Mr Suarez is not a racist and Mr Henry is not a hypocrite
By Prestwich_Blue, Fri 20 January 2012 15:41
Last year, when the extended and enhanced Etihad sponsorship deal was announced, Liverpool was in the forefront of those clubs questioning the ethical and commercial aspects of the deal. Their owner, John W Henry, sneered "What was the losing bid?" He agreed with Arsene Wenger that it was for a ridiculous amount. Their MD, Ian Ayre posed the question "Are Etihad, City and Sheikh Mansour related parties? If they are, it's up to UEFA to rule on them." Well, if you'd asked me Ian I could have told you all about IAS 24 and disclosure of related party transactions in a company's accounts. I could also have told you that it isn't UEFA's responsibility to rule on them; it's the individual club's. Is the MD of a company that is supposed to abide by certain accounting standards really that ignorant of his responsibilities? That's frightening, if so.
So why bring that up now? Well as you may have seen in the news, Liverpool has officially confirmed their deal with Warrior Sports to manufacture their kit for the next 6 seasons. The figure wasn't confirmed but is believed to be close to £25m a year, making it one of the biggest deals yet concluded and nearly the equal of the one the rags did. So to echo John W Henry's question "What was the losing bid?" We know that for Liverpool's deal because the losing bidder, existing supplier Adidas, told us. "We thought that what Liverpool were asking and what they were delivering was not in the right balance" said a spokesman. This was a polite way of saying that Liverpool's lower profile of the last couple of seasons, without a top four finish in the Premier League and therefore no Champions League exposure, wasn't worth the price Liverpool were demanding. Their previous deal was believed to be slightly less than the £13m a year Arsenal get from Nike and apparently Adidas weren't offering more than that.
You will have heard of Nike, Adidas, Umbro and other global sports manufacturing brands but maybe not Warrior. That's because they only currently do Ice Hockey & Lacrosse kits, both fairly niche sports. So a company with absolutely no experience in the manufacture and sale of football kits has secured a pretty prestigious brand for their entry into that market. You'd expect the selling club to extract a fairly good deal for that privilege and Liverpool have certainly done that.
Liverpool claim that they were Adidas's biggest selling brand so Adidas must feel the figure being paid by Warrior is grossly excessive if they couldn't come close to matching it. Warrior has therefore clearly paid a very significant premium to gain their entry in the lucrative, global football market. By all accounts the deal isn't performance related plus they've given up the right Adidas had to sell non-branded merchandise, ceding that to Liverpool and giving them an extra, potentially significant, revenue stream. That's a risk on both sides with Warrior gambling that the price they've paid is worth it to gain entry to the market and Liverpool's risk is that Warrior can deliver and market a suitable kit when they have no experience of doing this within the sport of on a global basis.
Information on shirt sales is closely guarded by the manufacturers but Liverpool is estimated to sell around 50-60% of the number of shirts sold by United. Sales of other branded kit items may make up for that but, if those figures are close to correct then Warrior's risk appears to be greater than Liverpool, particularly if they settle into the upper mid-table position that rivals Everton used to occupy. Warrior's risk is even greater as there is apparently no performance related clause in the contract. These usually tie the sponsorship amount payable to the club's performance in various competitions but Liverpool will still be getting the mooted £25m a year even if they drop into the Blue Square Premier in 6 years time.
So who exactly is Warrior? They're owned by a Boston-based company called New Balance, well known for trainers mainly and, as I've said, started in the Lacrosse market before moving into Ice Hockey. Which begs the question of how such a niche producer got such a prestigious gig? Boston-based New Balance, known primarily for sports footwear, was introduced to Liverpool by their Boston-based owners Fenway Sports Group. Fenway also owns Boston's Red Sox baseball team which is sponsored by Boston-based New Balance. The more perceptive will have noticed a theme in this paragraph. One Boston-based company sponsors a Boston-based sports team whose Boston-based owners introduce them to their own UK-based sports team, who conclude a deal for far, far more than their existing suppliers feel the market is worth. A deal that outstrips their Manchester rivals who sell twice as many shirts and regularly finish in the top 4.
Does the suggestion of a couple of mates doing each other a big favour creep into your mind when you read that? No – it didn't occur to me either. Because if it was then the club crying foul about the Etihad deal would look like a bunch of classless hypocrites wouldn't they? And we know, from the dignified way they dealt with the Suarez issue, that you certainly couldn't apply that label to them.