When the biggest transfer in football history was being negotiated in June there were several parties involved in the deal. There was one Brazilian footballer, two of Europe’s largest clubs, an 18m transfer fee and in the shadows a sportswear brand which has moved from just making shoes to being one of the biggest players in world sports marketing.
Nike has been flexing its muscles. Its ambitions have accelerated in recent years with the opening of its NikeTown retail chain – there are now nine in the US and one believed to be opening in the UK; an attempt to “buy” international football; and most significantly the creation of specialist units to develop sports marketing and entertainment opportunities, including the sale of TV rights for Nike created events.
Rivals Adidas and Reebok are having to play catch-up.
“Our goal is to offer more than just a contract to our athletes,” says Nike Americas football PR Christine Amour. “Other companies can give you that. Our aim is to be a little bit special, to offer extra advice to our athletes. We see these two new areas[sports marketing and entertainment] as regions where we can build our business.”
Nike’s role in the transfer negotiations between Barcelona and Inter Milan for the 18m sale of Brazilian striker Ronaldo is a perfect example. The company has an agreement which ties Ronaldo to it for the rest of his playing career.
When his move to the Italian giant Inter Milan, which has a kit agreement with Umbro, was first discussed, Nike wanted the player to stay at Barcelona. It was concerned that it would lose control over the 20-year-old star. Officially, Nike says its role in the talks was as an “intermediary” but there was speculation that the company actually discussed buying Ronaldo’s contract from Barcelona with the intention of then loaning him out to clubs around the world on a game-by-game basis.
While the prospect may seem bizarre, there were clubs – including Glasgow Rangers – offering Ronaldo a deal allowing him to decide the games in which he would play. In the end, he moved to Inter Milan. On the surface, it appears that Nike lost the battle but the whole episode is the most public example yet of the company’s role as a broker for the stars which it has previously used to simply endorse its products.
Fila UK marketing director Stuart Ryan was, until four weeks ago, the footwear sales manager at Nike UK. “The (sports agency) unit has been set up to get a greater consistency of message for the brand,” he says. “It wants to take greater control of the other endorsement opportunities that come a sports star’s way.
“If Nike builds a marketing strategy around a basketball player with a tough reputation, it would not want to undermine this image by letting the player appear in a comic commercial for, say, a cereal company. Eventually the idea is to represent the athletes at every level of commercial activity. This is still in the development stage but if it works the strategy will roll out globally.”
The company is jumping into the area of sports marketing and agents dominated by Mark McCormack’s International Management Group (IMG) over the past 20 years or the recently merged combination of Alan Pascoe International and Advantage.
Equally, the word “experimental” is attached to its Sports Marketing and Entertainment divisions. Nike created the entertainment division in the spring of 1996, with the intention of gathering Nike athletes, including the likes of world champion Michael Johnson, to run in events owned and promoted by Nike. The first took place in Tokyo 12 months ago.
It has traditionally driven profits on the back of its association with arguably the world’s most successful sportsman, Michael Jordan. But the company is now turning its attention to football.
Earlier this year it signed a ten-year 250m shirt sponsorship deal with the Brazilian national football team, which commits it to playing five Nike sponsored games each year. The company can then sell the worldwide TV rights. “The cost of kit deals is soaring,” says Ryan. “And the competition between Nike, Adidas, and Reebok to sign the most attractive teams is intense because large amounts of money can be made selling replica shirts.
“But as clubs started to demand higher fees, Nike sought other ways to capitalise on its substantial investment. That is how the idea of Nike-created tournaments came about, where the clubs that wear its kit play each other in games that Nike has sold the TV rights for.”
The latest example of this is the 12m kit deal Nike signed with Arsenal, which meant it played in a pre-season Nike tournament and not in something like the Umbro Cup. The Brazilian national team has already played a number of games under the Nike World Tour banner, against the likes of Mexico and Japan. But the danger of having too many tournaments is that they become meaningless and the TV value goes down.
“Football is the biggest and most popular sport in the world, and to be a truly global sports company we must have a presence,” says Amour. “All the big sports companies will want to be the number one.”
At the time of the 1994 US World Cup, Nike had several players wearing its boots but none of the teams wore the famous swoosh on their chests. In France, next year that will be very different. The company now clothes ten national squads: the Netherlands, Italy, South Korea, the Czech Republic, Poland, Russia, the US, Portugal, Nigeria and Brazil.
Adidas, the official sportswear World Cup sponsor in France, must be concerned that Nike will adopt the ambush marketing tactics it has previously used with the London Marathon and Euro 96.
