Reading the excellent Shoe Dog by Phil Knight gives a new perspective on sports giant Nike. Usually when you think of Nike you think of a global corporate giant that controls every facet from design to manufacturing to marketing. But reading Knight’s memoir of where it all started you get the origin story. Nike the start-up being run out of a bedroom, living in a constant state of debt with no equity, and driven forward by a small team of passionate and dedicated people.
One measure of the phenomenal growth is to look at endorsement deals. The figure below shows some of the seminal Nike deals, from Ilie Nistase’s $10,000 in 1972 to Derek Jeter or Rafael Nadal’s $100,000,000 in 2008. Of course the nature of these deals has changed to become multi-year, multi-layered agreements but it is interesting to think how conversations around the table change as you grow.
Figure 1: Selected Nike endorsement deals 1972-2008
The winners in the endorsement world
But the investment is worth it. One piece of research found that when Tiger Woods endorses a brand it leads to a price premium of roughly 2.5%. As a result, approximately 57% of Nike’s investment was recovered just in US golf ball sales alone.
Looking from the other side of the table this growth is good for athletes too, and even more so for their agents. With agents often taking about 10% of any deal you’re basically removing one zero from those figures above. In the 70’s and 80’s that seemed like a fair deal for what’s involved, but 10% of $100m is excessive even for the more complicated nature of the deals.
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