The Adidas Deal: Inside the Numbers

The big business story in American soccer over the last 24 hours was the announcement that league sponsor adidas has significantly increased its committment to MLS with a new 8 year, $200 million that runs through 2018.  The deal replaces the previously signed 10 year, $150 million deal signed between the parties in 2004.  With four years remaining on the original deal, adidas has increased its annual committment to Major League Soccer by $10 million per year.

In addition to supplying the clubs and league with merchandise and balls, adidas will remain the the official supplier of uniforms and equipment to MLS youth academies and will increase its advertising presence during MLS broadcasts.  The increase in MLS youth academy presence in affluent and urban areas gives Adidas significant opportunities to reach younger players and familes with an entire line of merchandise.  Moreover, the 8 year deal allows MLS to develop and plan its strategies with the knowledge that these funds are coming through 2018.

According to the Sports Business Journal, adidas’ decision to extend the deal,is based, in part, on the 600% increase (over the last five years) in annual MLS merchandise sales to $300 million per year.

With its FSC contract up this year, the Adidas deal may provide a background for further broadcast negotiations.  With promises from adidas to become a greater presence in television advertising, FSC, and potentially Versus,  may have more reasons to consider signing with MLS.  ESPN may also recognize greater return on its long term investment in the league.

This is obviously a great moment for the league, as it ensures a significant commitment from one of the great merchandise and marketing powers in the world of sports.  At the same time, adidas is shrewdly increasing its participation in MLS at a time when the league is devoting increasing resources to youth development.  We

We’ll let Don Garber have the last word:  “One of the major reasons Major League Soccer has become one of the top soccer leagues in the world is due to the support and commitment of adidas. “They have a clear vision for the sport in North America, and they see MLS as a cornerstone of that vision. Our extension with adidas is a major statement by an internationally respected brand that MLS is increasing in value and that our commitments to stadium construction, strategic expansion, player development and improvement in the overall quality of play are playing dividends.”

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Selling the Gear: A Look at Soccer Merchandising

On the move for the next couple of days, so here is our quick take on a recent article about the sale of soccer merchandise in the United States and around the world. OregonLive presents an interesting article on Adidas marketing efforts for the 2010 World Cup.  The article provides in depth analysis on the soccer apparel industry and efforts to sell sporting goods in the current market.

The article focuses on Adidas’ worldwide efforts to market its product and the importance of the World Cup in spreading brand awareness.  Sales for the sporting goods giant are down significantly, and World Cup 2006 provided a significant boost that Adidas hopes to equal or surpass. However, for MLS fans, there is this juicy quote:

“To build its U.S. soccer edge, Adidas paid a reported $150 million over 10 years to sponsor and outfit men’s Major League Soccer, which is expanding to 18 teams and drew 3.6 million spectators this year. Stu Crystal, MLS marketing vice president, said annual sales of league-licensed merchandise has grown more than 600 percent, to $300 million, since the Adidas partnership began in 2005. “Being connected to Major League Soccer gives Adidas exposure to millions of soccer fans and reinforces its position with the sport,” he said.”

While the Beckham effect is certainly an enormous contributing factor to the exponential growth referenced above, this is obviously a good sign for the league.  Selling merchandise can have a snowball effect, as brand awareness can ultimate increase sales.  The article provides some great data and we recommend the read.