SBJ/November 17 - 23, 2003/This Weeks Issue

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  • 2003: The Year in Brief for Nike and Chairman Phil Knight

    Jan. 13: The Sporting News ranks Phil Knight No. 6 on its 13th annual "Power 100" list. Knight is up nine positions from No. 15 in 2001.

    Jan. 19: Nike debuts its Shox NZ "streaker" spot to rave reviews. The Wieden & Kennedy spot premieres during the NFL conference championships, and Newsday's Steve Zipay calls it "hilarious."

    Shox NZ ad: Nike’s naked ambition

    Feb. 6: Sonny Vaccaro, then Adidas director of grassroots basketball, tells espn.com that he is out of the bidding to sign high school phenom LeBron James. Vaccaro: "Nike has more money than God. If Phil Knight wants to sign him, he'll get him. I know LeBron better, no question, but what does that mean? There have been people from Nike living in Akron so long, they're going to have to pay Ohio taxes."

    May 19: Nike signs former Syracuse basketball player Carmelo Anthony to a six-year, $19.5 million deal.

    May 21: LeBron James agrees to a seven-year, $90 million deal with Nike, and it includes a $10 million signing bonus.

    May 26: Thirteen-year-old soccer prodigy Freddy Adu agrees to a $1 million contract with Nike. Adu is already an offensive star on the U.S. under-17 national team.

    June 6: Knight talks of signing Adu with Portland radio station KFXX-AM: "In some ways, that might long term be a bigger deal than LeBron James in the sense that not only is he a great player at a very, very young age, but he really, as an American, could lift soccer to become a very popular sport."

    June 23: Knight receives his second Advertiser of the Year award at the 50th Cannes Lions advertising festival, making him the first two-time winner of the award. Knight previously received the award in 1994.

    June 24: The Los Angeles Lakers' Kobe Bryant signs a five-year, $40 million endorsement deal with Nike. The Los Angeles Times reports that Bryant also will "receive royalties on a planned signature shoe, which would boost the total value of the deal, though not necessarily into the range" of LeBron James' $90 million Nike contract.

    July 10: Nike announces it will pay $305 million to acquire Converse and assume some of the company's debt. Thomas Clarke, Nike president of new business ventures, tells The Wall Street Journal that Converse is "a great brand that has a lot of elasticity. We like their business plan." Nike brand communications manager Joani Komlos is quoted as saying, "Nike is becoming a much more mature brand. We're looking for non-Nike brands to grow."

    Aug. 18: SEC filings reveal that Nike increased its monetary commitment to athletes and teams by almost 32 percent, or nearly $350 million, in the last year, from $1.094 billion in fiscal 2002 to $1.442 billion in fiscal 2003 ended May 31. The figures do not include the value of the Nike products the company supplies to all of its endorsers, whether individuals or teams.

    Aug. 25: Nike receives a perfect score in the Human Rights Campaign's second ranking of how large domestic companies treat gay, lesbian, bisexual and transgender employees.

    Aug. 30: Knight tells GolfWeek magazine, "In my mind, golf fits perfectly. Nike is all about sports and fitness and excellence. We attacked running first, and basketball second, and probably tennis third. We've made great progress in soccer. Now it's golf."

    Sept. 19: Nike posts a first-quarter profit that tops Wall Street estimates. The company reports net earnings of $261.2 million, or 98 cents a share, for the first quarter, compared with a loss of $48.9 million, or 18 cents a share, in the year-ago period. Nike's shares rise 4 percent in after-hours trading following the announcement. Analysts had expected earnings of 88 cents a share.

    Sept. 23: Nike holds its annual shareholders meeting, and Knight and other executives use the occasion to promote the growth opportunities they see in soccer.

    Sept. 25: Golf Digest ranks its 18 most powerful people in golf, and Knight is No. 12.

    Oct. 6: Forbes ranks Knight No. 31 in its annual list of the 400 wealthiest Americans, putting his worth at $5.8 billion.

    Oct. 31: University of Oregon President Dave Frohnmayer defends Knight's contributions to the university's $90 million renovation of Autzen Stadium, disputing criticism from skeptics calling Knight, an Oregon alumnus and a major donor to the program, "the best owner in college football." Frohnmayer: "That statement's halfway between uninformed and insulting. Phil Knight has been extraordinarily important to the [University of Oregon]. He has given more of his resources to the academic side of the university than any single donor in our history and obviously he's done the same on the athletic side of the university."

