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SBJ/20100830/This Week's News
Adidas ups MLS bet with $200M deal
Published August 30, 2010
The biggest sponsorship agreement in MLS history just got bigger.
Despite having four years left on a 10-year, $150 million agreement with MLS, Adidas opened the contract and agreed to new terms that will see it remain the official athletic sponsor and licensed product supplier to MLS through 2018. An announcement is expected today.
Sources valued the deal at more than $200 million, making it one of the sporting apparel company’s largest investments in the sport worldwide. The deal, which is worth $25 million annually, represents a 66 percent increase per year from Adidas’ 10-year, $150 million agreement signed in 2004.
In addition to maintaining its position as the official supplier to all MLS clubs and youth academies, Adidas will continue to provide the league’s official ball and remain the only athletic brand with advertising rights for all MLS games. It also plans to increase its marketing support of MLS teams and broadcast partners, and make a mutual commitment with the league to player development.
“Our new agreement with Major League Soccer will shape the future of the sport in America and create new opportunities for the next generation of American soccer stars,” said Patrik Nilsson, president of Adidas North America. “We’ve enjoyed a successful partnership with MLS during the last five years and are eager to build on that success.”
MLS Commissioner Don Garber said, “Beyond the financial benefits, this is an important new agreement because the extension is a major statement by an international company that MLS is increasing in value. Our commitments to stadium development, strategic expansion, player development and improvement in overall quality of play are paying dividends for us.”
The original Adidas deal signed in 2004 was a landmark agreement for MLS. It came just three years after the league contracted by two teams and served as a vote of confidence at a time when many questioned if the fledgling U.S. soccer league would survive.
Since then, MLS has added seven new franchises, expanded into Canada ’s three biggest cities, built seven soccer-specific stadiums, added television-rights agreements with ESPN and Univision, and increased annual attendance by 24 percent to more than 3.6 million spectators across North America.
Because designing and producing uniforms requires two years of planning, Adidas and MLS officials planned to begin renewal talks as early as next year. Sources familiar with negotiations said discussions began earlier largely because Adidas recognized that MLS had expanded and the U.S. consumer’s interest in soccer, as illustrated by 2010 World Cup viewership, continued to flourish.
Two weeks ago, Adidas CEO Herbert Hainer flew to Boston from Germany and joined Nilsson and David Baxter, Adidas America ’s head of sport performance, for a meeting with Garber and Kathy Carter, Soccer United Marketing’s executive vice president. What was supposed to be a two-hour meeting became a six-hour renegotiation session that resulted in the new deal.
The results from the first six years of the Adidas-MLS partnership supported the company’s decision to extend it. Since 2005, MLS merchandise sales reportedly have increased more than 600 percent annually, to $300 million.
Those sales increases have been aided by the league’s push to sign more designated players, who are often international stars such as English midfielder David Beckham or French striker Thierry Henry. Beckham remains the biggest designated player signed to date, and Adidas sold 300,000 of his jerseys when he joined the league in 2007.
While outfitting elite players in Adidas jerseys was important, the prospect of outfitting youth players was equally important to the new deal. MLS clubs have begun developing youth academies for soccer players ranging in age from 9 to 18 years old and currently work with more than 20,000 youth soccer players nationwide. Most wear MLS replica jerseys made by Adidas.
The structure of the new deal guarantees that Adidas will have a direct pipeline to some of the most talented young soccer players in the U.S. and Canada as teams such as FC Dallas expand their youth ranks from 2,500 to 5,000 players in the coming years.
“The part of our strategy that resonated most with Adidas is our commitment to youth and player development,” Garber said. “It’s their commitment to that with us that we’re most excited about.”