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 vice president of consumer products, 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.
[EDIT: Check out this comment below, which posits that the adidas deal does NOT preclude MLS from receiving a percentage cut from all merchandise sold in addition to the rights adidas paid for in the announced deal. I think that makes sense, and as such, the above comment by me is probably wrong. My apologies for the sloppiness. See also this followup.-FS]
This is also awesome:
That's helped with women customers too. Though the men's soccer products market is much larger than the women's market, women's soccer is growing in the U.S., particularly in high schools and colleges. Women make up about 40 percent of Major League Soccer spectators and it doesn't hurt that the league has glamorous stars such as the Los Angeles Galaxy's David Beckham; Adidas sold 300,000 Beckham jerseys when he joined the league in 2007. "I have two 13-year-old daughters who are Beckham fans," Crystal said. "They know he's cute."
Yeah, like I'm so sure MLS's women fans follow the league more because the players happen to be cute.
relampago: lolol this actually took me like 2 seconds to find. but yeah.
whatsername104: mmmmm
Oh now come on, it's not the only reason.
-FS
12 comments:
This is blowing my mind. I'm wondering if you could help me understand something here. Maybe the cold and snow is causing my brain to not grasp something obvious, or my math is way off, or I'm ignorant of some other facts. The 10-year Adidas partnership started in 2005; and I'm guessing that, as it seems with all things MLS contract related, we have little-to-no information as to the details of that partnership, so we don't have a clue as to what the amortization of that $150 million is over those 10 years. We do not know what has been paid, and what is left to be paid so, for simplicity's sake, let's assume that it's $15 million a year with 6 years left. The article claims a 600% increase in total annual sales of MLS/Adidas merchandise to now $300 million. That means that in 2005, sales of MLS merchandise was $50 million. So, for all we know, the difference between cost and revenue (that is not to say, cost and profit) for Adidas has grown from $35 million to $285 million per year in just 4 years.
So, getting back to my original statement, that being that my mind has been blown: you say with some certainty "It's too bad they didn't have some kind of escalator clause." Is this true? MLS didn't even negotiate some tiny, small, negligible, hardly-noteworthy, graduated percentage of revenue sharing from merchandise sales, should something like, oh I don't know, they increase by 600% in 4 years? I mean, *sputter sputter*, huh?!
I think this speaks to where the mindset of the leaders of MLS has been for the last 5-10 years. It just seems so incredibly--for lack of a better word--myopic. I understand the conservative mindset, the idea that a bird in the hand, blah blah blah. But I think that the MLS investor-operators far too often mistake vision to be unnecessary risk; and in this case, saying to Adidas "Once we start making money on this--and we are confident that we will--let's talk about an additional 3% to 11% reinvestment of that money back into the league." It's at moments where everyone around you thinks that you should be most unsure--like MLS circa 2004-2005--when you must negotiate most confidently.
I can only hope things are changing a little, although a basis for that hope escapes me at the moment. To quote the line at the end of that article:
"New season, new haircut, new balls."
Well, you'd think that if there was some sort of escalator, MLS would have said "Deal worth up to $xx million over 10 years." But they haven't, it's always been reported as a flat figure.
Footie business also pointed out how Beckham undoubtedly drove sales, and it's always been reported that he gets a percentage of merchandise - certainly he's seeing a big chunk of money as well.
At the beginning of the deal, $15 million a year was probably over-paying, but it looks like they've taken some growth into account on the deal. Even so, I'd say this year the deal looks as fair to MLS as it could be. Keep in mind that 2009 was a bad year economically, too. If merchandise sales continue to grow (and they probably will as more teams come in), I think adidas does very well at the end of this.
Right now the deal is about 5% of revenues. In my mind, I think a good cut for MLS would be about 10% of gross revenues - obviously if you're MLS you'll try and get more. But I'm not really basing that on any sort of other merchandising deal, just a general knowledge of how deals like this work, so maybe that number isn't realistic.
I do find it hard to believe that MLS would not have thrown in some kind of "best case scenario" improvement. Maybe there's a renegotiation clause that we don't know about. Maybe they got the best deal they could have. Maybe adidas didn't want to look like they were overpaying back in 2005. Or maybe MLS just fucked it up.
It's hard to say, and maybe MLS was willing to trade stability for the potential of bigger dollars at the end. Perhaps they thought they'd recoup in the next contract if things were going great, and wanted the certainty of money coming in as a way to sell potential investors, etc. In case it isn't clear, this is all speculation.
That being said, if revenues continue to grow, it does look a little like MLS could have gotten more out of the deal. But we're talking now with 4 years of hindsight and outrageous gate successes at new expansion teams that no one expected.
-FS
Yeah, like I'm so sure MLS's women fans follow the league more because the players happen to be cute.