    Nov. 5: The Sporting Goods Industry Hall of Fame announces it will induct Knight in 2004.

    Nov. 7: The New York Times reports that several Finish Line and Footaction stores in Cleveland had received small allotments of LeBron James' Air Zoom Generation and the shoe quickly sold out. Footaction President Shawn Neville: "They blew out. Nike wanted to create some buzz and seed the business."

    Research by Alisha Puckett

    Sources: The Sports Business Daily, SportsBusiness Journal archives

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  • Big South Conference on the way to its biggest revenue year ever

    The Big South Conference expects record revenue this year, thanks to increased corporate marketing support.

    The league plans to announce eight new corporate partners Thursday, which will bring the total to 20.

    The addition of the new partners will help bring Big South corporate marketing revenue to more than $600,000 this year, Big South Commissioner Kyle Kallander said.

    That figure is about 21 percent above last year's corporate marketing revenue, he said, and about 14 percent above corporate revenue generated in the 2001-02 school year, the league's previous record year.

    Kallander thinks the Big South, though not as high-profile as bigger Division I conferences, is able to attract blue-chip sponsors because of its one-stop-shop packaging of sponsorships.

    The Big South, unlike most conferences, includes inventory from its members in all of its deals, Kallander said. Big South corporate partnerships typically range from $25,000 to $100,000 a year.

    The league buys inventory from its schools to include in its league deals so a corporate partner receives not only conference rights, which typically revolve around the league's basketball tournament, but also rights to certain or all of the league's member schools.

    "It's really a flexible approach and depends on what the partner's looking for," Kallander said.

    The new sponsors are Edy's Grand Ice Cream, Geico Direct, John Deere, Kroger, Naturally Fresh, New Balance, Pepsi and UPS. Those companies join Choice Hotels, which announced its sponsorship last month, as new sponsors this year.

    The increased revenue is significant because it gives the league the opportunity to add to its television exposure and increase the amount of money it can distribute back to its schools, Kallander said.

    Overall, the league is projecting revenue of $1.9 million this school year, an increase of about 7 percent over last year. More than $500,000 of that is expected to be distributed back to members. The rest is used to pay for league operations and television production. The Big South's television agreements are primarily designed so that the league pays for production and splits ad revenue with its television partners.

    NESTLÉ INCREASES TOURNEY ROLE: Nestlé Purina, in its third year as a sponsor of the Missouri Valley Conference's men's basketball tournament, is beefing up its involvement with the league with an in-store promotion for discounted tickets to the 2004 tourney.

    Nestlé Purina is on the ball with plans for the next Missouri Valley Conference tourney.

    Plans as of last week called for Nestlé Purina to run a buy-one-get-one-free ticket promotion in Schnucks grocery stores throughout the St. Louis area, said Missouri Valley associate commissioner Joe Mitch.

    The promotion centers on Nestlé Purina's line of dog and puppy chow and will include in-store point-of-sale displays, Mitch said. It is also likely to be supported by radio and television spots. The promotion is slated to begin in late January or early February and will run until the start of the tournament March 6. Arrangements with other retailers were still being worked out, according to Nestlé Purina officials.

    In addition to promotional rights, Nestlé Purina receives media and signs as part of its sponsorship of the tournament. The company also plans to again feature its Incredible Dog Team during the tournament. The dog team will perform acrobatic tricks and catch Frisbees at halftime.

    Bud Hanson, director of experiential marketing for Nestlé Purina, said this year's involvement with the Missouri Valley is greater than in the past because the company's retail partners were looking for ways to further promote Nestlé Purina dog chow brands. "This was a way to do something beyond pricing," he said.

    For the Missouri Valley Conference, the promotion helps promote the tournament at retail and is hoped to help increase attendance, Mitch said. He would not disclose financial details of Nestlé Purina's deal. Overall, the Missouri Valley Conference generates about $1.4 million annually from media sales and tournament sponsorships.

    The 2004 tournament will be March 6-8 at the Savvis Center. The last tournament had a league record attendance of 60,000 over five sessions.

