SBJ/Jan. 17-23, 2011/Marketing and Sponsorship

Nike report hints at big NFL check

Nike's commitment to future endorsement spending surged between May and November last year by nearly half a billion dollars, or 13 percent, suggesting the company paid more to secure NFL rights than has been previously reported. In fact, for just the first four years of the new NFL deal, which begins in 2012, the company's commitment to spend future endorsement and sponsorship dollars has increased 23 percent, according to Nike's securities filings.

The NFL in October announced that Nike had secured the right to outfit its teams in a new five-year deal starting in 2012 reported to be valued at $35 million a year, or $175 million total.
While the more than $480 million increase in new endorsement commitments detailed in Nike's quarterly report released earlier this month cannot be fully ascribed to the NFL, there are few other explanations, experts said.

"It's the only Nike deal [in that period] that is close to that size," said John Horan, publisher of Sporting Goods Intelligence.

Nike declined to comment. The NFL has declined to comment on the value of the Nike deal, though a league source at the time the deal was announced said the reported figures were too low.

» INCREASED COMMITMENT
The amount of money that Nike has committed annually to
endorsements between 2012 and 2015 is higher now than
it was in the middle of last year. Those years are the first
four years of the company's new NFL deal, which was
announced last fall.
Endorsement Obligations

As of
Nov. 30, 2010
As of
May 31, 2010
Change
2012 $704 million $638 million +$66 million
2013 $716 million $568 million +$148 million
2014 $656 million $508 million +$148 million
2015 $540 million $411 million +$129 million
Source: Nike securities filings

Nike usually details its endorsement and sponsorship obligations in its annual report, but when a significant change occurs within its fiscal year, the company will note the change in the quarterly reports. Nike last made a quarterly disclosure of changes to endorsement obligations in 2008.

Nike's endorsement obligations stood at $4.27 billion as of Nov. 30, 2010, according to the quarterly report, up from $3.79 billion as of May 31, 2010, according to the company's annual report.

The FIFA World Cup occurred during the same time period, and Nike sponsored several teams during the competition, but those deals would not be reflected as change because they had been set well before.

The Nike deal replaces Reebok's contract with the NFL. According to Nike's securities filings, endorsement obligations for 2012, the first year of the deal, now stand at $704 million, up from the $638 million reported last summer, prior to the deal being announced. Endorsement obligations jumped $148 million in 2013 and 2014, and $129 million in 2015.

Even if the increases are not justified by additional equipment and jersey sales, Horan said, Nike may see the deal as worth it because it knocked Reebok out of the marketplace.

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