SBJ/January 28 - February 3, 2008/This Weeks News

Nike to keep Federer with 10-year deal

Nike is poised to sign Roger Federer to a new deal that stands to be the most lucrative tennis endorsement ever, sources said.

The 10-year extension could be worth as much as $13 million a year. Sources close to the deal differed on whether that money was fully guaranteed or in part depended on how well tennis’ top male player performs on the court.

If the contract indeed reaches that amount, the deal would make Federer one of the top-paid endorsers at Nike in any sport.

At press time, Federer was two wins away from his third straight Australian Open crown, which would leave him one behind Pete Sampras’ record 14 Grand Slam titles.

Federer’s agent at IMG, Tony Godsick, declined to comment. Nike did not reply to requests for comment by press time.

A source said the deal is expected to be signed in February.

With tennis a secondary sport in the United States, Nike is clearly wrapping up Federer for international exposure. And while Nike could add a Federer line to its sneaker and clothing offerings, tennis is not a big seller, so the deal is seen as more about branding than moving shoes and shirts.

“In the U.S., probably less than 2 percent of athletic footwear sales are tennis,” said John Shanley, an analyst with Susquehanna International, who noted that K-Swiss is a bigger tennis brand in America than Nike. “[Tennis] does get a lot of publicity, a lot of mention in news articles, and a lot more people watch the sport than participate in it. Branding is probably a pretty good part of the deal, particularly in Nike’s European sector, where [tennis] is much more important.”

When Federer in 2002 signed his current deal to wear Nike apparel and shoes, which expires next month, he had no agent and negotiated the deal himself. That contract, which guaranteed the then Slam-less Federer about $1 million annually, was considered in tennis agent circles to be a terrible deal. It’s possible some of the money he is acing with the new deal serves in part as an acknowledgment on Nike’s behalf of the semi-free ride they have had with Federer during his rise.

Adidas and Polo were seen
as potential suitors, but
Federer stayed with
the swoosh.

While he wins consistently and with grace, Federer is not viewed in America as a tennis player who transcends his sport like Andre Agassi or John McEnroe. Overseas, however, in areas where tennis is booming, Federer is a superstar. He costs $1 million an exhibition in the offseason in Asia, and his re-signing comes at a time when Nike is expanding its presence in China.

Shanley points out that Nike’s LeBron James signature basketball sneaker has fared well in China. James’ seven-year, $90 million deal is one of Nike’s top athlete contracts. The gold standard for the company is Tiger Woods, whose contract is believed to be worth around $40 million annually, though that includes royalties from golf ball and apparel sales.

Most tennis endorsement contracts are built around performance, so comparing them is challenging. Maria Sharapova’s Nike deal is believed to guarantee her around $6 million annually. Agassi’s much-hyped deal with Nike in 1995 for more than $100 million was royalty-based.

If Federer’s deal is fully guaranteed, he would easily become the highest-paid tennis endorser. Even if, for example, half the money was guaranteed, it still would make him one of the top, if not the top, endorser.

Nike also counts Serena Williams, James Blake and Rafael Nadal as endorsers.

Not to be ignored in Nike’s re-signing of Federer is the brand’s desire to keep him away from a rival. Adidas, based in Europe, could have been a natural fit for the Swiss player. Some tennis insiders had speculated Polo Ralph Lauren also might make a run at fashion maven Federer, but a spokesman for the company, which sponsors Wimbledon and the U.S. Open, said no offer was made.

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