Nike endorser tab up $192M

Nike Inc.'s long-term endorsement tab grew by almost $200 million between May and November of last year, topping out above $1.6 billion.

Nike revealed last week in a filing with the Securities and Exchange Commission that its endorsement commitments had grown from $1.442 billion on May 31 to $1.634 billion when its fiscal second quarter ended Nov. 30. That's an increase of $192 million, or 13 percent.

The rise in the company's endorsement commitments coincides with a lengthy list of high-dollar contracts the company announced in 2003, including deals with LeBron James for $90 million, Serena Williams for $60 million, Kobe Bryant for $45 million and Carmelo Anthony for $20 million.

It is not clear whether all of those deals are included in the company's accounting of endorsement commitments. The Williams deal, for example, was first reported in December, after the most recent Nike fiscal quarter had ended. The Beaverton, Ore., company does not break out how it accounts for individual endorsement deals.

Nike's filing attributed the increase in endorsement commitments to modifications and additions to endorsement contracts and the effects of changes in foreign exchange rates on those contracts. Nike spokesman Scott Reames wouldn't elaborate beyond the SEC disclosure.

Nike's earnings have benefited in recent months from a drop in the U.S. dollar's value against other major world currencies, but some of its international endorsement deals apparently have become more expensive as a result of the dollar's fall.

A spokeswoman for Cleveland sports marketing and management giant IMG, which represents many star athletes including Nike endorser Tiger Woods, said of the increase, "It isn't a surprise. It is a great market for athletes."

John Shanley, a Wells Fargo Securities analyst who covers Nike, said the rise is "about in keeping with their sales and earnings increases."

Shanley said he thinks Nike will "ramp up" its endorsement spending in the fourth fiscal quarter, which ends May 31, as well as in its first 2005 quarter, which ends Aug. 31. Shanley expects the company to add endorsements related to this summer's European soccer championships and Athens Olympics.

In its SEC filing, Nike breaks out money it is obligated to pay each year from 2004 to 2008, then lists its total obligations beyond 2008. The total figure represents "approximate amounts of base compensation and minimum guaranteed royalty fees we are obligated to pay athlete and sport team endorsers of our products," Nike said.

Nike disclosed that the largest increase in its endorsement commitments occurs after 2008. The money Nike owes endorsers after 2008 grew from $204.7 million to $405.7 million between May 31, 2003, and Nov. 30, 2003.

"That would certainly indicate that there are a lot more long-term agreements" since the company last reported its endorsement commitments, said Nova Lanktree, executive vice president of player marketing for Lanktree CSMG International.

Another agent who has represented star athletes said the increase in money due after 2008 also could mean Nike is deferring more payments to its sports endorsers.