SBJ/Feb. 17-23, 2014/Champions

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  • Bill Schmidt: Thirst for the deal

    Born the son of a coal miner, in a house built by the company whose coal pit gave the town its name, Bill Schmidt made the unlikeliest of exits on his way to one of the most unlikely of careers.

    In an area of western Pennsylvania where employment meant coal mines or steel mills, and at a high school where wrestling was the glamour sport, Schmidt found his way out by riding an 8-foot-long spear. Little did he or anyone else know, it was a ride that would take him to all corners of the sports industry as he created some of the most memorable branding and altered how products are marketed across sports.

    Photo by: STEVEN BRIDGES
    THE CHAMPIONS


    This is the fourth in a series of profiles of the 2014 class of The Champions: Pioneers & Innovators in Sports Business. This year’s honorees, and the issues in which they will be featured, are:

    Jan. 27: Rick Hendrick
    Feb. 3: Joan Cronan
    Feb. 10: Wayne Embry
    Feb. 17: Bill Schmidt
        Related stories: Gatorade grabbed Jordan from Coke
                                  Bill’s Best: Favorites through the years

    Feb. 24: Michael Ilitch
    March 3: Verne Lundquist
    And it all started with that spear.

    Schmidt started throwing the javelin as a sophomore in high school. By accident, really. Nine years later he medaled at the ’72 Munich Olympics, achieving something only four other American men had ever accomplished and none has equaled since. So years later when he helped lead the marketing team that pioneered the sports drink category and grew Gatorade from a niche brand to one that sold in the billions, no one should have been surprised.

    “If you have the assignment to throw something long and heavy a great distance, you soon realize that it’s a very involved and detailed process, requiring endless planning and almost painful focus,” said Peter Ueberroth, for whom Schmidt worked as vice president of sports at the 1984 Los Angeles Olympics. “Bill brought that sort of perspective to everything he did.”

    But even with that Olympic medal, and time spent in the military, little on Schmidt’s résumé in 1984 suggested he had the organizational and executional skills to grow Gatorade, let alone the creativity to make it part of the fabric of American sports. That didn’t matter. Schmidt combined an athlete’s knowledge of sports with keen negotiating skills, marketing savvy, vision and a knack for building and maintaining relationships that would make Dale Carnegie jealous. He was a perfect fit for the job.

    Certainly, growing a sports drink at a time when sports’ biggest stages were dominated by Coke and Pepsi required determination and focus. But that was nothing compared to that start amid the coal mines. The son of a miner. One of seven children. In a home that required an outhouse.

                                                           

    Schmidt’s start in life was even harder than already described. He has no memory of his father. His dad took his own life, leaving his mother to raise the family. When Schmidt was 5, the family moved to a $3,000 house in Canonsburg, Pa.

    With a twin brother Bob — the only ones in the family to finish high school or college — Schmidt always had a playmate, and it wasn’t long before their backyard Olympics began. As brothers, things got very competitive. “It was always, ‘how far could you throw something,’ whether it was an apple or a stick,” Schmidt recalls.

    Still, that didn’t translate to track success in the beginning. In ninth grade, Schmidt originally was the manager of the track team at Canon-McMillan High School, but after he lost the keys to the gym and they had to break through a wall to get inside, he decided to start throwing things instead of organizing them. Schmidt also played football and baseball, but on the track team he had to find his way, from the hurdles to the discus to eventually the javelin. None of the school’s coaches had any javelin experience, so Schmidt largely had to teach himself, something that fostered focus and self-reliance.

    “I watched a lot of film,” he says.

    And it paid off.

    Schmidt had never been on an airplane, and had barely heard of the school, when he headed to North Texas State (now the University of North Texas) on the promise of a partial track scholarship in 1966. As he says today, “It was a way out.”

    Also on the North Texas track team at the time was a shot-putter named Joe Greene. He had yet to pick up the “Mean” nickname. To this day, a Pittsburgh Steelers helmet signed by the hall of famer is one of Schmidt’s prized possessions.

    While at North Texas, Schmidt’s javelin throws steadily improved, and by his senior year he was on full scholarship and earned All-American status. “I got a little bigger and I had good genes,” he says. “My great-grandfather was a strongman in an Austrian circus.”

    He also was on his way to earning a degree in business administration.

    “I wanted to dispel the dumb-jock stereotype,” he says.

    Drafted into the U.S. Army in 1970, Schmidt was stationed in California and later West Point. He continued to throw the javelin, setting military records along the way. In 1972, he wasn’t one of the favorites to make the U.S. Olympic team, but he secured a spot.