I don't want to speak for anyone but myself here, but I'll be honest: the reason I got into soccer (years and years ago) was because the players were cute. I have friends who've gotten into it the same way. But I don't think that's enough to keep someone interested in a sport on its own, or at least it wouldn't be for me.
And I think expecting women fans to not notice that some players are attractive is kind of silly (not saying that you were doing that here, though). Just because I think Stuart Holden or whoever is cute doesn't mean I don't have anything to say in a more serious discussion.
This comment sounds like I'm mad or something, and I'm not. I've just heard "you only like [Team X] because the players are cute" more times than I ever wanted to, and I think women fans have a lot more to contribute than that.
Oops, forgot to sign. This is @commie, obviously.
No, I'm glad you posted that. You more or less put into words what I was thinking when I wrote that.
On the one hand you have the "Women aren't/shouldn't be sexual" mentality. And then on the other you have things like "all they care about are cute guys, so they can't offer anything serious to the discussion." Obviously, it's more complex than either of those things.
For what it's worth, I've also had gay fans tell me that hot bodies are the reason they started going to MLS games. But if they're committed fans, they obviously know a thing or two about the game.
Good -- I'm glad we're on the same page here.
It's a hard balance to strike, and there's no real analogy for men, because women's sports aren't as popular, and men ogling/objectifying women is par for the course in culture overall. But I've pretty much decided that there's nothing wrong with either serious analysis or posting shirtless pictures, as long as they're both in the appropriate context. I'm not going to be ashamed of either. That's why I have a Tumblr, you know?
I also didn't realize that women were such a high percentage of MLS spectators. You sure couldn't tell it from the FSC ads (or things like DC United's "Ladies Night" promotion).
DC United had a "ladies night" promotion?
I tend to stay away from condemning objectification too much around here, as I think everyone appreciates a little eye candy. At the same time, "women do it too!" is not an adequate justification, for hyper sexualization that's needless, unwanted, or that's used to degrade and intimidate. That's a rough approximation of how I feel about the issue at the moment.
As for the percentage, I had seen that before, and I think there's actually a post somewhere around here where I talk about it. You'd think things like the Axe ads on MLSNet would take account of that.
I'm trying hard to remember whether the ads during WPS games were for hair care or the army.
I think they did it twice, actually. With manicures and, um, a mechanical bull: seriously.
And I'm with you on the whole objectification thing, pretty much. There are sites where it's to a degree (or using such language) that it's pretty clear that I'm not in their intended audience. I'm gonna call out The Original Winger here, and the Offside Rules from time to time, though it's somewhat improved.
You would think, but I guess not. (Ew. Axe.) I watched WPS games, and mostly I remember the Puma ads. Or ad, singular.
Wow. I'm . . . I'm not surprised, and yet that's incredible. I think the classiest aspect is the free drinks and publicizing where potentially intoxicated women will be sitting.
I don't read the Original Winger, as every time I have I've found it to be 1) Far to many posts on 2) stuff that has no relevance to anything I'm interested in, and 3) almost un-navigable. Although I now see that they post match highlights from the weekend, so that's one justification for reading it. I suppose people whose existence revolves around movie trailers, soft porn, and television would find it more interesting.
As for TOR, it's only a matter of time before something awesome gets posted on MLS insider.
I don't know, I think the mechanical bull really seals the deal. That says "we take you seriously as a potential fan base" all the way.
I briefly read TOW, but it's been a long time now and I haven't missed it at all.
Please do not confuse "sales" with direct revenues and certainly not profit.
If you buy a Beckham shirt at Dick's, that's an $80 sale. I don't work in retail, so I don't know the exact percentages, but chances are the retailer is keeping a decent percentage of that. So let's say adidas is pulling in $50 from the sale. Then there's the cost of the shirt itself, the amount that's owed to MLS and Beckham for licensing, the cost to transport and store inventory and so on and so on.
$300MM in sales does not mean adidas has made $300MM in profit or even $300MM in revenues.
Further, the $15MM per year is for the right to outfit the MLS teams. It's for the right to be the sole provider of MLS clubs. It doesn't mean MLS isn't getting a cut of actual sales too.
MLB has exclusive deals for hats and jerseys, but it's not like Russell or New Era gets to keep all the money from every MLB jersey and hat sold. No, they pay for the right to be the exclusive provider. Then they pay their licensing percentage on actual sales just like anyone else.
Thanks for that comment.
In making my comment I was specifically thinking of Apple, who for some ipod accessories charges a licensing fee of 10% of the total cost of the item. So that sort of scheme would also be based off of sales, not profit.
You are correct that the adidas deal is to sponsor and outfit the league and it also includes exclusive sales rights of MLS gear, in addition to other things preventing other athletic suppliers from advertising via SUM.
So if MLS is continuing to get a percentage of the sales, which I think makes sense after reading your comment, this deal looks much more logical.
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