I know, I know. The MLS playoffs start Friday (unofficial slogan: Finally, Games That Matter). But I want to address the new blockbuster 10-year, $150 million agreement between MLS and Adidas, easily the most important sponsorship deal in the history of the 9-year-old American soccer league.
News of the deal broke on Oct. 5, when Adidas announced the partnership at its Investor Day in Germany, and sports business mavens took notice. "To have historically the No. 1 soccer brand in the world invest in your league as a key sponsor is a great legitimizing statement to the league at a time when it's looking to expand again," said Paul Swangard, managing director of the Warsaw Sports Marketing Center at the University of Oregon. "My initial response when I first heard of the deal was that [sixth-year MLS commissioner] Don Garber and his group are sort of hitting their stride. The long-term approach to building a soccer league with managed and realistic expectations has really begun to show its dividends."
While MLS has bled some $15 million in the past year (and an estimated $350 million since '96), its backers have shown a profound tolerance for red ink. What's more, they recently have attracted new investors, built soccer-specific stadiums and announced plans for expansion (from 10 to 12 teams in 2005).
Since the news broke, however, all parties in the MLS-Adidas deal have been mum. MLS has yet to make a formal announcement, while Adidas reps have been unwilling to provide substantive details.
The reasons are simple enough: Adidas wanted to make a big announcement for its Investor Day, even if it meant doing so within hours of finalizing the deal in a late-night marathon negotiating session. Meanwhile, MLS is still working out its first collective bargaining agreement with its players (in which the Adidas deal is playing a big role) while quietly smoothing out any backlash from lame-duck suppliers Nike, Puma and Reebok (which combined still will outfit four MLS teams in 2005 before Adidas takes over completely in 2006).
Expect a bells-and-whistles press extravaganza from MLS and Adidas leading up to MLS Cup IX on Nov. 14. For now, though, I've pieced together details of the agreement through conversations with multiple sources inside MLS headquarters.
Let's get to the questions:
What does Adidas' $150 million commitment include?
The three stripes will become the official athletic sponsor and licensed product supplier to MLS starting next season. Adidas has sponsored three MLS clubs since the league started in 1996 (Columbus, D.C. United and Kansas City) and in 2005 will add five more teams (Chivas USA, Colorado, FC Dallas, Real Salt Lake and San Jose). In 2006, it will take over the MLS game ball and the uniforms for the remaining teams: Chicago, Los Angeles, the MetroStars and New England.
With one company controlling MLS apparel, making it a priority and leveraging its relationships with retailers, league poobahs argue it will be far easier to buy, say, a MetroStars jersey at your local mall. "The idea is that we'll have a much broader array of product in the market than we've had in the past from our suppliers," says an MLS source. But there's far more to the deal than equipment and apparel. Adidas' $150 million also includes "a multimillion dollar MLS-Adidas marketing commitment outside of MLS-controlled media," says one league source. In other words, look for MLS-Adidas ads in all sorts of new venues, including newspapers, Spanish-language television, Fox Sports World's Premier League telecasts and potentially even SportsCenter and prime-time network broadcasts. "I won't tell you we'll be on CSI: and The Apprentice, but the idea is to promote the relationship by reaching out to soccer fans and general sports fans," says a league source.
Swangard said the media component of the deal is crucial. "All the traditional properties will tell you, it's not about my marketing budget, it's all about the use of OPM: Other People's Money," he explained. "To be able to truly amplify your message and grow your sport, you need to have your sponsors doing it for you. Garber knows that because he's an ex-NFL guy."
A significant part of Adidas' $150 million will go toward playing a major role in grassroots player development for MLS. Project-40, the development program previously sponsored by Nike, likely will be "expanded" next year (one source's term) using money from Adidas (and potentially U.S. Soccer) to help start a reserve-team league. In return, Adidas will secure a coveted entry point developing relationships with the next generation of young American soccer talent (though not the only one, considering Nike sponsors the U.S. Soccer Federation and its under-17 residency program in Florida). Moreover, Adidas will become the only athletic brand with advertising rights for all MLS games as well as the 2006 World Cup broadcasts on U.S. English-language networks. (MLS' marketing arm, SUM, owns those broadcast rights.)
It's also possible that Adidas will arrange exhibition matches between its European club powerhouses (such as Real Madrid, Bayern Munich and AC Milan) and MLS all-star sides. "It's a groundbreaking sponsorship," says Dean Bonham, a Denver-based sports industry analyst. "For MLS to get this deal done sets a standard for the league's sponsorships and will get them closer to being a recognized sport in the United States like the other four major leagues are. There's absolutely no question that Adidas and Nike see the handwriting on the wall. Soccer is here, it's going to grow and it's going to stay."
Grant Wahl will periodically answer questions from SI.com users in his mailbag.
Will part of Adidas's $150 million go toward raising MLS's $1.7 million-per-team salary cap?
Not likely. One MLS source says the $150 million over 10 years will be "siloed" for Adidas-related initiatives. "It's not a $150 million check," says another league source. "It shouldn't affect player salaries."