    In Munich, Schmidt nearly lost his chance at a medal before he even got started. At an Olympics where two American sprinters missed their race because they showed up too late, the same fate almost happened to Schmidt. When his transportation didn’t show on the day of the javelin competition, Schmidt ran four miles to the Olympic stadium, only to be stopped at the gate by guards who said he was too late. Schmidt ignored them and burst into the stadium.

    “I did a jailbreak,” he says. “They were either going to be fast enough to catch an Olympic athlete or I was going to compete.”

    He got there in time to compete, and one of the things that still stands out is how the German crowd cheered him on because of his name and German heritage.

    “The thing about the Olympics is that it all gets down to one particular day,” Schmidt says.

    And on that particular day he was great, winning the bronze medal — the only American man to win an Olympic medal in the javelin throw in the last 60 years.

                                                           

    Following his Olympic success, a scholarship took Schmidt to the University of Tennessee, in Knoxville, where he now lives. He earned a master’s degree in business education in 1976, subsequently teaching and coaching in Knoxville schools and at the university. Ten years after the Munich Games, he networked his way into a job as director of sports at the 1982 World’s Fair in Knoxville.

    “That’s where my sports marketing started,” Schmidt says. “You had to be creative, because I had no budget. When I started at Gatorade, it was the same situation.”

    Schmidt’s ascension in the sports industry is a long way from the western Pennsylvania coal-mining town of Southview where he was born.
    Photo: COURTESY OF BILL SCHMIDT
    Imagine the politics of getting the various sports halls of fame to work together. Schmidt was able to convince some of them to lend their artifacts to the fair for six months, building a World’s Fair Hall of Fame, and when the halls wouldn’t cooperate, he would get trophies and medals directly from the winners.

    Gatorade sponsored the exhibit — Schmidt’s first experience dealing with the brand.

    Also part of the fair were exhibition games between the NFL champion Pittsburgh Steelers and New England Patriots at the University of Tennessee,
    Schmidt, shown at the 1972 Olympic trials, used his ability to throw the javelin as “a way out” of meager beginnings.
    Photo: COURTESY OF BILL SCHMIDT
    and the Boston Celtics against the Philadelphia 76ers.

    In the end, the man who began with no budget put on 23 events and ended with a surplus of $300,000.

    More importantly for Schmidt, he gained valuable experience — essentially the equivalent of another post-graduate degree — and he learned what he wanted to do in the next phase of his life. He liked the detail involved in event planning and the creativity of starting each week with any number of blank canvases.

    “I found that I liked putting the deals together and I loved negotiating the contracts,” he says.

    From the World’s Fair, Schmidt took a job working for Gatorade’s owner, Stokely. His position had marketing in the title, but not sports marketing, which didn’t really exist as a term yet. Within months, the Olympics called and Schmidt was offered the job running track and field, along with boxing, for the Los Angeles Games. The position later took on six other sports. Schmidt took a leave of absence and moved to Los Angeles. Similar to the World’s Fair, the 1984 Summer Olympics, led by Ueberroth, started with no budget and ended with a surplus — $225 million.

    With his background as both an Olympic athlete and an event planner, Schmidt was able to find different ways to successfully manage the venues and competitions. His ability to take the long-term view coalesced with his abilities for building and leading a strong team, and an unassailable culture crystallized.

    “Bill comes from an individual performance sport, but you’d think he was a middle guard on an offensive line, because he’s able to build a good team around him so quickly,” Ueberroth said. “He just has this vision. When everyone is heading right, he’d always look left, just to be sure.”

                                                           

    Causality is nearly always complex. Former Quaker Oats President Phil Marineau thinks Schmidt was born with many of the qualities that made him a success. Nonetheless, one of his favorite “Marineau-isms” is that “I never valued experience until I got some.”

    Marineau recalls when first meeting Schmidt during the Los Angeles Games that “this was not only a guy who really knows the world of sports, he could also make the trains run on time.”

    During Schmidt’s Olympic leave, Stokely sold Gatorade to Quaker Oaks. And in 1984, when Schmidt arrived at Quaker Oats in Chicago as Gatorade’s first vice president of sports marketing, it was an $85 million brand. Oatmeal was a bigger seller for the company at the time.

    When he left 15 years later, thirsty consumers were gulping down $2 billion of the neon-colored sports drink each year, and Gatorade was a fixture on the sidelines of every major sports league.

    Gatorade’s massive growth came on the heels of a strategy built on sideline ubiquity and an implied endorsement across the most visible pro sports, along with grassroots availability — always being at the “point of thirst” to promote trial. That formula of “visibility and usability” helped Gatorade soar.

