22 Feb 2021
Posted in Sport
New Balance and AS Roma deal highlights shift to pay-for-performance model
New Balance has struck a new kit supply deal with Italian soccer club AS Roma, utilising a pay-for-performance kit supply model in securing the contract. The deal, reportedly worth around €4m ($4.8m) per-year plus the Value-In-Kind (VIK) of the kit supply, offers a lower-base fee than incumbent kit supplier Nike, who were reportedly paying €5m ($6m) per-year. However, AS Roma will have struck the deal under the belief it will generate enough sales to make the deal more profitable than what other kit suppliers were offering, as New Balance’s offer of 40% commission on kit sales is a significant uplift on what Nike were offering, says GlobalData, a leading data and analytics company.
Liam Fox, Sport Analyst at GlobalData, explains: “The move highlights another example of a pay-for-performance deal model in the kit supply market. Previously, Nike made the headlines in 2019 when it took over from New Balance as the kit supplier of Premier League side Liverpool, utilising the pay-for-performance model with success in negotiations for the rights. In June 2020, GlobalData predicted that this would be one of the key market trends in the kit supply market moving forwards.”
Although pay-for-performance deals offer a lower guaranteed base-fee than traditional kit supply contracts, they can be more mutually beneficial for both parties. On the one hand, if the club experience success on the pitch and shift more kits as a result, it will receive a greater share of the profits, which can translate into greater revenues than what may have been possible through an offer with a higher base-fee but a lower commission. On the other hand, on pitch success will increase the kit suppliers exposure and credibility, which in the case of New Balance is likely to be strongly desired after losing its biggest kit deal with Premier League champions Liverpool. New Balance’s revenues will also be less susceptible to negative team performances and changes in consumer behaviour.
Exchanges in kit supply contracts between Nike and New Balance have been rife in recent years. Prior to Nike taking over from New Balance at Liverpool in 2020, Nike took over from New Balance as the kit supplier of Spanish club Sevilla for the 2018/19 season. With New Balance taking over the AS Roma kit supply rights from Nike, perhaps the Boston-based brand had learned from the past as it seeks to regain some of its lost market share to rivals Nike.
Want to find out more? Send your questions to Tamika Providence, PR Executive at GlobalData (email@example.com)