The Category-A Principle How Adidas and Nike Are Cementing Football's Wealth Gap
Adidas and Nike are locked in bitter competition for the right to represent players and teams with the greatest global reach. It is a battle that cements the gap between the rich and the poor in world football. Cristiano Ronaldo's contract is perhaps the most astonishing.
FC Chelsea and Adidas. It is a relationship that seemed indestructible, and certainly one that was extraordinarily profitable for both parties. Since 2005, the German sporting goods company had been the team's outfitter and one of its primary sponsors. For Adidas, this deal with a top team in its core discipline was a vital element of its marketing strategy.
But after 11 years, the upper-echelon Premier League club ended the deal, according to the "private and confidential" letter sent by FC Chelsea on April 13, 2016 to Adidas headquarters at a former barracks in the Bavarian town of Herzogenaurach. The missive was the equivalent of a divorce announcement: FC Chelsea was informing Adidas that it would be backing out of the sponsorship deal effective June 30, 2017, even though that deal had several more years of validity.
That alone was a bitter pill to swallow for Adidas CEO Herbert Hainer, who was set to soon leave the company. But it became all the more bitter when FC Chelsea announced half a year later that it would be switching its allegiances to Nike, the industry leader. Indeed, hardly anything is more painful to Adidas than seeing a long-time business partner defect to its biggest competitor.
Nike and Adidas have been fighting for decades for top-dog status in the world of sporting goods and apparel. The greater the reach attained by football teams and their stars, the more important it has become for the two companies to be linked to them on the long term. And FC Chelsea belongs to that small group of teams that is immensely popular around the world -- a club in Category A, as it is termed in sponsorship contracts.
The 2016 battle for the FC Chelsea contract clearly demonstrates the ruthlessness of the rivalry between Adidas and Nike as they try to defend their own territory while simultaneously seeking to poach clients from their competitor -- and how much money is at stake. All sides seek to maintain the strictest of secrecy, and FC Chelsea likewise agreed in its "termination agreement" with Adidas to "not make any statement ... which would be disparaging to Adidas" or their relationship with the sporting goods company. The team also pledged to keep all information pertaining to their divorce strictly confidential.
For FC Chelsea, the switch to Nike in 2016 was extremely lucrative. The "signing fee" of 70 million pounds, along with a "commitment fee" of and additional 10 million pounds paid to Chelsea by the American company went almost exclusively to the indemnifying of Adidas for the premature ending of the sponsorship contract -- a total of 67 million pounds. But all additional payments that Nike committed to in the more than 150-page contract provided the club from Stamford Bridge previously unimaginable marketing revenues.
The Influence of Nike and Adidas
From July 2019 to the end of June 2032, FC Chelsea will be earning a so-called "partnership fee" of 40 million pounds per season. On top of that is the licensing fee for the sale of Chelsea products, so-called "annual royalties," worth around 15 million pounds. A Champions League victory would bring in an addition 3 million, as would a Premier League title. Altogether, the 15-year contract is worth 755 million pounds, the equivalent of around 835 million euros at the time the deal was signed.
The 2016 agreements that document FC Chelsea's defection from Adidas to Nike can be found in the Football Leaks trove of data, along with dozens of other sponsorship contracts that sporting goods companies have signed with clubs and their stars. The rapidly advancing commercialization of football, its orchestration, its romanticization, its hero worshipping: All of that is closely related to the influence that Nike, Adidas and Puma have on the industry.
The companies' decision to focus on the very best of the best is one of the primary reasons why the financial gap between the rich and the rest is growing ever wider. It applies to clubs just as it does to players and has resulted in a dwindling number of clubs that can afford the very best footballers. And the circle of clubs able to break through and win a national title or European championship is becoming smaller and smaller.
The chances that an outsider might emerge victorious -- like FC Porto did in the Champions League in 2004, or VfB Stuttgart in the Bundesliga in 2007 or Leicester City in 2016 in the Premier League -- is sinking from year to year. With their money, Nike and Adidas are helping to cement that state of affairs.
No other player is as illustrative of this development as Cristiano Ronaldo. The Portuguese star has been sponsored by Nike since 2004 and his contracts, which can also be found in the Football Leaks trove, clearly document how Nike fuels the cult of hero worship.
When Ronaldo signed his first "football endorsement contract" on Sept. 1, 2004 as a 19-year-old, Nike guaranteed him a base fee of 3.65 million euros for the period ending in summer 2010. That added up to 608,000 each year.
On Aug. 31, 2009, this agreement was extended -- just a few weeks after Ronaldo had switched from Manchester United to Real Madrid for a then-record transfer fee of 94 million euros. Now, the star striker would be receiving at least 3.1 million euros each year, with the contract running until 2014, though it contained a provision that automatically extended it to 2016. That provision, though, would only be triggered if Nike's net revenues from the global sale of Ronaldo-related merchandise between September 2009 to October 2013 were at least 120 million euros -- a benchmark that was apparently achieved, because the two sides only renewed their cooperation with a deal dated Sept. 1, 2016, according to a draft contract.
The Greatest Beneficiaries
Ronaldo's new contract is to run until mid-2026, when he will be 41 years old. The draft paper that DER SPIEGEL has in its possession is a key document in the Football Leaks data trove and one which clearly shows the surreal earnings capabilities of the superstar. According to the draft contract, Ronaldo is to receive 162 million over the deal's 10-year duration, with payments being made annually. For as long as Ronaldo plays for a Category A club, he was to be paid 16.2 million each year by Nike, the document says. Plus incentives. According to the draft contract, Ronaldo received an addition 4 million euros from Nike for winning the Ballon D'Or in 2016, the fourth time he had been chosen as the world player of the year.
26.08.2019, 17:13 Uhr
Rafael Buschmann, Michael Wulzinger
Football Leaks 2: Neue Enthüllungen aus der Welt des Profifußballs - Ein SPIEGEL-Buch
Among German players, Mesut Özil is among the greatest beneficiaries of the competition between the sporting goods companies. His contract with Adidas was signed in 2013 and runs until mid-2020. By ending his German national team career, Özil sacrificed 800,000 euros per year, with his annual payments now at 1.2 million -- not even a 10th of what Ronaldo is to earn from Nike.
The company Polaris Sports Limited, headquartered in Dublin, is the owner of Ronaldo's marketing rights and is named in the draft as Nike's contractual partner. The company declined to comment for this story. Carlos Osório de Castro, who has long represented Ronaldo on all manner of legal affairs, responded that he does not represent the star on this issue. He added, however, that he "fails to see how disclosing the details of a contract between Polaris and Nike could be warranted by 'public interest.'" But the Porto-based lawyer did have a suggestion: "If you want to get his comments on this subject matter, you should contact him directly." DER SPIEGEL asked Ronaldo for written comment by way of his agent Jorge Mendes and his agency Gestifute, but received no answer.
Nike, meanwhile, responded by saying: "We do not comment on athlete contracts."
This article is an excerpt from a new book based on data from the whistleblower platform Football Leaks. The book, "Football Leaks II: Neue Enthüllungen aus der Welt des Profifußballs," is appearing in German on Monday, September 9.