    “Bill’s truly a pioneer,” said former NBA Commissioner David Stern. “People forget that sports drinks were hardly a category — he defined it.

    “He not only understood what sports could do from a business perspective, he had a passion for his product, for the athletes, and he combined them all and achieved unparalleled success.”

    The NBA had less than a handful of national sponsors when Schmidt met with Stern and the league’s other top executives for the first time. Then the Gatorade logo started to creep onto NBA sidelines, first on coolers, then onto seatbacks, towels and cups.

    Think that’s not revolutionary? At the time, the big beverage companies like Coke and Pepsi were charging teams for cups and coolers.

    Schmidt found a way to outflank Coke and Pepsi on the sidelines. If you can’t win the game, change the rules. For all the money Coke and Pepsi spent at sports venues, their equity was still at the stadium or arena soda fountain. Gatorade pioneered a new approach, and it was one teams and leagues could practice while continuing to accept sponsorship dollars from the beverage giants.

    “Bill and Gatorade figured out how to take a beverage and give it physical visibility with players” said Rick Welts, former NBA chief marketing officer and now president and COO of the Golden State Warriors. “Nobody but Nike had figured that out. That transformed how people thought about sports, not just basketball.”

    Realizing the value of NFL exposure, Schmidt pushed and cajoled until his NFL relationship grew from a licensing deal to a full-fledged sponsorship that has had Gatorade on every NFL sideline since 1983.

    And by the mid-1980s, with the development of the Gatorade bath, it was official: Gatorade was an endemic NFL product. The brand’s current NFL deal runs through 2022.

    “With Bill’s efforts, Gatorade became as much a part of the NFL as the game ball,” said Octagon President and CEO Rick Dudley, who helped bring Gatorade onto the NFL sidelines when he was at the NFL.

    “Bill had to convince us that Gatorade belonged on the sidelines, which he did,” said Jim Schwebel, who sold corporate sponsorship rights at the NFL from 1983 until 2003, last serving as the league’s senior vice president of corporate sponsorship marketing. “Bill’s just a tough, directed and focused person. Once he got to the Olympics, I believe that he thought he could do anything he put his mind to.”

                                                           

    While Schmidt went on to sign Michael Jordan, as well as resuscitate Major League Baseball’s Home Run Derby and the NBA’s Slam Dunk Contest, one of his first and most inspired sponsorship initiatives was one he’s still remembered for — aligning Gatorade with athletic trainers.

    Shortly after returning to Gatorade, Schmidt started making friends in the training community. As an athlete, he knew that if Gatorade was to rule the sidelines, it needed the hearts and minds of trainers. As a marketer, he knew the value of the sidelines those trainers controlled. One of Schmidt’s initial deals was a founding sponsorship with the National Association of Athletic Trainers. It was a classic symbiotic relationship: Trainers gave Gatorade authenticity, and Gatorade legitimized the trainers’ dedication and purpose.

    “Bill has done more for the athletic training profession than any other single person,” said longtime Gatorade marketer Tom Fox, now chief commercial officer for EPL club Arsenal. “He elevated their importance even within their own leagues.”

    Like so many of Schmidt’s initiatives, the idea was so sound that it’s still around today.

    “You really had to understand the culture of sport to get that,” said Hank Steinbrecher, former secretary general of U.S. Soccer, who worked with Schmidt at the ’84 Olympics and at Gatorade for five years. “Trainers are the most underpaid, overworked, underappreciated guys in sports. He came in and showed them respect — and it didn’t hurt that they controlled the sidelines and were the primary purchasers of the product.

    Schmidt (center) toasts with former league executive Rick Welts (left) and recently retired NBA Commissioner David Stern after signing a deal together.
    Photo: COURTESY OF BILL SCHMIDT
    “Bill had this gift of knowing sports from the inside out and realizing where the best opportunities would be.”

    Nike/Jordan and Gatorade/Jordan are two of the most successful marriages of athletes to products in history, but those who worked with Schmidt say Gatorade’s affiliation with athletic trainers was far more significant.

    “Without the support of athletic trainers, there would be no Gatorade,” said Greg Via, Gillette global director of sports marketing, who coached track with Schmidt at the University of Tennessee, worked with him at the Knoxville World’s Fair and was a Gatorade sports marketer for 13 years. “Having the trainers was much more important than having Michael Jordan.”

    Schmidt, who at age 66 is now consulting and teaching after a stint as CEO at Oakley, established a reputation for building and maintaining relationships across sports that’s legendary — and enduring.

    “His name is still synonymous with Gatorade sports marketing and comes up regularly in my discussions with partners to this day,” said John Shea, current Gatorade director of sports marketing.

