Although all is not rosy with Real Madrid when it comes to their performances in La Liga, Champions League and coaching at the moment, with the sacking of Julen Lopetegui affecting the club in several areas, the Madrid brand is still commercially viable and still attracts investors which has lead to the signing of a record jersey partnership deal with kit maker Adidas.
The deal was the renewal of the sponsorship deal with Adidas which is about to be signed and would mean 110million euros coming in over the next ten years for the Spanish giants. It would be a groundbreaking deal as regards sports marketing in Europe, which will make the shirt the most expensive in world sport.
With an assured profit of 110million euros each year and another variable part which depends on merchandising that could see the amount rise up to 150million euros, the club would double the 52m euros that they currently receive from the German company.
To understand the magnitude of the deal, compare it with Nike in the NBA. Nike kits out all the 21 franchises for 100million dollars over a period of eight years. In other words 125million dollars, or 110million euros a season for 21 teams which is the same that Adidas will pay to Real Madrid alone.
The relationship between Adidas and Real Madrid goes way back to 1998 although they also wore the same sponsor’s shirts in 1981. In fact, that was the first year that the team wore a shirt with a sponsor’s name and until 1986, Madrid wore Adidas before changing to Hummel until 1994 and later Kelme from 1994 to 1998.
An evidence of the time the negotiations have been ongoing is that in May of last year Der Spiegel in collaboration with Football Leaks revealed an agreement between Adidas and Real Madrid from January 2016. In the revealed document, the conditions were of a deal of 70million euros and a minimum of 30million euros more for merchandising.
The deal also means that if a Real Madrid shirt is sold for 100 euros, the club retains 22.5% of the profit while the rest goes to the kit maker.
Other brands like Nike and Under Armour have already approached Real Madrid looking to break Adidas’ foothole with the club but the German company were always going to do what they could to keep them.
Recently there have been changes with big clubs like Arsenal moving from Puma to Adidas. There are speculations that Manchester City could change from Nike to Puma. In 2016, Barcelona renewed their deal with Nike for 105million euros over ten years and the possibility to rise to 155million but in reality, it is 83million.
Clubs sometimes increase the figures and Barcelona had a deal that would see them receive 30million euros extra as a bonus for the deal and take back the management of product licencing a wringing that had been in the hands of Nike.
When this deal comes into effect, Real Madrid will take over from Manchester United as the club which earns the most from sportswear companies as they currently earn 85million euros with Nike.