New Balance wants to extend its “kit” deal with Liverpool that it first forged in 2011 (“kit” is a British term for uniform). The Brighton-based athletic shoe and apparel company believes its contract allows it to match any competing offer, while Liverpool, owned by Boston-based Fenway Sports Group, believes it can maximize its newfound position as a global soccer powerhouse by striking a more lucrative deal with the far larger Nike company.
Adding an awkward local wrinkle to the High Court of England and Wales (Commercial) drama is that Fenway Sports Group also owns the Red Sox, and New Balance and the Red Sox have maintained a close corporate partnership that reached new heights just as the Liverpool-New Balance kit deal began.
Whether or not the Red Sox-New Balance relationship will be affected by the New Balance-Liverpool dispute is yet to be known.
What is known is that New Balance and Liverpool being unable to reach a settlement and having to go to court throws all the parties involved into a tangled web of deep-pocketed relationships.
“To me, it makes total sense there’d be a big fight, especially in European soccer,” said Jonathan Jensen, an assistant professor at the University of North Carolina who teaches sports marketing. “There is no salary cap, and these players are going to the highest bidders with these transfer fees that are paid. It’s like Major League Baseball on steroids.
“[Liverpool] needs to siphon every dollar they can possibly get in order to compete at that level and in order to sign those players. Every single year, essentially, these players are up to the highest bidder.
“It stands to reason, even something as innocuous as an apparel or kit sponsor, is it that big of a deal? Well, they’re trying to wring every last dollar out of that deal because they know they’re going to need it to keep [top scorer Mohamed] Salah or whomever.”
Liverpool won the Champions League title in June, the latest and most significant feat in its rise to the uppermost tier of European soccer, joining the likes of Barcelona, Real Madrid, Paris Saint-Germain, Juventus, and Bayern Munich. Fenway Sports Group bought Liverpool for $477 million in October of 2010. A month before its Champions League victory, Liverpool was valued at $2.2 billion by Forbes magazine.
New Balance, with estimated annual revenues of more than $4 billion, struck a kit deal with Liverpool in 2011, and its current deal expires at the end of the season next summer.
Liverpool has struck a preliminary deal with Nike to be its next kit supplier.
Nike, according to the Times of London, has guaranteed Liverpool $37.7 million a year, while the deal with New Balance pays Liverpool $56.6 million a year. Liverpool, according to the Times and other European soccer media, was swayed by Nike’s promise of a global distribution network twice as big as New Balance’s, and a higher-than-average royalty rate of 20 percent that would translate into more revenue than New Balance could provide.
In its glimpse at the court papers, the Times reported that Nike said it would promote kit sales by using superstars, including Liverpool part-owner and basketball star LeBron James, tennis star Serena Williams, and the musician Drake.
In a statement, New Balance lauded its ability to deliver two prior home kits for Liverpool fans “and we continue to match the ambition and achievements of the club as it grows from strength to strength.” The statement went on to say, “In line with our current contract, we have matched the offer made by Nike. As part of the contract renewal process, LFC has called into question elements of the agreement and as such we are asking the courts for clarity on this case.”
Irwin Kishner, co-chairman of the sports group at the New York-based Herrick Feinstein law firm, elaborated on the stakes.
“What’s got Liverpool all googly-eyed, if you will, is I think they see a much larger distribution network, particularly in Asia, more specifically China, and that market is ripe for the taking,” said Kishner, “and I see Liverpool saying, ‘Wait a second, what does New Balance have in comparison to Nike in China?’ And you really don’t have much of a comparison there; that’s just the way it is.
“From New Balance, I see this being a crown jewel that they are fighting tooth and nail to try and find a way of keeping in the family.”
The Red Sox and New Balance have been in business in a partnership that extends far beyond shoe deals.
A 2011 multiyear deal announcing New Balance as the ball club’s official footwear and apparel sponsor included the construction of the red neon “NB newbalance” video scoreboard that stands over the right-field bleachers at Fenway Park.
New Balance works closely with the Red Sox Foundation, the two serving as co-presenting sponsors of the Pan-Mass Challenge. New Balance is the presenting sponsor of Run to Home Base, which is co-sponsored by the foundation, and New Balance is listed as a charitable donor to the foundation.
At the very least, the fact that New Balance is taking to court the Red Sox’ “sister” company, Liverpool, creates a backdrop of tension against the deep ties currently maintained between the sporting world’s giants.
New Balance, the Red Sox, and Fenway Sports Group all declined to comment on whether the sponsorship deal between the Red Sox and New Balance has expired or is still active. They similarly declined to comment on any impact New Balance taking Liverpool to court would have on their relationship.
To add one more layer of context, the Boston Globe is owned by John Henry, the principal owner of Fenway Sports Group and the Red Sox. Henry did not respond to a request for comment on this story.
Michael Silverman can be reached at email@example.com. Follow him on Twitter: @MikeSilvermanBB