    There is no business more reliant on networking than sports marketing. In deference to the Mark McCormacks and Pete Rozelles of the world, it’s impossible to say that Schmidt discovered that on his own. However, he certainly perfected it, becoming an Olympic-caliber schmoozer in a business where that skill is indispensable.

    “He brought the importance of relationships to this business and turned it into an art form,” Welts said. “I never had a conversation with him when he didn’t ask, ‘What can I do for you?’”

    “Bill was a genius at developing relationships,” said longtime agent David Falk, who in 1991 helped bring Jordan and Gatorade together (see related story, Page 30). “Some people have relationships with all the commissioners and chairmen, but he knew them and all the people in the trenches. I have never met a person in corporate America more well-liked.”

    Before Schmidt came to Gatorade from the Olympics, Marineau did a few deals himself, including a $10,000 sponsorship of the Prairie State Games, which subsequently asked for a $25,000 fee the next year. After seeing the Games and Gatorade coolers on TV, Marineau asked Schmidt about the new deal. Schmidt had renewed it for $5,000.

    “That epitomizes him,” Marineau said, “and the Games still loved us.”

    Consequently, when you ask even the most skilled negotiators about Schmidt’s talents at the bargaining table, they all gush.

    “He was very difficult, and that’s a compliment,” Stern said with a laugh. “But you always knew the dance was going to end with a deal. We used to pride ourselves on knowing everything about Gatorade’s business, and he would sit down and know just as much — if not more — about the NBA.”

    As Octagon’s Dudley put it, “Bill was never a bully, even when Gatorade’s market share was above 90 percent.”

    Schmidt’s bronze medal from the 1972 Munich Games is the only Olympic medal won by an American man in the javelin throw in the last 60 years.
    Photo by: STEVEN BRIDGES
    Schmidt knew when to push buttons and when not to. One of his NFL deals included a $1 million penalty for each time any NFL team didn’t put Gatorade coolers on its sideline. With three violations from the San Francisco 49ers during one season, Schmidt could have imposed that penalty and paid for that year’s entire NFL rights fee. Instead, he held his cards, and those sorts of decisions later paid off.

    “Bill was one of the most charismatic and intimidating individuals I ever worked with,” said Steve Seyferth, who helped develop the “Be Like Mike” campaign while heading the Gatorade business for ad agency Bayer Bess Vanderwarker. “He had the strongest relationships at the highest levels. There was a time when [Coke’s] Powerade thought they would come in and take away all the league contracts. Guys like David Stern said to Coke, ‘Where were you when we needed you?’”

    While names like McCormack, Stern, Dell and Knight are often cited as the architects of sports marketing, perhaps it’s now time to add to that list a javelin thrower from a coal-mining town in western Pennsylvania.

    “Bill is one of the originators of sports marketing in this country,” Marineau said. “He was one of the guys who first showed how you can use sports to get it done. The evidence of that is Gatorade’s growth.”

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  • To ‘Be Like Mike,’ Gatorade had to poach Michael Jordan from Coke

    Michael Jordan’s 23-year relationship with Gatorade has been around so long and supported by such artful advertising that most people forget what was at the heart of the deal: Gatorade stole Jordan from Coke.

    There are dozens of stories about how Gatorade snatched Jordan from Coca-Cola. Everyone agrees on the motivating force: MJ was one of dozens of stars in Coke’s constellation of endorsers. Gatorade offered Jordan an average of $1.4 million a year over a decade to be Gatorade’s first and only endorser.

    “The [Coke] creative wasn’t very imaginative, and Michael was one of 30 or so Coke endorsers,” said David Falk, then Jordan’s agent.

    Gatorade and Schmidt (above, far left) signed Jordan in 1991 and quickly filmed the iconic “Be Like Mike” campaign (below).
    Photos: COURTESY OF BILL SCHMIDT
    When it came time to bid, Jordan and Falk decided to go with a sealed-bid process. Falk said he told both sides he wanted a 10-year deal at seven figures per year. Gatorade owner Quaker Oats made an offer that fit those parameters. Coke’s five-year offer did not, according to Falk.

    “They had Elton John and Whitney Houston making millions,” he said. “I don’t understand why they wouldn’t pay Michael the same.”

    After losing the sealed-bid auction, Coke came back with more money
    and a 10-year offer, according to former Quaker Oats President Phil Marineau.

    “To their credit, Falk said a deal was a deal,” he recalled.

    The formula of seven figures a year over 10 years became a template for many future Jordan deals.

    Marineau insisted that the Jordan-Gatorade relationship actually began years earlier, when Gatorade got courtside seats next to the Bulls bench in the old Chicago Stadium. It wasn’t long before “Schmoozemaster Schmidt” was sending cases of Gatorade to Jordan’s home.