    HEISMAN DINNER OPEN TO PUBLIC: The Heisman Trophy dinner will be open to the public for the first time in almost 70 years.

    The Downtown Athletic Club of New York City Inc., the presenter of the award, decided this year to sell tickets to the public as a way to raise money for the Heisman Trophy Foundation, which donates money to a collection of charities, including the Boys and Girls Club of New York. The only other time the presentation was open to the public was in 1935, the first year the trophy was awarded.

    In previous years the dinner was open only to Downtown Athletic Club guests and members. But with the club closed and its members dispersed, club officials wanted to change the focus of the dinner, said Norman Shaffer, president of 707 Marketing, which handles marketing for the Heisman.

    The club, located at 19 West St., just blocks from the World Trade Center site, was closed indefinitely after the terrorist attacks of Sept. 11, 2001, because of damages to the building and a subsequent inability to fund repairs. As a result, Heisman Trophy presentations for the last two years have been held at alternate locations in the city.

    This year's trophy presentation will be Dec. 15 at the Hilton New York. About 1,500 people are expected to attend, Shaffer said. Tickets are selling for $600 apiece or $6,000 for a table for 10. Downtown Athletic Club officials hope to raise $400,000 to $500,000 for the foundation.

    As for the Downtown Athletic Club, Shaffer said club officials are trying to reopen it in another location.

    Contact Jennifer Lee at jlee@sportsbusinessjournal.com.

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  • Churchill Downs sells out its 64 new luxury boxes

    Churchill Downs has sold out all of its 64 new luxury boxes, pulling in more than $5.5 million in revenue from corporations, groups and individuals willing to pay for a good seat for the track's premier event, the Kentucky Derby.

    The suites have sold at an average annual price of $87,000, and the average box holds 24 seats, said Tyrone Tubbs, senior vice president of sales for Churchill Downs Inc., which owns the Louisville, Ky., track. That $87,000 price tag is just for the weekend of the Derby, which is held the first Saturday in May, he said.

    Suite leases for the rest of the year, excluding Derby weekend, sell for $10,000 each, he said.

    The new suites are part of Churchill's $121 million renovation of the historic facility, which is scheduled to be completed in 2005. Churchill will have an additional 15 suites to lease before the 2005 Derby, Tubbs said.

    "We have an extensive waiting list," he said. "We have a good 25 to 30 folks who have expressed an interest."

    About half the 64 luxury boxes have been leased by corporations. A quarter of the suites were leased by individuals and the remaining quarter were leased by horse racing industry groups.

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  • NFL may let clubs sell past 75-mile limit

    The NFL is strongly considering letting its teams dramatically expand the geographic areas they can market to, including potentially pitting clubs against each other for fans.

    Now, teams abide by a decades-old policy of restricting their marketing to a 75-mile radius around their home city. They cannot sign preseason TV, or radio, deals outside that 75-mile range. Nor can they market to fans outside that circle.

    Under a new framework that emerged from the league's marketing meetings earlier this month in Chicago, the league would scrap the 75-mile rule and instead assign clubs designated market areas, or DMAs, which television has used since 1955 to define geographic regions.

    "It's kind of how TV and radio works," said Jonathan Kraft, the New England Patriots' president. "You'd give a team a DMA they are allowed to market in. Maybe there would be two or three DMAs you would own, or have semi-exclusive access to," when team markets overlapped.

    That likely would mean that under the new formula two clubs could compete against each other for fans in market areas bereft of NFL teams.

    The use of DMAs still must be approved by the owners, and would likely need to be part of the renewal of the league's commercial business model, or Trust, which is expected to occur at the annual owners' meeting in late March. And the DMA strategy is still in the discussion stage.

    But Kraft, and executives who were at the Chicago meeting, said it appeared likely the league would change the marketing rule. The point person at the NFL leading the discussions is Gary Gertzog, senior vice president, business affairs and general counsel. The league declined to comment.

    Many clubs have complained about the artificial nature of the 75-mile rule, which was instituted in the 1960s to prevent clubs along the densely populated Eastern seaboard from competing with each other for fans.

    Except perhaps for the two New York clubs, whose TV market area is enveloped within the 75 miles, DMAs would expand the number of possible fans most teams can reach.