Nike sells its products through a successful mix of provocative advertising and the endorsement of controversial sports stars. Its ads range from the sweat and tears of last year’s Atlanta Olympics, to the current football ads showing stars like Ian Wright, Robbie Fowler, and Eric Cantona playing park football on Hackney Marshes. It has even run a poster campaign in Siberia carrying just the Nike swoosh, which has become as internationally recognised as the Red Cross.
But this is all a long way from 1971, when Nike chairman and chief executive officer Phil Knight started the company. He commissioned designer Caroline Davidson to design a logo. She offered the now famous swoosh to represent the wings of the Greek goddess of victory from which the sportswear company takes its name. Knight still prides himself on the fact that he paid Davidson only $35.
Last year, the company reported worldwide revenues of 5.6bn, up 36 per cent on last year’s 4.1bn. The UK, Nike’s fastest growing European territory, delivered 237m of that.
Tim Wright, international vice-president of the world’s largest sports marketing company IMG, puts forward a widely held view of the company. “It has picked the best stars with the highest profiles. On top of this it has invested large amounts of money promoting these links. The effect has been to make the brand incredibly cool in the mind of the consumer.”
Nike’s famous advertising line, Just Do It, is actually a credo. As one UK advertising chief executive says: “What does Just Do It really mean? It’s an Eighties way of saying to hell with everybody else.”
That attitude is consistent with its use of provocative stars. In the early Seventies, the then number one tennis player and bad boy Ilie Nastase set the tone. Since then the company has used John McEnroe, Pete Sampras, Andre Agassi, athlete Michael Johnson, and arguably the most famous sportsman in the world, basketball player Michael Jordan.
M&C Saatchi sponsorship joint chief executive Matthew Patten says the aim of the company is clear: “Nike’s ambition is to become ubiquitous in sport. It is prepared to invest enormous amounts of money in its marketing and advertising and like Marlboro wants to stand for more than just its brand.”
Nike, in common with several other brands, came to a crossroads in the mid-Eighties, says Patten:
“At this time a number of sports brands thought they should get into fashion and manufacture non-sporting clothes. But not all sports companies believed this was the way to go.
“I remember a company called LA Gear was very much in favour of this direct fashion crossover. Nike went the other way, and thought that focusing on sport would draw consumers to its brand. The results are clear, no one hears about LA Gear anymore.”
Nike’s success in positioning itself as the authentic sports brand, despite its relative youth, was done using Michael Jordan. He became famous in countries where basketball is not even considered a major sport.
The Nike Air clothes and apparel bearing the star’s name helped drive company profits from 625m in 1986 to 1.3bn by 1990. In contrast Adidas, which was overtaken as the number one sportswear brand in the early Nineties, had lost its way and was being perceived as staid. Reebok made great strides with the
Eighties aerobics craze, but saw that surge flatten out in the Nineties.
The response of both brands was to go down the Nike route. Adidas, which has signed stars like boxer Prince Naseem, focuses on its sports heritage. Reebok in the UK concentrates on football, producing a range of ads based around Manchester United player Ryan Giggs.
Flattering though this is for Nike, it faces a number of potential problems. Although it has positioned itself as a sports brand, everyone connected with the sportswear business accepts that about 80 per cent of all sales are bought as fashionable streetwear.
“The danger is that fashion goes out of fashion,” warns IMG’s Wright. “The closer a brand becomes identified with fashion, the more at risk it is from another company with a more up-to-the-minute image.”
The issue of Third World exploitation could also still explode in its face. A Christian Aid report in 1995 slammed Nike, among other manufacturers, for exploiting Third World workers, paying them $1.66 to produce a pair of trainers which are then sold for $70 (44). A number of anti-Nike campaigns have sprung up in the US, Australia and elsewhere as a result.
There is also the more specific question of how a company, which has made its reputation as anti-establishment, reacts when it becomes the establishment.
“Who is there to kick against when your company becomes the biggest in town?” asks one advertising chief executive. “Apple had similar problems dropping its immature enthusiasts work ethic and finding a structure to manage substantial growth. It wasn’t able to do that and has paid the price.”
Nike has grown massively. And in ways that even two years ago seemed impossible. It wants to “own” sport – not just what the runners, jumpers and players are wearing but also in terms of on pitch TV rights and their commercial activities away from the ground.
In that context, Nike could extend its influence into any media area – for instance advertising, possibly owning an agency that would have exclusive creative rights to its stars. Although that might seem far-fetched, Nike wants to do it all.