During the recent NBA All-Star festivities in New York City, we asked both the league and licensee side about the NBA apparel deal and were told it was too early to give much consideration to a deal that doesn’t expire until 2017. A month or so later, and some NBA dealmakers are talking about having a new deal completed in time for the mid-April board of governors meeting.
So what made the NBA’s next uniform deal accelerate from the plodding pace of an Andrew Bogut to the league-best acceleration of a Russell Westbrook?
The aftermath was pretty tawdry, actually. Subsequent to the All-Star Game, the incumbent, Adidas, made an offer it thought would be acceptable to the NBA. It was “nowhere near what [the NBA] was looking for,” we’re told. Reminds us of a “Pawn Stars” episode where the gap between the ask and offer is 3 times. As Rick Harrison says frequently on History Channel’s flagship series, “Guess we’re not making a deal today, but thanks for coming in.” That’s pretty much what the league said, adding it would send the deal out to bid, thinking that Adidas needed the NBA exponentially more than the reverse.
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Goliath Nike has deals with 85 percent of NBAers, while Stephen Curry’s new shoe has given David Under Armour a boost in footwear.
Photo by: NBAE / GETTY IMAGES; GETTY IMAGES |
That was enough to send Adidas out the door — after which both sides took turns trying to convince people like yours truly that their side left the deal first. Immaterial, to use a term favored by the legal minds who pass muster on these agreements. What’s paramount now is the next uniform deal. What set a new uniform deal from a summer schedule to something more immediate was that as soon as the NBA made inquiries elsewhere it found interest.
So let’s set the stage there. This is a two-horse race between Nike and Under Armour — companies separated in annual revenue by more than $24 billion, but on par as apparel brands among many of their 30-and-under core consumers. Under Armour is still struggling to find its way in non-cleated footwear, though we’re told that its new Stephen Curry shoe is having a nice run.
On the other hand, Nike is basketball, with 90 percent of the basketball shoe market and about 85 percent of the NBA’s players under contract. Nike has had NBA jersey rights before and it’s had a license to use NBA marks in advertising forever. Sometimes in these deals, might equals right.
“If Nike wants it, they’ll get it,” said Tom Shine, a former Reebok, Puma and Adidas marketer who helped negotiate NBA apparel deals for all those brands.
Ah, but convince us that Nike needs NBA uniform rights, especially since there has never been an apparel logo on an NBA jersey. (Of course, that might change now.)
“I don’t know why Nike would need it or want it,” said Howe Burch, a former Reebok and Fila marketer and now president of TBC Advertising, Baltimore. “Under Armour’s trying to gain a position in basketball and footwear generally. The question is whether an NBA relationship would help them. It would be a big statement for Under Armour. Whether it would translate into more basketball sales or footwear sales remains to be seen.”
NBA legitimacy for Under Armour equals how many dollars? That’s another key question.
The NBA’s “globality,” to use a favorite David Stern word, also would be attractive to Under Armour. More than half of Nike’s sales are from offshore; for Under Armour, it’s less than 10 percent.
“Nike has all the marquee players, but the leading question for me is whether Under Armour could use NBA rights for international expansion,” said Bill Marshall, the father of NBA licensing, who came to the league in 1981 when there was no leaguewide jersey deal and helped grow sales to a high of 4 million replica jerseys sold.
However, Under Armour’s lack of international distribution might hurt it when questions arise about its ability to service overseas markets. The countervailing model is about helping to create a Nike alternative. Retailers want it. Does the NBA?
“It’s a fascinating situation,” said David Pace, a Hingham, Mass.-based independent licensing consultant who helped cut the last two NBA uniform deals while an in-house attorney at Reebok. “I can tell you that when Adidas came in, the NBA was thrilled not to have all their eggs in the Nike basket.”
Other dynamics make the deal even more intriguing. Matt Mirchin, Under Armour president of North America, negotiated these same deals in his years with the NBA and at former uniform rights holder Champion. Also, ad logos from brands other than apparel manufacturers should be on NBA jerseys soon; it’s “inevitable,” says the commissioner. How will that change uniform values?
While the NBA has split its uniform rights among as many as three brands, we’re told definitively that won’t happen this time around.
So while in each case we are talking about billion-dollar brands, it still gets down to playing ball with David or Goliath. It will be intriguing to see with which side the NBA aligns.
“From a resource and distribution perspective, Nike’s clearly the favorite, but just as clearly they will pay less,” said Ian Gomar, once chief marketing officer at former uniform rights holder Starter and now an independent consultant. “Other than money, it gets down to whether there’s faith in Under Armour to service and market the NBA here and overseas.”
We’ll see what comes out in the jersey wash.
Terry Lefton can be reached at tlefton@sportsbusinessjournal.com.
