what_your_boots_say_by_dan_leydon

Football Player Boot Deals Explained


November 25, 2016

Here are five tips to understand how football player boot contracts with elite brands like Nike, Adidas, Puma, New Balance and Under Armour work in practice.

The blog explains how deals are structured, what the players will be required to do and how such deals fit into all the other agreements that a player will enter into.

1. A boot deal isn’t usually just a boot deal

At the very least, the contract will usually require the player to wear and use the brand’s products for training and in games.

For a number of elite players, wearing the particular branded football boot is only one part of an overall brand ambassadorial role that can include personal appearances and photo-shoots, commercial and social media activation (Instagram Live chats, or Twitter takeovers), corporate responsibilities as well recording advertisements.

It means that for all public activities a player’s role will not only be wearing particular footwear and shin guards (plus gloves if a goalkeeper) but most likely also be kitted out, depending on the circumstances, in the brand’s clothes when attending photo sessions and promotional appearances. As discussed below, some difficulties can arise depending on whether the player is appearing in a personal, domestic club or international club capacity.

The specific products/apparel that a player will be required to wear will include athletic footwear, clothing and accessories like bags, gloves and hats. Such a product list may also cover sunglasses, golf clubs, sports equipment, headphones, personal care and hygiene products, watches and electronic accessories like tablet cases, skins/sleeves and mobile/tablet cases.

The player will as a result be provided with a variety of branded products to use. The flip side is that the boot deal may actually limit the opportunities for a player to sign additional deals with, say, headphones or watch manufacturers. This is because the boot deal may limit the player to only using their branded products.

It can be important for the agent finalising the deal (along with a lawyer) to ensure that if the player is giving away the opportunity to enter into particular deals (because the boot brand agreement covers so many categories), that the player is being rewarded adequately for the deals that he subsequently cannot enter into.  If a player’s boot deal is so wide as to cover a large number of products like sunglasses or phone accessories, the player should be aware that the scope to enter into additional commercial deals will be limited.

The reality, however, is that most players will not have quite the same commercial appeal as Pogba or Ronaldo and thus will not have a large number of commercial sponsorships deals outside of their boot deal.

2. Brand consistency between club, international club and personal deals is tricky

Issues can arise when a player has to juggle the obligations of his domestic club, his international team and  his individual personal commercial partners. A player will have:

  • club obligations: i.e. training and playing in club kit, being pictured in a club shirt at a new kit launch or being part of an official club autograph signing afternoon (usually labelled  ‘club context’);
  • international team responsibilities:  i.e. wearing the training and playing kit and potentially endorsing commercial partners of the international team when away on international duty (usually labelled  ‘national team context’); and
  • personal endorsement deals like a boot deal or individual ambassador deal not directly linked to the club.

So, for example, Gareth Bale plays for Real Madrid (sponsored by Adidas), plays for Wales (sponsored by Adidas), has  a boot deal with Adidas, whilst having commercial partnership agreements with EA Sports and Sony. Importantly, Adidas has complete brand consistency across its apparel line with Bale playing in Adidas for Madrid and Wales. Similarly, Neymar for example is endorsed by Nike whilst playing for Barcelona and Brazil (both using Nike kit).

When appearing in a club context, the club will want to ensure the player is wearing club kit/apparel to satisfy their own kit sponsors and partners. There will be an obligation on the player to dress appropriately though the club will normally allow the player to wear the footwear of his boot supplier (even if it is a direct competitor of the team’s kit manufacturer).

Indeed, when the player is on international duty, a club cannot stop  its player wearing the international kit of a competitor (i.e. Barcelona (Nike)) cannot prevent Messi from wearing the Adidas Argentinian kit and training wear. That is why to the likes of Nike or Adidas for example, having players that remain consistent in their endorsement messaging like Bale and Neymar can be of significant value.

Further, clubs in the UK who for example enter into image rights agreements with their players can potentially further control the range of additional commercial partners that a player can endorse if they are in conflict with their own sponsors/partners. For example, it is unlikely that Chelsea would allow one if its players to personally endorse a rival tyre manufacturer to its main shirt sponsor Yokahama tyres.