    “I wanted Michael ever since I watched him hit the winning shot in the 1982 NCAA final,” Schmidt said.

    Negotiations with Falk started during the 1991 NBA All-Star Game in Charlotte. Gatorade was already doubling its business year after year. Adding Jordan, who eventually became the world’s most popular athlete, supercharged its marketing efforts at home and abroad.

    “Jordan got us instant credibility in countries where they had no idea what a sports drink was, and that it cost four times as much as water,” Marineau said. “We saw some competition coming and the only way they could challenge us was with a slew of athlete endorsers, so we got the endorser.”

    However, Gatorade ad agency Bayer Bess Vanderwarker had to create a campaign worthy of Quaker’s Jordan investment. Eventually, it crafted “Be Like Mike,” one of the most memorable and effective campaigns in the history of sports marketing. But there were some bumps in the road during the creative process, which started just after that February 1991 All-Star Game and ended with an ad in August that became a standard-bearer.

    BBV Creative Director Bernie Pitzel had recently seen Disney’s “Jungle Book” with his 5-year-old, and the movie became the inspiration for the campaign. Pitzel mixed some Jordan footage from Nike ads with the song “I Want to Be Like You.” The sample ad ended with a message that read, “Be Like Mike. Drink Gatorade.”

    Steve Seyferth, then running the Gatorade account for BBV, recalls high-fives being exchanged when the sample creative was first shown to Gatorade marketers. Schmidt loved it immediately and promised to check with Jordan on whether it was permissible to call him “Mike” instead of the usual Michael.

    Everyone loved it but Disney, which asked for $1 million to license the song.

    Meanwhile, Jordan’s popularity blossomed, as the Bulls won their first NBA championship in June and MJ took home the NBA scoring title as well as both the regular-season and playoff MVP awards.

    By the time the agency began shooting in July, some assistance from Falk helped reduce Disney’s asking price to $250,000 — with the provision that the “Be Like Mike” slogan be eliminated. Seyferth remembers getting this news on a golf course with Schmidt. As soon as he repeated the offer, both men shook their heads no.

    “‘Be Like Mike’” made the campaign, not the music,” Seyferth said.

    Shortly thereafter, Pitzel sat down at Avanzare, his favorite Chicago watering hole, and penned the lyrics for what became “Be Like Mike” on a cocktail napkin. BBV got the catchy Caribbean tune from a commercial music house. “Be Like Mike” launched Aug. 8, 1991.

    “Everyone knew about Nike and Jordan,” Schmidt said. “We wanted consumers to identify Gatorade and Jordan, right after Nike, and within a few months we accomplished that.”

    As for Coke?

    “I still can’t believe they didn’t have right of first refusal,” Schmidt says more than 20 years later.

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  • Bill’s Best: Favorites through the years

    These days, Schmidt consults and teaches while living in Knoxville, Tenn.
    Photo by: STEVEN BRIDGES
     FAVORITE ATHLETE OTHER THAN MICHAEL JORDAN: Mickey Mantle, because I wanted to play Major League Baseball.

    FAVORITE BOSS: Bill Smithburg (former chairman of Quaker Oats) and Phil Marineau (former Quaker Oats president, who later went on to be president at Deans Foods and president and CEO of Levi Strauss): Each of them gave me a blank canvas, allowed and fostered creativity, and trusted me.

    FAVORITE GATORADE TV AD: No question, it was “Be Like Mike.’’ From the beginning, it was special. We put a tent in our parking lot and invited our entire employee base just to announce to them our relationship with Michael.

    FAVORITE COMMISSIONER: David Stern was the one I worked most closely with. He had clear vision early on, and at the start of our relationship he was in need of people who believed in his vision, and it was the same for us and him. He always stayed loyal and danced with the people that brought him.

    FAVORITE FLAVOR: Actually, I like some of the newer flavors, like Fierce Melon and Fierce Strawberry. There’s still Gatorade in my kitchen; it’s still in my blood.

    FAVORITE SPORTS VENUES: Different ones, depending on the sport. United Center always has had the best game presentation. Camden Yards was the first retro MLB park, which I love. The facility here (at the University of Tennessee) is pretty hard to beat on a football game day with 92,000 people, the river filled with boats, and all of that orange.

    FAVORITE EVENT YOU ATTENDED: The original 1992 Dream Team in Barcelona. It was just a surreal experience. From an event standpoint, Michael Jordan winning the All-Star Slam Dunk contest in Chicago (in 1988) was very special.
    — Compiled by Terry Lefton

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