How Adidas' £150M Deal With Liverpool Could Wreck Soccer

Last Updated Apr 6, 2010 4:19 PM EDT

If Adidas (ADS.DE) signs a £150 million contract with Liverpool F.C. to retain the rights to sponsor and market the team's shirts, it will be ruinous for soccer as a business. Players will see no reason to rein in their demands for higher salaries, even though player costs are driving clubs ever closer to bankruptcy.

The Adidas deal, which would span the next 10 years, follows Standard Chartered's (STAN.L) £80 million lead sponsor deal with Liverpool (replacing Carlsberg), and the club is looking for another £240 million in stadium naming rights. Coming up for renewal soon will be Manchester United's £300 million deal with Nike (NKE), signed for 13 years in November 2000. Chelsea F.C. signed Adidas for £100 million over 10 years in 2005.

While all this might be good for Liverpool specifically, it will be bad for football generally. The game's finances are driven by the escalating cost of acquiring and then keeping top players. Forced to stretch themselves to the limit, most clubs rest on a fragile compilation of ever more onerous debts.

Even United, the world's biggest sports brand, teeters perennially on the brink of bankruptcy. Portsmouth F.C., which won the F.A. Cup (England's equivalent of the Super Bowl) two years ago, has been bankrupted out of the English Premier League and will start next season in the game's second division as a punishment.

The problem with the Liverpool-Adidas deal is that if sponsors are willing to plunk down that kind of cash, then the rumored offers of £100 million for Liverpool striker Fernando Torres now don't look like pie-in-the-sky dreaming. They look like a price index that simply tracks inflation.

A salary cap for English the Premier League has been discussed at the highest levels over the last year or so, by such luminaries as FIFA boss Sepp Blatter and UEFA chief Michel Platini. Even the chairman of the Football League (which represents professional clubs in the rungs under the Premier League) has demanded a salary cap policy. That now has no chance of becoming a reality.

For fans, the truth is that there's already a salary cap in place: It's called bankruptcy court. All supporters can do is watch and hope that their clubs' purchases stay within their revenues, knowing all along that it will be the balance sheet and not the score sheet that determines every club's fate.

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