SBJ/Aug. 3-9/Marketing and Sponsorship

Nike commits $6.2B to sports deals

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The endorsement and sports marketing sector continues to be red hot, and it’s no more clearly evident than in the latest financial figures from Nike.

NBA jersey rights are expected to push Nike’s sports spending even higher next year.
Photo by: NBAE / GETTY IMAGES
Nike’s financial obligations to sports teams, leagues, associations, colleges and athletes reached nearly $6.2 billion as of May 31, up a whopping 32 percent over the same time a year before, according to the company’s most recent annual report.

In fact, as pressure builds from Under Armour and from an Adidas push to spend more on sports marketing, Nike has been ramping up more than ever. Between May 31, 2013, and the end of May this year, Nike’s commitments in this area surged 72 percent, or nearly $2.6 billion.

“The reality is you see a bit of a jump because they can,” said Jay Sole, a research analyst for Morgan Stanley. “The business is performing very well; the profits are continuing to grow.”

Nike did not respond for comment.

Nike’s commitments look to grow even more when its 2016 annual report emerges because of the $1 billion deal for NBA jersey rights the company signed in June — meaning it is not reflected in the $6.1 billion figure for 2015. That amount covers contracts signed on or before May 31 of this year. That figure represents all dollars owed on these contracts stretching over the life of the deals.
nike's sponsorship and endorsement commitments
YEAR* AMOUNT ($ BILLIONS) PCT. CHANGE AMOUNT CHANGE ($ BILLIONS)
2015 $6.192 32% $1.49
2014 $4.704 31% $1.10
2013 $3.603 -6% -$0.23
2012 $3.828 -14% -$0.62
2011 $4.444 17% $0.65
2010 $3.790 -10% -$0.41
2009 $4.201 10% $0.37
2008 $3.827 37% $1.03
2007 $2.794 70% $1.15
2006 $1.642 -2% -$0.04
2005 $1.685 -2% -$0.03
2004 $1.713 19% $0.27
2003 $1.442 32% $0.35
2002 $1.094 NA NA
* For the 12-month period ending May 31 of the listed year.
NA: Not applicable; 2002 was the first year the SEC required disclosure of all major corporate obligations, such as endorsements.
Source: Nike annual reports

For all the talk of Under Armour nipping at Nike’s heels, the upstart from Baltimore is miles away in terms of marketing exposure. For example, Under Armour’s commitments to sports teams, leagues and other entities was $392 million as of the end of January, according to the company’s annual report.

Put another way, Under Armour’s total commitment is just a quarter of Nike’s $1.49 billion increased spending commitment in the most recent year alone.

“Nike is very focused on what Under Armour is doing, and Under Armour is very focused on what Nike is doing,” Sole said. “But at the end of the day their business model and strategy is not dictated by what Under Armour is doing.”

Some large Nike deals agreed to in the last two years include renewing with the U.S. Olympic Committee through 2020; a 23-year contract extension with USA Track & Field; renewing its NFL on-field rights; and an extension with U.S. Soccer.

Sole cautioned that despite the large endorsement numbers, viewed in the context of overall spending, the sum is not so daunting. Nike’s expenses were $9.8 billion in the year ended May 31, 2015, and while that too might seem high, its revenue was $30.6 billion.

“The bottom line,” Sole said, “is profits are growing at a double-digit rate.”

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