How does Adidas' $150 million investment compare to Nike's investment in American soccer?
The shoe companies' investments are comparable, I'm told. Nike, which first began sponsoring the USSF in 1995, extended its agreement with the U.S. federation through 2014 earlier this year. The 10-year Nike-USSF deal is "in the same ballpark" money-wise as Adidas' $150 million MLS commitment, says a USSF source. (One wrinkle: The Nike-USSF deal stipulates that the U.S. will always be one of Nike's top three federations in terms of financial support. Keep in mind, Nike's clients include Brazil, Holland, Mexico and Portugal.) Nike also has shoe and apparel deals with Freddy Adu, Landon Donovan, Abby Wambach and Mia Hamm.
Will Nike-sponsored players appear in the rollout of MLS mainstream advertising paid for by Adidas?
Yes, says an MLS source, which is important considering the league's most recognizable stars (Adu and Donovan) are Nike guys. MLS plans to follow the so-called Rule of Four, which states that non-Adidas players such as Adu or Donovan could be included in such advertising if they're part of a group of four or more players. At the same time, you can be sure we'll see a lot of Adidas-sponsored MLS players in those ads as well. Guys such as Carlos Ruiz, Pat Noonan, Danny Szetela, Cory Gibbs, Pablo Mastroeni, Damani Ralph and Amado Guevara.
Will the five new Adidas MLS teams for next spring have their uniforms in time? And will they be "cookie-cutter" styles that simply have different color schemes?
The new teams (Chivas USA, Colorado, FC Dallas, Real Salt Lake and San Jose) will have their uniforms done in time, says an MLS source. "Things normally done with a nine-month or 12-month lead time have been cut to five months to get it done," the source says. "We will have product on the market for fans too." As for the uniform designs, they will follow the template for Adidas' global designs, which include between six and eight different styles. From those styles, MLS teams will stamp their own identities on them through colors, badges and other unique details. Emphasizes one MLS source: "We're not gonna look like a rec league where all our teams are wearing the same uniform with just their names being different."
What are the main concerns about the deal?
Several agents and players I spoke to were concerned that Adidas/MLS might try to limit the options of players (especially MLS-groomed rising stars) when it comes to signing their own footwear sponsorship deals. (Bob Foose, the executive director of the MLS Players' Union, had no comment.) Currently players are allowed to wear the shoe logos of four official MLS suppliers: Adidas, Nike, Puma and Reebok. Negotiations for MLS' first collective bargaining agreement have dragged on much longer than expected, and the new Adidas deal has only added one more element to the talks.
However, one MLS source said players will continue to have options. "We don't want to hurt our players," he said, adding that 1) the league will respect all pre-existing deals, and 2) the shoe requirements are unlikely to change much from their current form. From MLS' perspective, about the only other concern is whether Adidas follows through, and nobody in the league office seems to doubt that at this point. "It is putting all our eggs in one basket to some degree, but if we're going to do that with any company then Adidas is the company," one league source says. "I think they'll do a great job."
What led to the MLS-Adidas deal getting done?
The negotiations took nearly to a year to complete. According to an MLS source, league officials met in Portland, Ore., with Adidas, which said it wanted to "make some noise" in the American soccer market. Discussions progressed from Adidas proposing to take over a couple new teams to the idea of doing a league-wide deal. MLS and its marketing arm, SUM, were able to leverage their ownership of the World Cup '06 broadcasting rights and help get the agreement done. Adidas is clearly trying to ramp up sales in North America, which have not matched the company's performance over the past 18 months in other geographic areas. In 2003, Adidas suffered a 6 percent drop in currency-adjusted North American sales, and its 4 percent currency-adjusted growth in the second quarter of 2004 in North America was the first positive performance in four quarters. However, Adidas expects North American sales to grow between 3 percent and 5 percent in 2004 (when adjusted for currency effects), by a mid-single-digit percentage rate in 2005 and by double-digits in 2006. Part of that bullishness is reflected in its MLS investment. "We see the U.S. market as one of the most important markets in terms of growth rate," Adidas managing director Erich Stamminger, a prime architect of the MLS deal, said earlier this month.
How big is this agreement for American soccer?
It's huge. "Any time you have the availability of additional resources to spend on the development and promotion of the sport it's great," says Oregon's Swangard. "Nike got Adu, so it has a signature star. Adidas will come in at the league level. A lot of assets connected to North American soccer are going to be leveraged in the near future, and the ramp-up to '06 creates this nice window over the next 16 to 24 months for people to see a lot of soccer marketing hit in places they didn't otherwise see it before." Or, as one MLS source put it: "This is something that makes sense for our brand. There are no easy answers, no quick fixes to get the league where we want it to be. But this is an important piece of the puzzle. Freddy Adu and the next five Freddy Adu's are a piece. Soccer-specific stadiums are a piece. Getting better time slots on national television is a piece. There are a lot of things, but this is an important one."
Sports Illustrated senior writer Grant Wahl keeps you up to date with the world of U.S. soccer at SI.com.