SBJ/20100802/This Week's News

Nike endorsement tab swooshes down

Growth in Nike’s spending on endorsements, promotions and advertising came to a halt in its most recent fiscal year, and its obligations on payments to athletes and teams fell by 9.5 percent, according to the company’s recently submitted annual 10-K filing with regulators.

Nike’s obligations to pay athletes and teams cumulatively over the lifetime of their contracts had risen in each of the past three years, dating to fiscal year 2006 (see chart). The decline in value of those obligations to $3.8 billion as of May 31 still leaves a total that is more than three times the amount posted in 2002, but it’s down $400 million from a record $4.2 billion last year.

Meanwhile, demand creation, an annual amount that consists of advertising and promotion expenses and includes the costs of endorsement contracts, rose in the year ended May 31, 2010, by $4 million, less than 1 percent, to $2.356 billion, after rising by 35 percent between 2006 and 2009.

“The moderation reflected a couple of things,” said John Horan, publisher of Sports Goods Intelligence, which tracks the sporting goods industry. “There was not one event to get excited about [in fiscal 2010]. Two was the economy, and three, they have started to shift more and more away from traditional media.”

Nike declined to comment.

Nike’s fiscal 2010 ended May 31, so the recent FIFA World Cup, which was played in June and July, falls into fiscal 2011. Meanwhile, the 2008 Beijing Olympics was in the fiscal year that ended May 31, 2009, when Nike’s endorsement obligations hit its record $4.2 billion.

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