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.

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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.


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