The NFL Calendar is Re-Written

The old adage in NFL product licensing is that “Reebok owns Sunday (pro), Nike owns Saturday (college), and Under Armour owns Friday (high school).”  Well, get ready to rewrite the calendar. Reebok’s 10-year deal with the NFL expires in 2012, and the lion’s share is ending up in Nike’s hands. Nike is a winner here. But let’s face it…these deals are getting expensive. The biggest winners might very well be the retailers.

A few thoughts…

1)      Nike will absolutely blanket both the collegiate circuit as well as the NFL.

2)      A decade ago, this deal did not make sense for Nike (it was just emerging from a VERY ugly period when the contract -- which it owned -- came due). Today, it makes all the sense in the world. This synchs perfectly with the company’s focus to go deep into specific categories – US Football being one of them.

3)      It’s not on the cheap. We’re still waiting on numbers, but it’s safe to say that it will be well above the $30mm/year paid by Reebok. This deal will also have some up front payment that is likely to flow through the P&L. The interesting point here, however, is that even if it were $60 per year, we’re only talking 2% of Nike’s Demand Creation budget. If there was never a single dollar of sales associated with this deal, it would only hurt margins by 30bps.  Clearly, that’s not the plan…but it shows the size and scale Nike has vs. its’ competition.

4)      Let’s give credit where it’s due to AdiBok for not chasing this puppy. But what does it do now? The $300mm was an extremely poor investment for Reebok – one of the worst in recent memory for any company in this space. But Adidas now has a powerful $30mm/year weapon on its P&L. Will it use it in another sport in the US? Will it go after specific athletes? Our bet is that it will up the ante for European Football. Nike will not have the luxury of ignoring this.

5)      Under Armour is more likely to get Tom Brady (see our 10/7 post – Tom Brady – Free Agent). That would be somewhat of a loss for Nike – even though he has not had great commercial value. The traditional Nike mindset would be to keep him anyway (they'd let pride get in the way). If they let him go, it will impress me as it relates to Nike letting its ego go and focusing on the highest ROI uses of capital. That said, while cutting Brady loose might make sense on paper, what happens if UA steals market share because they use him more effectively? Decisions, decisions... I just argued both sides in a simple paragraph. Can you imagine what the debate is like internally?

6)      Foot Locker is likely to benefit as well. Note that Nike has co-branded NBA shops with FL. FL would love NFL shops, but AdiBok wasn’t exactly the best partner. That will change.