SBD/October 18, 2012/Marketing and Sponsorship

Nike Decision To Drop Armstrong Seen As A Defining Move For Company

Nike will continue to support the Livestrong brand founded by Armstrong
The move by Nike to drop its sponsorship of cyclist Lance Armstrong is a "defining moment in the Armstrong saga, as the corporation has a history of sticking with its athletes," according to William Fotheringham of the GUARDIAN. The company notably stuck with Tiger Woods "during his marital troubles” that began in late '09. It is also “defining because of the extent to which the corporation bought into cycling, establishing a massive presence on the ground during the Tour de France” (GUARDIAN, 10/18). In Chicago, Rick Morrissey writes yesterday’s news was “a few more shovels of dirt on the grave of his reputation.” Nike “doesn’t give up on moneymakers.” But the company “seemed to realize that Armstrong was a lost cause, and, more importantly, that there was a chance of a backlash from a public that buys Nike products as if they’re necessities” (CHICAGO SUN-TIMES, 10/18). SI.com’s Austin Murphy wrote, “This kiss-off from Nike marks a new phase in his fall. This is when he truly starts hemorrhaging money” (SI.com, 10/17). SB Nation's Amy Nelson said Nike's move is a "stronger message than USADA could ever deliver" ("Markets Now," Fox Business, 10/17). In N.Y., Belson & Pilon report Nike called Bill Stapleton, Armstrong's agent, on Tuesday and "told him it was ending its agreement with Armstrong, thought to be worth millions of dollars.” The company “did not leave room for negotiation” (N.Y. TIMES, 10/18).

BAD FOR BUSINESS: optionMONSTER co-Founder and CNBC contributor Pete Najarian said there is "zero upside" for Nike to keep Armstrong among its roster of endorsers. Najarian: "Nike's not going to sell an extra sneaker just because they have Lance Armstrong” (“Fast Money,” CNBC, 10/17). Solomon McCown & Co. President Ashley McCown said Nike had "no choice but to cut ties" with Armstrong. McCown: "Lance Armstrong is a brand, and Nike is a premiere brand. He is now a toxic asset that cannot be associated with. There is too much of a chance for Nike’s fine reputation to be tarnished. Lance is damaged goods” (WASHINGTON POST, 10/18). PMG Sports President & CEO Evan Morgenstein said that Nike brand managers “would have had ‘an absolute nightmare’ dealing with the collapse of the Armstrong brand.” Morgenstein: “Just take it from a business perspective first, how much inventory are they going to have to liquidate now, or how much of it’s coming back to their warehouses from their retailers?” (VELONEWS.com, 10/17). FOXSPORTS.com’s Greg Couch wrote, “I’m not going to believe for one minute that Nike did this because it believes Armstrong is a cheater. No, Nike dumped Armstrong because you think he’s a cheater. Nike made a business decision, and also a Nike-image decision.” The numbers “just don’t add up anymore" (FOXSPORTS.com, 10/17).

ODD TIMING
: IEG Senior VP/Content Strategy Jim Andrews said that he was “dumbfounded by Nike's decision to pull away.” Andrews said, "It came so close to their statement last week supporting him. Something happened internally that we are not privy to” (MILWAUKEE JOURNAL SENTINEL, 10/18). SB Nation's Bomani Jones said of Nike, “You have to wonder when they made such a point to say how they were misled and they were fooled just like everybody else. ... If Nike wants to divorce itself now, that’s fine. But this is weird that they’re the first ones off the ship” (“Around The Horn,” ESPN, 10/17). But in Portland, Erik Siemers reported there is "evidence that Nike has long been planning for this eventuality in a way that would limit the impact on the brand.” It is as if Nike has "created two Lance Armstrong personas: The dominant athlete and the cancer survivor." Siemers: "It’s the cancer survivor ... that seems to have come to the fore in recent years.” In losing Armstrong the athlete, Nike "doesn’t give up any signature product lines like it would with Tiger Woods or LeBron James” (BIZJOURNALS.com, 10/17).

WORDS COMING BACK TO BITE THEM
: Nike is taking some heat for a commercial it released in '01 supporting Armstrong against doping allegations. As footage shows Armstrong alternating between working out and being drug tested, he says in a voiceover, "Everybody wants to know what I'm on. What am I on? I'm on my bike, busting my ass six hours a day. What are you on?" (THE DAILY). ABC’s Neal Karlinsky said, “Not so long ago Lance Armstrong and his partners at Nike were making fun of those who accused him of doping. Today, Nike is eating its words" (“World News,” ABC, 10/17). CNBC’s Andrew Ross Sorkin said of the ad, “If you’re Nike, you cannot be happy that you paid money for this, right?” ("Squawk Box," CNBC, 10/18). Meanwhile, advertising experts said that the “public manner in which Nike severed its ties with Lance Armstrong is rare.” Northwestern Univ.'s Kellogg School of Management marketing professor Tim Calkins said, “What’s surprising is that Nike came out with a very pointed statement about Lance Armstrong. And behind that statement there seemed to be some bitterness” (AUSTIN AMERICAN-STATESMAN, 10/18).

DEVIL’S ADVOCATE: YAHOO SPORTS’ Dan Wetzel wrote under the header, “Nike, Livestrong Abandoning Lance Armstrong At Wrong Time.” Wetzel: “This should've been time to regroup and reload in a different way. This should've been time to stand stronger behind Armstrong because, from here on out, his purpose could be clear and true." It was not “until Armstrong's name became mud and his ability to move merchandise was destroyed that Nike decided it couldn't ethically stand by the cyclist.” As long as “the money was rolling in, they were with him.” The idea that Nike “could be naively duped into believing in Armstrong's innocence is ridiculous.” The company “either knew or would've overwhelmingly believed Lance was doping all these years” (SPORTS.YAHOO.com, 10/17).

INTEGRITY OF THE SPORT: In London, Simon Hart writes a “closer inspection of Nike’s history supports the view that it was only a matter of time before Armstrong was cut adrift.” While the company has been “tolerant of indiscretions away from the sports field, it has been ruthless in its rejection of athletes who have cheated on it.” Former U.S. sprinter Marion Jones was “once the face of Nike until allegations surfaced about her involvement in the BALCO drug conspiracy.” The company “refused to offer her a new endorsement deal in 2005 -- two years before she confessed to drug-taking at her perjury trial.” Nike also dropped other BALCO clients including Rockies 1B Jason Giambi and U.S. sprinter Kelli White. Meanwhile, U.S. sprinter Justin Gatlin in '06 was “shown the door by Nike following his second positive drug test” (London TELEGRAPH, 10/18).
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