    The Patriots, Kraft said, can't market in Bangor, Maine, even though there is no NFL team in that state. Western teams, such as the Denver Broncos and Houston Texans, are particularly affected, and would have access to huge swaths of potential boosters if freed from the 75-mile shackles.

    "There is a belief that teams should have some greater latitude in marketing their teams," said Texans chief sales and marketing officer Jamey Rootes. "The 75-mile definition may not work. It is probably not appropriate for today's environment."

    Nielsen Media's Barbara Zidowsky said it would not be surprising if the NFL adopted DMAs, which Nielsen invented nearly five decades ago. A host of industries, such as packaged goods, switched from their own market territory definitions to DMAs, she said.

    Today, Nielsen has 210 DMAs ranging from the No. 1, New York, with 7,376,330 TV households, or 6.804 percent of the United States, to the last — Glendive, Mont., with 4,968 TV households, or 0.005 percent of American TV households.

    The NBA has the same 75-mile rule that the NFL currently uses, while the NHL market territory definition uses a 50-mile radius. Major League Baseball is the only league that does not place a strict mile limitation on its clubs, which instead can market and broadcast to defined counties.

    Print | Tags: Denver Broncos, Football, Houston Texans, NBA, New England Patriots, NFL, This Week's Issue
  • Ratner’s $275M bid for Nets just a start

    The bidding for the New Jersey Nets has only just begun, with Bruce Ratner's offer of $275 million setting a bar that will likely be raised over the next few weeks.

    New York Islanders co-owner Charles Wang reportedly bid $265 million when initial bids were submitted last Monday. The team of developer Charles Kushner and Sen. Jon Corzine, D-N.J., offered $250 million, while relative unknown Stu Feldman, the CEO of New York-based investment firm Chelsey Capital, put in a bid of $257.5 million.

    Some of the bidders, however, indicated that they will resubmit higher offers, said a source close to the talks. The competitive process could bring the final sale price to $300 million, the source predicted.

    The Ratner, Wang and Kushner-Corzine bids all included guaranteed financing. While there were a few contingencies built into each offer, none is dependent on getting a new arena for the Nets.

    Ratner

    Ratner is trying to build an arena in Brooklyn, N.Y., as a centerpiece of a large commercial and residential development. He has asked for the state and city governments to cover $18 million of annual debt service on the arena, said a source with ties to the city government. Skeptics are asking how Ratner will get that sort of backing, and how he'll make it work financially with only one tenant.

    But Dan Doctoroff, New York deputy mayor of economic development, said the city is close to reaching an agreement with Ratner, a developer who already has built up much of the section of Brooklyn where the arena would be built.

    "I wouldn't characterize the discussions as far apart at all," Doctoroff said. "We are very encouraged."

    Doctoroff said the city is prepared to make an economic contribution equal to the projected tax revenue the arena project would generate, including player payroll taxes.

    "I've said all along there is the real potential here for a win for the community, the city and for [Ratner] financially," Doctoroff said.

    Although many still believe Ratner has only an outside chance of getting the Nets, his bid is being taken very seriously by YankeeNets, the holding company that owns the team.

    The YankeeNets board will likely meet this week to discuss a strategy for moving forward, possibly eliminating two of the bidders or inviting all to participate in a second round, a source said.

    Minority YankeeNets shareholder Mort Olshan, who has a $75 million investment in the team, could be the swing vote if the major shareholders on the fractured YankeeNets board can't come to an agreement.

    Many insiders believe the bidder with the best chance of ultimately landing the club is Wang. The founder of Computer Associates, Wang would move the Nets to Long Island, where he hopes to build a new arena for the Islanders. In the interim, moving the Nets to Nassau Coliseum would trigger a contractual clause that would allow the Islanders to renegotiate their lease with arena manager SMG. The lease is known to be the worst in the NHL and is something the last three Islanders owners tried in vain to escape.

    Lehman Bros. and Goldman Sachs are jointly representing YankeeNets in the sale process.

    All of the potential ownership groups were declining comment last week.

    Print | Tags: Basketball, Hockey, Lehman Brothers Inc., Brooklyn Nets, New York Islanders, This Week's Issue, YankeeNets
  • Sports Executive of the Year: Phil Knight, Nike Inc.

