Why Adidas are upset amid new twist in £54m deal involving Chelsea
Chelsea’s kit deal is one of the most lucrative elements of their entire operation as a business and therefore central to complying with Premier League spending rules.
Under Profit and Sustainability Rules (PSR), Chelsea are allowed to lose no more than £105m over a rolling three-year period.
Todd Boehly and Clearlake Capital head honcho Behdad Eghbali, Chelsea are therefore scrambling to increase commercial income to offset their unprecedented spending in the transfer market.
And while we only have a small sample size to work with in terms of the club’s published financial accounts, they have had not had much luck so far.
Commercial income was around £209m in 2021-22, the final season of the Roman Abramovich era. In 2022-23, the latest financial year on record, it had remained essentially static at £210m.
For context, the likes of Liverpool and Arsenal regularly £30m jumps in commercial revenue per season, while Tottenham’s income across the same vertical has trebled to £218m since 2019.
It won’t have escaped fans attention that Chelsea are still without a front-of-shirt sponsor.
Even the most charitable of interpretations could only view that as a major misstep while the PSR margins are tight, especially given that it is the second successive season where the same thing has happened.
It is believed that the commercial department, who will soon be under the control of now ex-Tottenham CCO Todd Kline, are looking for a £60m-a-year deal.
And incidentally, Nike are reportedly not happy with Chelsea for the shirt sponsor issues, as the US sportswear giants believe it may have impacted sales.
That situation was preventable, but Chelsea have every right to feel frustrated about another potential commercial step backwards that is no fault of their own.
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Adidas unhappy with FIFA as Chelsea gear up for controversial tournament
Chelsea’s kit supplier between 2006 and 2017, Adidas are second only to Nike in the league table of revenue-generating sportswear brands.
As well as hundreds of football clubs and players worldwide, Adidas are the official partner of the Olympics and MLS.
But one of the very biggest brand exposure and association weapons in their arsenal is their £54m-a-year deal with FIFA, with whom they have been partnered with since the 1970s.
However, that relationship is now coming under strain because of the ongoing fallout of FIFA’s expanded Club World Cup project.
Chelsea will feature in the 2025 Club World Cup, which will be the first to be hosted on a quadrennial basis and the first under a new 32-team format.
FIFA promised that the new-and-improved Club World Cup would be an almost peerless revenue generating opportunity for elite clubs like Chelsea.
But Gianni Infantino’s reported claims of prize money approaching £80m for individual clubs have hit the rocks due to FIFA’s inability to source a TV deal.
They initially wanted £4bn for a broadcast rights package, but the only of they have received, from Apple, was worth £750m.
What’s more, the tournament until recently had no sponsors, although Hisense has now become the first commercia name to sign up at unspecified value.
But almost immediately after that good news for FIFA broke, another story emerged about Adidas and Coca-Cola taking world football’s governing body to court.
The pair are believed to have expected the rights for the Club World Cup to be part of their existing deals with FIFA.
FIFA disagree, it seems.
Either way, the infighting does not bode well for Chelsea, a club that some reports have suggested have calibrated their PSR compliance strategy around commercial income for the Club World Cup
The Club World Cup: How much will Chelsea earn?
The suggestion now is that Chelsea – who won the Club World Cup in 2022 – are hoping to earn somewhere around £34m in prize money for participating in the tournament in the United States.
That is big money for any club, not least one that is grappling with PSR (formerly called financial fair play, or FFP).
Chelsea’s commercial department will also recognise the benefits of being able to push their brands to a truly global audience.
But it remains to be seen whether FIFA can pull the even off and honour their financial commitments to the top teams in each of its confederations.
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