I’m sitting here on this snowy Saturday afternoon celebrating my twins’ 13th birthday. Life is good. We’re watching the Saints play who my colleague Darius Dale calls ‘the best worst team in the NFL’. Yes, Darius is from Seattle and is a hardcore Seahawks fan. It’s halftime now and Darius is happy.
This is definitely a big game for football. But to ANYONE that cares about sports endorsements, the game on Monday is the one that matters by a country mile.
Yes, I’m talking about the BCS championship. #2 Oregon Ducks vs. top-ranked Auburn Tigers.
It should come as no surprise that the Ducks serve as Nike’s primary face-plate in College Football. Phil Knight’s support for this program is legendary (Google it).
But Auburn is less obvious, as the Maryland Terrapins are logically the hallmark UnderArmour team. But the problem is that the high school team at our small New England town can probably hold its own against the Terps (not really, but you get the idea). Auburn, however, is a powerful franchise, and is UnderArmour’s most important college affiliation – as evidenced by a 7-year $28mm deal. Tack on all the noise around QB Cam Newton, who won the Heisman Trophy despite allegations of eligibility due to unethical/criminal behavior – and you’ve got yourself an event!
So let’s throw all this soap opera noise aside for a minute. What should we care about?
1) The investments in each of these teams have already been made by NKE and UA, but…
2) It is absolutely positively meaningless if the companies don’t suck it up and use the event to establish a better communication with consumers. That's incremental SG&A. Nike has the edge there due to sheer size.
3) UnderArmour has more to gain, and little to lose. While Nike has more to lose and less to gain.
- Nike is so big that people expect (consciously or not) to see the swooshes at any major sporting event.
- No one expects UnderArmour to be on the grid. The fact that it will be at the big game is meaningful. UnderArmour, however will need to be tactical about turning this into a near term-money maker.
4) In netting it all out, what do you get? As it stands today, just showing up is a non-event for Nike. But they can boost top line in its American Football business if they run the right 11th hour marketing campaign. Keep in mind that Nike has been investing in this sport meaningfully over the past 12 months – and capped it with its deal to take over the NFL next year.
5) For UA, the exposure should help. Furthermore, the apparel and footwear opportunity from the single event might actually be fairly meaningful to UA’s P&L – but that’s IF and ONLY IF they can be quick and tactical enough with marketing product that has already been created. They learned from their Superbowl experience a few years back that they need to be careful with their '11th hr' SG&A spend. Also keep in mind that they just endorsed Tom Brady. We're not too sure if UA can afford an SG&A surprise at this valuation.
6) Note: An important point is that it does not really matter who wins. Winning helps – don’t get me wrong -- at Hedgeye we expect to win every day. But Some of the most powerful franchises were helped by marketing sportsmanship or other extraordinary events that don’t necessarily synch with a W or L.
7) From a retailer perspective, its pretty much a wash. The obvious beneficiary might be Hibbett Sports given southeast exposure, but keep in mind that last year we had the Texas Longhorns and Alabama Crimson Tide shooting it out for the BCS title. So from a yy perspective, the difference may be marginal.