    Phil Knight had plenty to review for Nike shareholders in September, including the addition of Carmelo Anthony and LeBron James to the Nike endorser roster with Tiger Woods.

    The difficulty with SportsBusiness Journal and our sister publication, The Sports Business Daily, naming Nike founder, chairman and CEO Phil Knight as our joint Executive of the Year is not that he is undeserving; it really is the antithesis. Having built the most ubiquitous trademark in sports and one of the most renowned global brands, one could justifiably ask: Why this year? Why not every year?

    The answer lies in Nike's remarkable endurance, singularity of purpose, and clearly defined mission — all of which allowed the world's largest sports company to emerge from a two- to three-year slump in the sneaker market with its market dominance intact and a clear path to future growth.

    Coming off record annual and quarterly results, Nike shares, hovering around $63 at press time, were up more than 50 percent from the 52-week low of $41. (To be fair, it's a resurgent time for the industry, with Reebok recently posting its best quarterly results in six years.)

    Nike secured key foundations for future success with the addition of the Converse brand in July, buying retro cachet with another established brand and possibly entry into different channels of distribution.

    In addition, the company in May signed what could be the

    See also:
    next decade's two most important endorsers: 18-year-old No. 1 NBA pick LeBron James and soccer wunderkind Freddy Adu, then 13, who will likely be playing professionally before his 16th birthday. Adu is a naturalized U.S. citizen who turns 15 in June.

    Nike complemented those signings with the addition of Carmelo Anthony, the No. 3 pick in the NBA draft, and Los Angeles Lakers star Kobe Bryant, although the sexual assault charges facing Bryant since July have rendered him useless as an endorser.

    Nike continued to build upon its soccer credentials, second only to worldwide leader Adidas and separating itself from numerous specialty brands, and moved toward a reconciliation with Foot Locker, America's biggest shoe retailer, after a yearlong skirmish over distribution.

    Progress was made in other areas of business. While Nike veterans have never been totally comfortable with the company's apparel line — even Knight admits, "I still struggle with the 'f' [fashion] word" — others at the company's Beaverton, Ore., headquarters are gradually becoming more bullish on the category. Apparel now represents about 33 percent of Nike's total revenue, and observers believe that side of the business is being run more efficiently and effectively since it is no longer treated as an accessory to footwear.

    And when it comes to advertising, Nike again proved to have few equals, as Knight in June became the first marketer to repeat as "Advertiser of the Year" at the Cannes International Advertising Festival.

    Not a bad year, and considering how well-positioned the company is for the future, it is not difficult to assert that sport's most influential company has become even more important over the past 12 months.

    “Nike has weathered a storm that hit every
    athletic footwear and apparel manufacturer and seemingly come out stronger.”

    NBA Commissioner David Stern
    "Nike has weathered a storm that hit every athletic footwear and apparel manufacturer and seemingly come out stronger," said NBA Commissioner David Stern. "They've reasserted themselves on the endorsement front, continued to grow their soccer position to the point where they are a real global factor and made appropriate responses to the questions there were about their labor conditions."

    Said John Shanley of Wells Fargo Securities: "They are still looking for growth in the U.S., as is the rest of the industry, but they've had some nice hits with products like Shox and Air Force One and they've already seen a nice lift from the LeBron shoe, which should sell out. At retail, their better relationship with Foot Locker has picked up the stocks of both companies and it should really help Nike in the spring selling season. The biggest concerns I see are a slowdown in athletic product demand in Europe, but their Asian business has really improved and there's still a lot of opportunity there."

    There are challenges facing the eager Beavertons. Nike's domestic sales continue to lag, along with the rest of the industry, and technology issues at Nike Golf have been well-documented. But Knight remains bullish on the division, and points to Nike Golf's increased share in the ball category, where it now ranks as the fourth-largest brand after sales growth of almost 10 percent in early 2003.

    While he feels the golf division is unquestionably gaining market share, he also points to the acquisitions of Converse and Hurley as the businesses with the most domestic growth potential, since they are expected to gain incremental U.S. distribution for Nike products.

