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SBJ/June 26 - July 2, 2000/Marketingsponsorship
Nike leaving the field after talks with NFL break off
Published June 26, 2000
Licensed apparel manufacturers might actually have some leverage with the NFL after Nike Inc. announced early last week that it has broken off talks with the league and will not return as an on-field uniform supplier after the 2000 season. It leaves Adidas and Puma as the sole incumbent brands likely to return to NFL sidelines in 2001.
But even before the Nike talks broke down, the league had already moved to put at least one new brand on the sidelines, handing off five teams to Champion for the 2001 season. Champion, a division of Sara Lee Corp., never dropped out of the NFL uniform license, continuing to make team practice wear and selling replica jerseys at retail, but it has not been on the field with any game-day product for several years. The five teams it picks up are all now outfitted by Logo Athletic Inc. under the Puma brand.
Logo, back on its feet for the last three months after getting a cash infusion from shareholders, is in discussions with the NFL about extending its on-field deal past next season, but the league is keeping a close watch on the company's finances.
Talks are also under way between the NFL and Adidas, the league's other jersey supplier, as well as several other companies, said Chuck Zone, the NFL's senior vice president of licensing.
The talks with Nike broke off after the league turned down an offer to enter a joint venture in which Nike would be the exclusive licensee in every apparel category. Nike had no interest in extending its license under the current terms, which provides little exclusivity but includes more than $15 million in fees and minimum marketing requirements, plus a hefty minimum royalty that Nike never sold enough product to cover.
"They wanted the status quo. That was unacceptable to us," said Mark Hampton, president of Nike's Team Sports licensing division. "We looked very hard at the economic realities and what it takes to make money. The current licensing model surely doesn't work for us."
Ironically, Nike and Reebok were the first companies to throw multimillion-dollar up-front payments to the leagues for the rights to outfit their players, and drove the going rate for those fees up to a point where many traditional licensed companies could no longer compete.
Several factors contributed to Nike's decision to balk at paying those fees. In addition to the company being poised to become a powerhouse in team-licensed products, Starter Corp. and Pro Player Inc. are out of business, and Reebok, Russell Corp. and others have backed off the licensed business.
Hampton said Nike still expects to grow in the collegiate apparel market, where it outfits 30 schools, but he's no longer predicting that Nike will be the No. 1 seller of licensed apparel by next year, a prediction he made without hesitation a few months ago.
GATORADE TWEAKS PROGRAM: Gatorade will not run any under-the-cap or on-label promotions tied to sports properties this year, and instead will focus on account-specific promotions and school distribution. However, Gatorade took advantage of its sponsorship rights to the WNBA, NFL and Major League Baseball in a series of ads from FCB Chicago that feature Michael Jordan. The ads show Jordan trying to play golf while his caddie can't stop talking about other Gatorade endorsers Chamique Holdsclaw, Peyton Manning and Derek Jeter, all of whom appear in their team uniforms in spliced-in action clips.
PEPSI NASCAR PROMOS: The Pepsi-Cola Co. has teamed up with a slew of southeast U.S. retailers to run promotions tied to the Pepsi 400, the July 1 Winston Cup race at Daytona International Speedway. Circle K convenience stores, an official NASCAR sponsor, will help stage a sweepstakes in which Pepsi gives away a Chevrolet Monte Carlo, the new official pace car of NASCAR. Ten contest winners will attend the race and get keys to try to start the car. The one with the winning key gets to keep the car.
Pepsi also teamed with the Winn-Dixie supermarket chain to run the "Dew Crew" VIP promotion, in which more than 100 winners will get to attend the race and meet the Dew Crew — drivers Ward Burton, Terry Labonte and Chad Little. Meanwhile, U Save stores in Tampa and Kroger stores in southeast Georgia will stage a "Meet Jeff Gordon" contest, sending 10 winners to a VIP function with Gordon the day of the race.
Andy Bernstein can be reached at firstname.lastname@example.org.