Nike will have to pay huge money to retain link with Manchester United
Published 14/11/2012 | 16:14
NIKE face having to shell out huge sums of cash if they want to maintain their association with Manchester United.
The American sportswear giants are due to sit down with Red Devils officials in February at the start of an exclusive six-month negotiating period with United over their £303m kit supply deal.
And whilst United officials were giving little away today during a conference call to provide information on their first quarter results, it seems obvious Nike will have to come up with an enormous sum to satisfy the club's owners, the Glazer family.
In July, United announced a staggering £357m deal with General Motors for the Chevrolet logo to be worn on their shirts for seven seasons from 2014.
That figure prompted United to buy-out the present deal with DHL for United's training kit, which will now come to an end at the climax of this season.
"We feel we know, with some clarity, the value of our rights, and we are bullish about the abundance of opportunities available to accelerate the growth of this business," said Woodward.
"The planning on DHL started post-GM deal. We are always monitoring the value of our rights. We can improve the amount, duration and rights-package about that deal.
"Our six-month negotiating window with them (Nike) starts in February. We look forward to sitting down with them then."
Privately, United officials do not see the way the Nike deal is structured fits with the more commercially aggressive Glazer regime.
When the present deal was negotiated in 2002, United were a publicly floated company and preferred to take as much risk as possible away from any sponsorship tie-up.
Therefore, a profit-share arrangement was put in place which ensured United received only a proportion of the cash generated from worldwide shirt sales in exchange for a guaranteed sum.
The Glazer family have not gone down the same route. They have even stopped the policy of contracting out pre-season tour arrangements, believing they can negotiate better deals themselves.
As a battle is presently taking place between Sydney, Brisbane and Melbourne for two proposed matches in Australia during 2013, the value of such an attitude is obvious.
It has also been noted Nike now pay the French Football Federation almost £40m-a-year, without a profit-share arrangement, for a seven-year period which began at the start of last season.
Sponsorship certainly appears to be a lucrative revenue stream for United given they posted a 32% increase to £27.8m for the three months to September 30, 2013.
Including the General Motors contract, United did 10 sponsorship deals during that time, confirming an increase in workforce from 670 to 735 was almost exclusively connected to the marketing sector.
They now have mobile phone partnerships in 44 countries, with Woodward claiming the three-year deal with Japanese soft drinks manufacturer Kagome came as a direct result of opening an office in Hong Kong.
He added that the USA was the "next natural place" for the club to open a regional centre given as many supporters watch United live there as do so in the United Kingdom.
It was also confirmed United received £2.5million as a result of being an Olympic Games football venue, plus £1.3million in compensation for players appearing at Euro 2012.
In addition, United used proceeds of IPO to reduce total debt by 17% to £359.7m.
This is unlikely to appease the vast numbers of anti-Glazer United supporters though.
An 'exceptional item' of £3.1m related to professional advisor fees in connection with the IPO, part of what is estimated to be an overall spend of £550m in interest and fees since the Glazer takeover in 2005.