    'They don't need my meddling'

    Now 65, Knight continues to be the inspiration behind the brand and the culture at the company he founded. In a corporate structure typically atypical, he exists within a group headed by two presidents, Charlie Denson and Mark Parker. That leaves him free to be "selectively hands on" in terms of his management style. "They don't need a lot of my meddling," insisted Knight during a recent interview.

    Insiders will tell you that one thing Knight "meddled" in a lot over the past year was Nike's biggest PR splash of 2003, the signing of James to a seven-year endorsement deal worth $90 million. Knight's emphasis on signing James was similar to when he successfully lobbied to sign Michael Jordan 19 years earlier, when many within Nike's headquarters were touting the attributes of University of Kentucky center Sam Bowie, who was infamously chosen one pick before Jordan in the 1984 NBA draft.

    Knight pushed hard to sign "King James."
    "Believe me, that number got so big, the [James] deal doesn't get signed without my endorsement and I was enthusiastic about him from the very beginning," said Knight, hours after jetting back from Cleveland to witness James' home debut. "He's probably the best 18-year-old basketball player that has ever lived. The question is, 'Will he be the best 25-year-old basketball player that ever lived?' You pay your money and take your chances, but endorsement-wise, he is the whole package."

    Adidas and Reebok were in a frenzied competition with Nike to sign James, but it seemed that Nike had no ceiling on what it would pay to obtain him, lest he turn out to be the next Jordan. "Phil told me he had an unlimited budget and planned to exceed it," said a principal at one of the nation's biggest sports marketing firms.

    Knight maintained, however, "there was a price we wouldn't go beyond." As for the economics of the whole deal? "The early reads on interest in his shoe [the Air Zoom Generation, due at retail on Dec. 20] and the sale of [James] apparel already shows us what we thought all along," Knight said. "We're going to make money on this deal."

    One simmering issue over the past year has been the dispute between Nike and Foot Locker, its biggest retailer with 1,450 U.S. stores. In response to reduced orders from Foot Locker, Nike scaled back or eliminated shipments of its marquee shoes.

    But Knight confirmed reports that that feud has ebbed, if not ended, and in recent SEC filings, both Foot Locker and Nike said the chain had increased its U.S. orders. So is there an armistice? "Basically, that's correct," Knight said, "but I think the 'war' with Foot Locker was a little overblown, so now the word 'peace' is maybe a little overblown as well."

    Foot Locker officials would not elaborate on their relations with Nike beyond their most recent SEC filing stating the increase in orders. But while the chain is now on track to receive future high-end products, it won't be getting the initial shipment of the LeBron James shoes, which will debut at competing chains, including Finish Line, Athlete's Foot and Footaction. It is unclear whether Foot Locker will receive subsequent releases of the line.

    The culture club

    Those that know him well say the culture Knight has instilled over the past 30 years is what keeps Nike vibrant. Thus, a brand as ubiquitous as any in the United States can remain as edgy as a start-up, both in products and marketing.

    "Normally, when you get to companies of this size, everybody is looking for certainty, if only because of how much their shares are worth," said Dan Wieden, chief creative officer and CEO of Portland-based Wieden & Kennedy, the agency that has been producing Nike's arresting advertising for the past 22 years. "[Knight] is sitting at the head of a $10 billion company built from the trunk of his car, but to this day his passion for sports has not waned and neither has his willingness to take risk. With as much success as Nike's had, he's still not averse to throwing a Hail Mary."

    “With as much success as Nike’s had, he’s still not averse to throwing a Hail Mary.”
    Dan Wieden, Wieden & Kennedy
    Those are admirable qualities for any leader, particularly one Forbes ranks as the 31st-richest American, with a fortune estimated at $5.8 billion. The question is how inseparable is Knight from the brand and its culture?

    "Our culture has everything to do with our success, but it is by no means only my doing," Knight said. "Nike is young and irreverent and I am neither."

    Many who have worked for Knight dispute that assertion.

    "You can't really separate the brand of Nike from the person of Phil Knight," said College Sports Television co-founder and executive vice president Chris Bevilacqua, who left the job of Nike director of global negotiations in 1999.

    Tom Fox, Gatorade vice president of sports and event marketing and a former Nike director of U.S. sports marketing, said the relationship Knight holds with the company he founded is similar to the connection former University of Oregon track and field coach and Nike co-founder Bill Bowerman had with Knight.

