Is Under Armour The Real Winner In Nike's Billion Dollar NBA Deal?

In case you missed it, Nike just inked a deal with the NBA taking over the rights to outfit its players beginning in 2017.


(Spoiler-Alert … we don’t consider this deal a “win” for Nike.)


Consider this: Just a week ago (before the 'official' announcement) if you approached ten people in your office, gym, neighborhood (whatever) and asked them who endorsed the NBA, I would bet $100 that no fewer than seven would have said Nike. And yet…  it was Adidas.


Four key issues to consider:


1. League endorsements largely do not work. Consumers really don't care about the logo players are required to put on their jerseys. What they care about is the logo players proudly choose to wear on their feet. That's why Nike walked away from these league deals over a decade ago.

Is Under Armour The Real Winner In Nike's Billion Dollar NBA Deal? - z cy


2. Adidas paid $400mm over 11 years. Nike is paying $1bn over 8-years. While this is still less than the $1.1bn/5-yrs that Nike is paying for the NFL, it is still a lot of coin to pay for the 5th most watched sport in the United States (NFL, MLB, CFB, NASCAR, NBA, NHL) -- yes, NBA is just one notch above hockey.



3. Here's where Nike can earn its keep. If Nike can somehow figure out how to innovate the uniforms so that players notice a dramatic improvement in their ability to put points on the board and play over an extended period of time, then there's a commercial apparel opportunity for Nike. That's what Nike did with the NFL. But a football player's uniform weighs about 30lbs, and had not been innovated or streamlined in 30 years. That was a ripe opportunity for Nike.  Basketball? It’s a far different story -- shorts, tank top, shoes (maybe a headband)… that's it.

Is Under Armour The Real Winner In Nike's Billion Dollar NBA Deal? - z lf


4. We're reading a lot this morning about how this is bad for Under Armour.  Let's be clear about something...this helps UA. The fact that Under Armour is being boxed out of major endorsement deals by the 900lb gorilla in the space gives it all the ammo it needs to continue its reign as the anti-establishment brand for younger athletes.  We think Nike just gave UA a gift with this deal. And let's face it, UA has been crushing it lately with success in its own endorsement deals. Look no further than like Misty Copeland (a big miss by Nike), Jordan Spieth, Tom Brady, Andy Murray, and Stephen Curry.

Is Under Armour The Real Winner In Nike's Billion Dollar NBA Deal? - z jsp


Bottom line: Nike dropped the ball with this deal.

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more