8 Quick Takeaways on #Nike's Gut Punch to #UnderArmour (Courtesy of #KevinDurant)
UA will come back heavy within six months' time and endorse someone big.
NKE, UA - Durant spurns Under Armour to return to Nike
- "With Durant's seven-year contract with Nike expiring, Under Armour offered him a 10-year deal worth $265 million to $285 million. According to ESPN, Nike exercised its right to match any rival shoe company's offer to the All-Star guard. Nike officials told Durant and his representatives at Jay Z's Roc Nation Sports on Saturday that they would match Under Armour's offer."
- "Based on the ESPN report, Durant stands to make more money from Nike over the next two years than the $41.2 million the Thunder will owe him during that span."
8 Quick Takeaways on the Nike/Durant deal:
- The extra $20 million dollars in endorsement spend per year needs to generate an incremental $150mm in footwear sales in order to make it margin accretive for NKE.
- In other words, KD needs to eclipse King James as the leader in the basketball footwear marketplace.
- For NKE that translates to 0.9% growth in its footwear business - for UA to make the $28.5mm deal margin accretive it would need to grow the footwear category by 76%.
- Uner Armour's bid did not have much to do with ROI.
- The reality is that Under Armour is big enough now that it probably needs a mega-star to grow its footwear business and elevate its brand.
- Tom Brady (UA's biggest name currently) won't cut it.
- When the brand was in its infancy, it could simply put basketball shoes on "C" players in the NBA, and it was enough to boost the brand. Those days are over.
- Our sense on this loss is that UA will come back heavy within six months' time and endorse someone big. It already has Board approval for the capital outlay, and it won't let that money go unspent.
Nike's video "THE BADDEST" from this spring.