    "The Nike mentality is an athlete's culture," Fox said. "That's one reason there's lots of athletes and ex-athletes working there. Risk-taking is encouraged, and finding the story of an athlete before the hype kicks in is almost second nature."

    Adds Liz Dolan, a former vice president of global marketing at Nike who was at the company from 1988 to 1997, "Phil is so relentlessly competitive that you can't help but absorb it."

    IMG co-CEO Bob Kain recalls the time he called Knight to advise him that Andre Agassi was going to drop the swoosh for a competitor's offer. "Andre's heart wasn't in it," Kain told Knight.

    That was enough to stoke Knight's competitive fires. "I may not have his heart, but I will not lose his feet," Knight told Kain, subsequently signing Agassi to a 10-year extension that is still in effect.

    Two stories are told when colleagues are asked to recollect what Knight was most often heard saying around Nike's 175-acre Beaverton campus. One is a Knight dictum: "A good company isn't good at one thing, it is good at 17 things." No one seems to know why the number was 17, but little matter.

    The other is a tale that may be more mythical in nature. It involves Knight, when he was a long-distance runner at Oregon, seeking counsel from coach and confidant Bowerman on how he could improve his performance. Bowerman's answer, so legend goes, was that Knight simply had to adjust his speed — and run somewhere between two or three times faster, depending on who is telling the story. This is seen as a window on Knight's management style: focus on the finish line and the goals, and rarely allow his charges to lose their way.

    Knight has built a strong, cohesive culture for Nike that begins with the company’s 175-acre headquarters in Beaverton, Ore., and spreads outward to 23,000 employees around the world.
    "People that work at Nike understand that no matter how big the company gets, the mission is to serve the athlete," said Rick White, who was general manager of Nike's subsidiary brands from 1997 to 1999.

    "He is not likely to tell you exactly how to do something," recalled Dolan, now host and producer of "Satellite Sisters," an ABC Radio Networks radio talk show heard weekly in 72 U.S. markets, "but he constantly reminds you of the goal, and that's to win."

    Bevilacqua was reluctant to provide specific details on some of the high-profile athlete and league deals he engineered during his five years at Nike. But he recalls learning from Knight that whichever side has time on its side has a pronounced advantage. He also remembers advice from Knight during some very protected deals. "He made it clear that if you didn't get it done, you shouldn't come home," Bevilacqua said.

    The imagery

    Together, Nike and ad agency Wieden & Kennedy have crafted some of the most memorable advertising of the past 20 years, cementing Nike's reputation as a brand that either knows the intersection of sports and pop culture better than any other, or perhaps actually creates it.

    The legacy is one in which ad phrases become embedded in everyday life, with "Just Do It," "Bo Knows" and "It Must Be the Shoes" common refrains. Spike Lee's treatment of Michael Jordan and his animated interactions with the Looney Tunes characters spawned the film "Space Jam."

    There are other indelible images from Nike campaigns — including Pete Sampras and Andre Agassi playing tennis in the streets of Manhattan, or the Brit streaking a soccer pitch, garbed only in a scarf and his Nike Shox that was a critical hit in 2003.

    "If you want to have a hall of shame and show some bad ads, we might win that one, too," Knight said with a laugh, "but we do actually work hard at taking risks." Knight has come a long way from the man who told Wieden, when they first met, "I hate advertising." Now he sits as the only two-time advertiser of the year winner at Cannes.

    "He used to think there could be no better advertising than having an athlete wearing Nike shoes on the cover of Sports Illustrated," Wieden said. The strategy remains unscripted. "There has never been a search for a formula. From the beginning, what was exciting was that nothing was off limits. It was always, 'What you did yesterday was great, but for tomorrow I want to see something new and different.' That's also what's made them great designers."

    The best advertising injects emotion into consumer categories where it really doesn't exist. The Nike/W&K combination never had the dilemma of a boring category because sports connects with all aspects of the human condition on a daily basis. Still, they've exploited it for marketing purposes like no one before or since.

    "What you learn at Nike is the connection between athlete, brand and consumer," said Professional Bowlers Association Commissioner Fred Schreyer, director of sports marketing at Nike from 1987 to 1993 and founder of the now defunct Nike Sports Management division in 1992. "That's how Nike can be everywhere and still stay 'cool.'"

