Shirt sales DO NOT pay for a player’s transfer costs
As can be expected from an under-performing player that also happens to be the most expensive player in the world, Paul Pogba has been on everyone’s lips the last couple of weeks. Unusually, though, he’s been drawing more criticism than praise, even some United fans are joining the sentiment that for that price tag, Pogba really should be doing better.
As it often does, something came up in an online discussion the other day, and I thought it well to set the record straight. The argument went something like: “Well, it does not matter how much Pogba cost, because United have already made that money back in shirt sales…”
However nice that idea might sound for a superstar and a big club that can afford him, it’s simply not true though.
How’s that? Well…
No club has ever directly recouped a player’s transfer fee through shirt sales. Adidas, Nike, Puma and other kit suppliers get 85-90% of shirt sale revenue and this is the industry standard.
While there are some exceptions – a club such as Bayern Munich, which is part-owned by Adidas, may be given a slightly more favourable revenue share, and generally, once a certain (very large) number of shirts are sold, the revenue split on additional sales will skew more favourably to the club – these are the exceptions to the general rule.
As an example, Manchester United have a 10-year kit deal with Adidas worth £750m. This is one of the largest kit deals in football and easily the largest in the Premier League. However, the primary reason Adidas is paying Manchester United £75m per year is not simply to have a tiny logo emblazoned on United’s kit and use the club for marketing purposes. Of course, being associated with one of the few truly global clubs in football helps them capture market share in emerging markets and further solidify its presence in existing markets. But for the supplier, kit deals are licensing deals, and that’s where the real value lies to Adidas.
Football clubs are, by nature, football clubs. They’re meant to do football things. They don’t have the infrastructure required to manufacture and distribute millions of kits. Many can’t even handle running online shops, the logistics of which they outsource to third parties.
For any cynical readers who may not be so inclined to take our word for it – after all, it is a popular myth – just look at how United and Adidas announced the deal in July 2014, where the partnership is described, quite clearly, as a licensing package. In fact, Adidas CEO Herbert Hainer triumphed the deal as a “collaboration [that] marks a milestone for us when it comes to merchandising potential. We expect total sales to reach £1.5bn during the duration of our partnership.”
Despite the nonsense you may have heard about Zlatan Ibrahimovic shirt sales generating £50m for Manchester United, which would far exceed his wages, it’s simply not true. In fact, United don’t even automatically receive the 10-15% industry-standard royalty payment, no doubt because the up-front £75m annual payment is so large. United’s royalty payment only kicks in once a certain number of shirts are sold.
Just under three million Manchester United shirts were sold last season. As a case in point, let’s assume that Ibrahimovic helps sell an additional 300,000 shirts. A 10% increase is a very optimistic projection, especially considering Ibrahimovic is a Nike athlete and won’t be engaging in any Adidas promotional activities on his own. His image rights deal with United will almost certainly allow the club to feature him in Adidas promotional activities, as long as he appears with at least two other United players and the activity does not imply that Ibrahimovic is giving a personal endorsement to Adidas.
Additionally, while many United fans may choose to buy an Ibrahmovic shirt, over, say, a Chris Smalling shirt, a lot of those fans were already going to buy a shirt in the first place.
Let’s also assume that United’s royalty kicks in after three million shirts are sold, and the club receive a 15% royalty on each subsequent shirt sold. Assuming a price of £70 per shirt, that’s an additional £21m in gross sales from 300,000 shirts. Manchester United’s cut of that would be just over £3m. Now, £3m is not an insignificant amount, but it offsets less than 20% of what Ibrahimovic will likely cost the club this season (wages, agent fee, signing bonus, image rights deal).
So, at best, United are likely to see around £3m in additional revenue. While certainly not a paltry sum, it doesn’t come close to covering his costs, let alone help United earn an additional £50m. Put simply, there’s a reason why Adidas has earned more in the last six months than Manchester United, one of the highest-earning football clubs in the world, has earned in its 138-year existence.
Article first appeared on The Guardian