the club’s support around the world.

The Adidas deal is the perfect capstone for a year in which United have demonstrated their commercial might, announcing numerous partnerships with companies around the world in product categories from snacks to diesel motors. With the club losing its place in the 2014/15 UEFA Champions League and the resulting TV revenues, the Devils’ sponsorship platform is a vital source of revenue growth that the club will rely on to strengthen a weakened squad and build what it hopes will be another golden generation.

Manchester United’s New Deal Era