A boot deal can ensure that regardless of whether the player is playing club football, on international duty, undertaking off-field commercial activities or going out shopping, the agreement can usually control what the player wears on his feet.

3. A deal contains lots of performance clauses

Elite players can earn significant sums from their boot deals. Boot brands will structure their deals in different ways. Some will call payment ‘base compensation’ or a ‘retainer’.  Usually, a standard type of clause whereby an annual payment is drafted as follows:

“In the first year of the contract (July 1st 2016 until June 30th 2017), a fixed amount of £100,000 plus VAT will be paid in quarterly instalments if the player is named in the club’s first team squad.”  

This would be subject to the club category requirements set out below.

The £100,000 to be paid will be determined according to the calibre of the team that the player plays for. Most boot brands will classify particular clubs in different categories so that, for example, Manchester United, Barcelona, Real Madrid and Bayern Munich may be classed as category 1 clubs which mean the brand will pay the player the full £100,000. Clubs like Chelsea, Arsenal, Atletico Madrid and PSG may be classified as category 2 clubs and as such the brand may pay the player £75,000 rather than £100,000. It means that if a player moved from Chelsea (category 2) to Barcelona (category 1), the boot brand would likely pay the player man uplift becuase of the move.

There can also be specific reduction clauses in relation to the appearances made by the player for his club and international team. The basic amount is unlikely to be reduced if the player plays in at least 70% of competitive first team matches yet if the player is injured and only plays in say 40% of matches, the retainer amount can be reduced significantly.

Additional clauses can also be included if the player is an established international player. For example, if the player doesn’t play at least 80% of competitive club and national team games the player’s boot deal could be reduced by as much as 30%.

Similarly, there will be specific bonuses and reduction clauses depending on whether, for example, the club qualifies or fails to qualify for Champions League/Europa league competition. Additional bonus payments may be due if for example the player is:

•             Member of the final 23 player squad of a Euro or World Cup final tournament;

•             Qualifies for the semi-final, final and/or wins the Champions League/Europa League; and

•             Wins the top national league competition.

The player will usually have been required to play in a designated percentage of the games. Such a number is usually calculated on the number of minutes the player is on the pitch rather than the number of matches the player plays in.

4. Boot deals can contain relatively restrictive clauses

There are matching opportunities and rights of first refusal clauses that give the player’s existing boot brand the ability to re-sign the player or at least give the company an opportunity to match an offer made by any of its competitors.

Usually the brand will give between 3 to 6 months’ notice to the player if it wishes to extend a deal. If no agreement is reached, the brand may give the player its best offer in advance of allowing the player to negotiate for a short period of time (usually 1-2 months) with its competitors. Should any better offers be put forward, the current boot manufacturer may have a period of time (usually up to 30 days) to match the competitor offer.

With the existing brand holding the right to match any new sponsorship offer the player receives or even automatically extend/renew a deal if the terms are matched, there have been examples of disputes between player and brand. Mesut Ozil wanted to switch to Adidas though Nike (who was his boot manufacturer at the time) believed they had the power renew their deal with Ozil if they matched Adidas’ terms. A Dutch court ruled in favour of Nike in July 2013, though it was reported that the player ultimately signed a long term deal with Adidas.

5. Boot deals are just one part of a player’s commercial activities

A high profile elite Premier League footballer will likely have both an employment contract and an image rights agreement with their club. As set out in more detail here, the player will usually be a shareholder in a company that will have the benefit of the player’s image rights to exploit. That company will enter into an agreement with the club to market the player’s image rights as well as with other commercial brand partners. As such, apart from the player’s employment contract, almost all other deals will be agreed between the player’s image rights company and a variety of commercial partners including the player’s boot manufacturer.

There can be significant tax efficiencies of such an approach. If for example a player received £1m per year from his commercial deals, without an image rights company in place, the player would pay income tax (45%) and National Insurance (2%) totalling £470,000.

If such revenue is paid into a UK image rights company, the corporation tax rate is 20%, which is due to reduce to 17% by 2020.  Even at 20%, the tax to be paid is £200,000 which means a £270,000 a year saving for the player.

It can also be the case that even if the player does not have an image rights agreement with his club, the player may wish to set up an image rights company if he is being paid a significant amount by a boot manufacturer. This is something that players and their agents should be considering.