    A sports junkie

    For all the mysticism ascribed to Knight, those who have worked with him say he is easier to understand than most people think. He's just a sports junkie who happened to translate and amplify his passion into athletic shoes.

    Sure, signing James, Anthony and Adu were nice coups in 2003. His time with MJ is memorable. But he still tells confidants that the best day of his life was in July 2000 when he chatted with Lance Armstrong from Armstrong's coach's car while the five-time winner was traversing the mountain stage of the Tour de France, followed by a quick helicopter ride over to Scotland to witness Tiger Woods win the British Open at St. Andrews.

    “Our
    culture has everything to do with our success, but it is by no means only my doing. Nike is young and irreverent, and I am neither.”

    Phil Knight
    "I'll see Phil at the [Nike] cafeteria and he doesn't want to talk about the new deal we're negotiating," said Tom Ross, who runs Octagon's men's tennis business, which includes high-profile Nike endorser Lleyton Hewitt, "but he'll talk about Pac-10 football with me for 20 minutes."

    "He's the world's ultimate sports fan," Dolan said. "Because he's so passionate about sports, he intuitively understands who's out there as an endorser that the public will be passionate about."

    The love of sport and the lessons learned in athletic competition are part of the foundation supporting Nike. The Nike culture is the rest — and Knight and Nike deserve kudos for maintaining that strength while growing to more than 23,000 employees.

    "In terms of running a business that big, to be able to have all those employees on the same page is remarkable," Schreyer said. "It has always been very clear what Nike's brand stands for — the athlete — and that's what separates them."

    Wieden compares Knight's infatuation with sports to his own obsession with advertising. Each man's passion is so genuine that the creative work, and the shoes, are built on instincts honed to near perfection. Accordingly, the odds are long that Knight will ever retire; nor will Wieden ever sell out to one of the holding companies that control much of the agency business.

    "Look at the heads of all the agency conglomerates — none of those guys actually have anything to do with advertising; they have no love of the craft, they are strictly balance-sheet guys," Wieden said. "Phil is still deeply involved in sports and it shows in everything Nike does."

    Print | Tags: Adidas, Foot Locker, Los Angeles Lakers, NBA, PBA, Reebok, This Week's Issue, Wieden Kennedy
  • Turmoil over budget envelops Brewers

    The likely departure of popular Milwaukee Brewers CEO Ulice Payne, coupled with revelations that the franchise will try to cut player payroll by as much as 25 percent in the coming months, had fans in an uproar last week, even as the club was hoping to build momentum for its 2004 sales efforts.

    The storm clouds began to gather early in the week, after Payne publicly expressed concerns about the 2004 budget approved by the Brewers' board of directors, which recommended that payroll be cut from $40 million to $30 million, if possible. By week's end, it appeared that the dispute likely would end his one-year tenure as CEO.

    Payne publicly questioned potential cuts.

    Payne could not be reached for comment.

    Payne, an African-American who had been managing partner of a law firm, was the first — and to date only — minority-group member to head an MLB franchise.

    Rick Schlesinger, executive vice president of business operations for the Brewers, said he was surprised by Payne's stance, pointing out that Payne not only had voted for the plan, but had pitched it to investors.

    "My question is, and remains, why was Ulice supportive of something for nine months and then, in the space of a couple of weeks, he completely disavowed the very plan he helped put together?" Schlesinger said.

    Brewers patrons had another question in mind: What happened to the club's assertions that it would field a competitive team if it landed public funding to build Miller Park?

    That was the question raised by local columnists and editorial writers, some of whom suggested that the best remedy might be for MLB Commissioner Bud Selig to sell his controlling stake in the team, which has been held in trust since he was named commissioner in 2000.

    "For all the controversy, the fact remains that the [business] plan is sound," said Schlesinger, who stressed that the club would shrink payroll all the way to $30 million only if it could get back value in trades. "It recognizes that cosmetic patching of the team right now may help us sell a few tickets, but it's not going to help improve the team on the field in 2004."

    Print | Tags: Baseball, Milwaukee Brewers, MLB, This Week's Issue
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