Brazil's quarter-final loss at the World Cup hurts both Nike and Adidas in the footwear wars

CAPE TOWN, South Africa - Some of the best sport business storylines at mega events such as the biggest of them all, the FIFA World Cup, revolve around the marketing wars being fought out among many of the planet's most powerful brands.

At the 2010 FIFA World Cup in South Africa, there is arguably no more expensive battle - with no stakes higher - than in the shoe and apparel category.

It's on that front where both Adidas (the FIFA Global Partner, official World Cup event sponsor and official supplier to 12 of the 32 national teams in South Africa) and Nike (the sponsor of world #1 Brazil and eight other countries) have invested hundreds of millions in sponsorships, endorsements, television advertising, internet campaigns and retail activation.

Adidas spent $200 M US on the FIFA World Cup sponsorship alone, another $100 M US on national team rights and what I'd estimate as another $300 M or more in advertising. Between the two footwear giants, they're spending in the range of $1 B US in total marketing around their event campaigns.

Throw in Nike-owned UMBRO and its England sponsorship, along with Puma and its sponsorship of seven national teams -- including four African entries -- and the shoe wars are big business well into 10 figures.

Nike -- which leads the overall shoe business market share sweepstakes with around 38% to Adidas' 34% -- struck first and hard with its Write the Future video campaign while Adidas countered a few weeks closer to the month-long tournament with its Star Wars-themed hero series entitled The Quest.

They've both had wins and losses along the way but it would appear Nike's advertising investment has run the shorter course with every one of the primary individual players featured in Write the Future out of action at the World Cup...with the event's biggest week still to come.

When Brazil fell 2-1 in Friday's quarter-final against the Netherlands, both Nike and Adidas shared the grief. That's because Nike supplies the Brazilian national team, while Adidas sponsors one if its biggest stars; Kaka, a headliner in its global campaign around the World Cup.

Nike loses more directly as its marquee team is out before the final week for the second consecutive World Cup. The only consolation for the U.S. company is that Brazil's loss came at the hands of The Netherlands, with the Oranje also wearing Nike and giving the Swoosh one team in the final four (alongside Germany and Spain of Adidas and Uruguay of Puma).

Yet on the Brazil loss, Adidas is not unscathed, partly because it gives Nike a stronger European foothold in the Oranje. Adidas is hurt with The Quest star Kaka out and because its official World Cup presence and television signage could very well be seen by less eyeballs worldwide. Brazil draws more than just Brazilians to the World Cup party and what hurts World Cup ratings hurts Adidas as an official FIFA partner.

It's an interesting case study around sponsoring giants. Brazil is the world's #1 soccer team and as such, has the cache - both collectively and through its individual players - to attract more than one global brand in any one category.

When such a giant falls, it falls hard...and in a case like this, the giant takes more than one sponsor with it.

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What's shockingly bad for Real Madrid the soccer club is ironically not so bad for Madrid the city

This is not the way it was supposed to be for Real Madrid, which is a leading member of the Billion Dollar Club of sport franchises, among the soccer world's most storied megaclubs and one of the planet's leading sport brands.

Real Madrid finds itself and its Bwin.com jerseys on the sidelines after its aggregate loss to Lyon in the Round of 16 in the UEFA Champions League, the biggest annual sports tournament in the world...on the outside looking in after spending more than $300 million in player acquisitions -- including $145 million US on Cristiano Ronaldo from Manchester United and $100 million US on Kaka from AC Milan -- with a view to winning some continental and international hardware...eliminated early in the year it will host the UEFA Champions League final May 22nd at Santiago Bernabeu in Madrid.

It's a stunning turn of events for Real Madrid, which according to the accounting firm Deloitte led the world in sport franchise revenues by grossing $540.9 million US in 2007-'08, ahead of #2 FC Barcelona and #3 Manchester United.

The UEFA Champions League upset is bad news on the field for Real Madrid, but arguably worse off the field for the sport business juggernaut.

Real Madrid has already seen fewer replica jerseys sales than expected this year, behind United, Chelsea, Liverpool and others. Its attendance at Santiago Bernabeu is down eight per cent over last year, down to an average of 67,461 with Ronaldo and Kaka from 73,157 last year without them.

Now, according to Coventry University Business School professor Simon Chadwick, the Round of 16 loss will cost Real Madrid at least $80 million US in prize money, sponsorships, merchandising, television bonuses and other revenue streams related to advancing to the UEFA Champions League final.

Although it will not see the $100 million plus windfalls earned by runner-up Manchester United and champion FC Barcelona at last year’s final in Rome, Real Madrid will not be entirely shut out. It owns Santiago Bernabeu stadium and will be paid a formula for rent and revenue-sharing by UEFA.

The irony is that what's shockingly bad for Real Madrid -- a UEFA result that will seriously impact the club's business model and damage its ability to recoup much of its investment in players in the short or even mid-term -- is potentially good for the economy of the City of Madrid.

Two visiting clubs means more hotel rooms, more restaurant meals and more inflow for Madrid and for Spain, which finds itself in its worst recession since World War II. With two visiting clubs now guaranteed, the economic impact of hosting the UEFA final will be significantly higher, especially if the visiting fans are English or German, known for their penchant for traveling and spending.

We're talking about potential economic spin-offs worth more than $50 million US to the economy of Madrid.

Real Madrid fans will take little solace in that. In fact, some would argue the loss will leave a civic hangover and adversely affect employee productivity, consumer confidence and, ultimately, any gains realized from more soccer tourists in May.

Madrid the city should still win. But Real Madrid the soccer club -- adopting a high risk strategy hoping for the high reward of a UEFA Champions League title -- has a financial disaster on its hands.

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