A "battle" between adidas and Nike for "dominance of the global football gear market is driving a steep rise in sponsorship payments to elite clubs -- and cutting into the two manufacturers' profits," according to Emma Thomasson of REUTERS. Shirt deal inflation is "reinforcing the advantage of about a dozen clubs with a global fan base" -- among them Barcelona and Real Madrid, the two Manchester clubs and Paris St. Germain. Nike stock dropped this week after Morgan Stanley downgraded it to "equal weight," primarily on concerns the firm is losing U.S. market share to adidas and Under Armour, but also "citing a profit squeeze from the rising cost of sponsorships." Peter Rohlmann, a marketing consultant who advises clubs and federations on such deals, said, "At the top, it is a pure power struggle between Nike and adidas. The costs don't play a role. They want to keep their competitor out." Under the terms of sponsorship deals, "the brand pays the clubs for the license to sell replica jerseys and other merchandise." The clubs "usually receive a fixed fee, kit for the team, plus royalties of some 10-15 percent of the merchandise sold and performance bonuses if the team wins major trophies." Spanish champion Barcelona is the market leader, selling 3.6 million shirts last season, according to Euromericas agency, followed by Bayern Munich, Chelsea and ManU. This top four has negotiated new kit deals with Nike or adidas in the last two years "worth double or triple what they were previously receiving." Adidas could be "forced to stump up almost half a billion euros a year" for its top five football deals -- almost a quarter of its marketing budget -- if it yields to demands from Germany and Real Madrid for more. Repucom Global Strategy Head Glenn Lovett said, "Clubs are becoming increasingly sophisticated. Football is the most global sport and this is where you need to be if you want to be a global brand" (REUTERS, 6/4).
