Nike may come to regret its decision to walk away from Manchester United, writes Drew Barrand, associate director at Pitch.
You can imagine how the phone call would have gone.
Nike: "So, about our renewal deal. £60m a year. That’s a bit steep isn’t it?"
Man Utd: "That’s our valuation."
Nike: "With no European football?"
Man Utd: "That is a temporary setback and does not affect the valuation."
Nike: "Really? The squad isn’t exactly stellar at the moment."
Man Utd: "Our analysts have done the maths. Our global brand remains strong."
Nike: "We won’t pay £60m with no guarantee of European football."
Man Utd: "That is our price."
Nike: "I guess that’s that then."
In the commercial world of football, the habitual game of bluff versus counter bluff usually ends with the rights holder being the one to blink first. After all, climbing down by the odd million here or there isn’t as bad as losing the deal entirely and having to go back to the market. But then not all rights holders are Manchester United.
When news of Nike’s decision not to renew its kit deal with United broke, citing the heavy price tag on the deal, some commentators were quick to declare the demise of the club’s global commercial appeal. Nothing could be further from the truth.
There are two primary reasons why United continue to hold all the aces in their commercial negotiations.
Firstly, their global database and, in particular, their strong support in the economically-prosperous region of Asia, is the envy of football. Last estimates put it at 659m fans worldwide. If you are a global brand wanting to target football fans, especially if you are a sportswear brand, that is the deal you want. It is just a question of whether or not you can afford it.
Secondly, a club of the size and spending power of United will not suffer being outside of Europe’s elite for any sustained period of time. They will make the required investment to get themselves back at the top table as soon as possible. More than likely it will be proven to be nothing more than a one year hiatus from the UEFA Champions League. Two years max. Being in a position to win it may take a lot longer but competitive participation is enough to keep the club’s global fan base coming back for more.
Make no mistake, it will take more than a temporary hiccup to bring down the global brand that Manchester United has spent many years building up. Which is why there are already strong noises from Adidas about meeting the club’s valuation and taking Nike’s place on the famous red shirt.
The more pertinent question from these developments is why Nike believes £60m is a step too far for its business. What next for the swoosh is what we should all be asking.
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