The launch of Liverpool's new five year kit deal with Nike is one of the most talked about commercial agreements in football for some considerable time. It's very different to most kit manufacturing deals. Liverpool even went to court to make it happen. Will it be worth it?

Before we look at the new deal, it's worth looking at the recently expired one with New Balance. It originally commenced in 2012 with NB's Warrior brand for £25m a year, but unlike the preceding deal with adidas, Liverpool regained control over non-branded merchandise.

The six year deal, which was to end in 2018, was renewed with New Balance in 2014 with a newly revised five year deal commencing in the 2015/16 season. This deal was reported at the time to be £28m a year- a mere £3m increase.

In December 2018, journalists who closely cover the club began to report for the first time that the deal was actually worth £45m per year. This was likely true for the 2017/18 season's total revenue from the NB deal, but the base figure appears to have been £28m.

This is further supported by the fact commercial income for the club actually reduced by £670,000 between 2014/15 and 2015/16 (as per the club's accounts)- something that would have been extremely unlikely had the NB deal increased from £25m to £45m between those two seasons.

This suggests that the renewed deal, in NB's name, had a base of £28m and then profit share for any shirts sold above a specified quantity. This means, therefore, that in 2017/18, the NB deal probably did rake in £45m for Liverpool.

The court case between Liverpool and NB - held in October 2019 - brought to light interesting information- the NB deal generated £64m for Liverpool in the following 2018/19 season (something the incoming club CEO Billy Hogan confirmed was correct). That was based on 1.8m in sales

The 2019/20 kit, during the same trial, was also revealed to be increasing in sales by a whopping 59% (off the back of the Champions League win)- this resulted in circa 2.9m in sales. It's likely this saw revenue for the club exceed £70m in the final year of the NB deal.

It's worth noting that kit sales alone would not have generated this big growth in revenue from the deal. In addition to the kit, other merchandise - such as training wear, casual clothing (e.g. hoodies) and footwear - will all have seen a massive increase in sales.

The Nike deal sees the base figure increase to £30m from £28m that was in place through the last contract with NB. That said, Liverpool is then entitled to 20% of net sales. So if the club sells one of the cheaper replica shirts at £70, the club would make £14 from that sale.

The amount of money the club will make will vary depending on the outlet a kit is sold through. Kits sold through the club and Nike will result in a larger net sales figure whereas shirts sold through third parties such as Sports Direct will result in lesser revenue.

This is because the likes of Sports Direct pay wholesale prices and purchase very large numbers of shirts. It's likely that such retailers will secure a discount per item of anywhere between 25% - 50%, depending on how many kits they purchase.

If we take Sports Direct, as an example- if they sell the replica shirt for £70 (the same retail price as the club or Nike are selling it for), they may purchase it with a 40% discount (which is then their gross margin).

From the sale of a single shirt, the 20% net sale revenue for the club is therefore £8.40 (20% of £42, which is the wholesale price per shirt it has been sold to Sports Direct for). This contrasts with £14 per shirt if sold directly by the club.

Nike had originally been targeting 2.9m in sales (revealed in court last October) for 2020/21, but upon learning that this figure was achieved by NB with far less marketing, publicity and footfalll than Nike can and will bring to bear, their sales target has likely been revised.

It's not known how many shirts will be sold by the club, by Nike and by third party retailers. Let's assume 3m in sales and the average net sales contribution to Liverpool is £12. This will result in £36m. However, Nike has released the Vapor shirt which is retailing at £100.

This will likely be produced in lesser quantities than the standard replica shirt. However, if even a quarter of shirts sold are the more expensive Vapor versions, that will generate an extra £3m for the club.

The £30m base figure plus £39m (£36m + £3m) already takes us up to £69m. That's before you factor in all the non-kit sales, which are likely to be huge- especially if Liverpool can eventually extend the agreement into a collaboration with Jordan (like PSG currently have).

All told, then, this new deal should comfortably top £75m in its first year and has the potential to hit the £100m mark if its non-kit merchandise hits it off with the Liverpool fanbase.

Some have estimated that this deal might only be worth around £50m-60m or so to the club. Why would Liverpool go through an expensive court case to move from a deal that for the last season will have brought in at least £70m to move to a deal paying substantially less?

Liverpool is one of the best run clubs in the world, and though the deal is certainly a riskier one in how its assembled (especially if kit sales see an appreciable decline in three or four years' time), they would not have moved into this without carefully modelling its impact.

The Nike deal should see Liverpool's kit deal surpass the £79m per annum adidas generate for Manchester United each season. Later next week, I will look at whether Liverpool can bridge the still sizeable commercial gap between its fierce rival in other areas.