Liverpool Football Club’s announcement yesterday of a new deal with Nike to supply the club’s kits (that’s “uniforms” for the Americans in the audience) shines a spotlight on how much the apparel/footwear companies value the marketing opportunity (and the merchandising revenue) that can be generated by partnering with top  sports franchises.

Liverpool didn’t disclose the terms (or length) of its Nike agreement, which takes effect in June. However, it’s reported that the deal will be worth £80 million (about $105 million) annually, which would be a record for a UK club. Some are skeptical about that valuation, which apparently is based on projections of huge retail sales of Liverpool gear. According to filings from the court battle with current Liverpool supplier New Balance, Nike’s offer included a provision to pay Liverpool 5% of net sales of licensed footwear and 20% of net sales of all other licensed products over the course of the agreement.

A Pillar of Licensing
Sports has long been one of the major pillars of the licensing business, generating global retail sales of $27.8 billion, or 10% of the licensing business, in 2018. Throw in collegiate licensing (much of which is based on athletic prowess), and that number climbs to almost $34 billion, or 12% of the total.

Nike has uniform deals with a number of major soccer clubs such as FC Barcelona and Chelsea, as well as with three of the four largest U.S.-based sports leagues – the NFL, NBA and, beginning this season, Major League Baseball, for which Nike will supply uniforms and other gear; Fanatics will manufacture and distribute Nike-MLB products for retail. (Adidas has NHL uniform rights).

These are all long-term commitments. For example, the NFL deal runs through 2028, and the MLB agreement is through 2029. The NBA agreement runs through the 2025-26 season.

The Fanatics Factor
The company that winds its way through all of this, though, is Fanatics, the sports licensing eCommerce and onsite merchandising behemoth, which operates online shopping sites for each of the four big U.S. sports leagues (as well as the NBA Store in New York) and several major European soccer clubs. It’s become increasingly vertically integrated, taking ownership in 2017 of a major manufacturer (Majestic) and a licensing agency (Fermata Partners, now Fanatics College).

How closely tied is Fanatics to the business? Its minority owners include the NFL, MLB, NHL and NFL Players Association.

One thing is clear – these kinds of numbers are a tacit acknowledgment of the powerful emotional appeal inherent to sports – the kind of emotion that’s essential to the success of any licensing and branding effort.