Chelsea Football Club have just announced the £58m signing of Borussia Dortmund’s Christian Pulisic, with the American international heading back to Westfalenstadion for the rest of the 2018/2019 season on loan. He’ll join up with the Chelsea squad in the summer of 2019.

An opinion that I’ve seen following Pulisic’s arrival is that his shirt sales will be able to cover his transfer fee because of his large marketing appeal in the United States.

I’m writing this article to debunk that myth, and to explain how Chelsea’s shirt deal with Nike actually works in the simplest terms I can.

Initial reactions to Pulisic’ arrival

As Pulisic seems to have loads of potential, the move has been, generally, well received by the Chelsea fanbase . However, some fans have expressed their doubts over Pulisic’s large fee as the electric, and homegrown Callum Hudson-Odoi seems to be on his way out for a mere £40m.

Though, one thing every Chelsea fan has agreed on is the American marketing value that Pulisic attracts. Football has grown largely in the last decade in North America with the boom of Major League Soccer (MLS), their domestic top-flight which includes teams from both Canada and the United States.

This massive growth has now turned North American football into a very lucrative business, with millions of fans now supporting their respective teams. According to Forbes, Atalanta United FC and LA Galaxy, are both valued at around £250m which is higher than Southampton’s £200m valuation.

Kit deals in general

To start, I want to emphasize that no club in football’s history has ever been able to repay a player’s transfer fee through their shirt sales. That would include Madrid’s singing of Cristiano Ronaldo, PSG’s signing of Neymar and Manchester United’s signing of Paul Pogba.

With that being said, I can confidently say that Christian Pulisic’s shirt sales will not payoff his transfer to Chelsea.

So, how can that be? Ronaldo, Neymar and Pogba are some of the highest selling shirts in the world. Is it that they don’t make enough money?

No.

It’s because of the way that football clubs agree on their shirt deals.

Companies like Nike and Adidas have the facilities, knowledge and employees to make shirts, shoes and anything else.

Chelsea is a football club, they play football, but they need shirts to actually play and sell to fans. So, they let companies like Nike and Adidas handle that since Chelsea don’t have any idea how to make millions of shirts a year and get them sent to stores in several different countries.

That lead to Nike approaching Chelsea in 2016 and offering their current astronomical £900m kit deal to use them as their new sponsor rather than Adidas.

Nike kit deal in detail — The numbers

So, how does the Chelsea-Nike deal actually work?

Nike have agreed to pay Chelsea £900m over a period of 15 years, which equates to £60m a year — for the right to make shirts with the Chelsea logo.

Now here is where things get interesting, according to Jake Cohen — a sports lawyer who’s worked on both sides of football dealings — clubs typically receive only 10–15% from every shirt sold.

That would mean for every shirt sold, Nike receives 85% — 90% and Chelsea receive 10 — 15% of the final profits.

However, the 10 — 15% payment only kicks in after a certain, very large, number of shirts has been sold. This very large number isn’t stated publicly, but since the £60m upfront payment is so high it isn’t believed to kick in at all.

For the sake of argument though, let’s say that it does kick in and Chelsea do make money. How much would they be able to make?

According to a report, Chelsea sell 1.7m shirts a year. Now that Pulisic shirts are available, I don’t think much will change. The American fans that were buying Willian, Pedro or some other player’s shirt will still be in the market to buy a new one this upcoming season. So, instead of buying a Willian or Pedro shirt, maybe they’ll buy a Pulisic shirt. Overall, nothing happens to the total 1.7m, as these fans are already buying shirts anyways.

Dortmund, on the other hand, only sell around 500k shirts per year. In the last two seasons, their highest selling shirt has been Marco Reus or Aubameyang, not Pulisic. Based on the relatively low numbers, I don’t think we’re going to see millions of new Chelsea shirts sold, but we may see some.

Time for some math.

Let’s say of the 500k shirts that Dortmund sell, 100k of them are of Pulisic.

That’s 20%, a more than fair estimate. So, Chelsea will see a 100k increase of Pulisic shirts on top of the already established 1.7m total.

A Chelsea shirt at a Nike store in the U.S costs $165 (£130).

(100k shirts) x ($165) = $16.5m (£13m)

Nike would make £13m total from Pulisic shirt sales a year. If Chelsea take 15% of that, that’s a small £1.95m per year. Now, this is a massive oversimplification as we didn’t even consider costs incurred to make the shirts in the first place, which would place the number much lower.

Pulisic cost Chelsea £58m just for his transfer. If you think that the small amount made on his shirt sales will cover his transfer fee, you are terribly mistaken.

Endorsement potential and my view on the player

I believe from a business standpoint signing Pulisic is a great move. He certainly won’t be able to pay off his transfer value with shirts but it does give Chelsea an entry into the American football market.

As football grows in the U.S newer generations of fans will grow up looking for a Premier League team to support. With the increased American exposure that will undoubtedly come from Pulisic’s arrival, fans will certainly lean favourably towards Chelsea. Further, if he does go onto fulfill his potential as a future American star, fans will certainly be watching his rise for years through a Chelsea lens.

Overall, I like the signing of the Pulisic. I think he’s a talented player and I believe he’s coming in to replace the likes of Willian and Pedro rather than as a long term replacement of Hudson-Odoi or Eden Hazard.

 

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