Steep price paid by Nike likely to pay off
April, 3, 2012
By Kristi Dosh | ESPN.com
Nike may be able to earn back the $1.1 billion it reportedly spent on its NFL apparel deal rather quickly if sales projections pan out.
Nike on Tuesday unveiled its new NFL jerseys, which will be available for presale on April 15 and in stores on April 26. Some Nike apparel is already available on the league’s nflshop.com.
“Fanatics expects to see year-over-year sales of NFL jerseys to increase by 2-times-to-3-times at the time of the new Nike jersey launch,” said Fanatics public relations manager Anne Lacey Whitaker via email. Fanatics is a licensed apparel seller for several pro leagues and the NCAA.
Fans will see an increase in the cost of some items. The cost of a Nike base replica jersey will be $100, up from the $85 charged by the former apparel-rights holder, Reebok.
Paul Swangard, managing director of the Warsaw Sports Management Center at University of Oregon, said he expects an initial sales bump followed by more gradual growth: “Hard-core fans will want it right away, while the masses will re-gear or gear up [in the third quarter]."
Those expectations should please Nike.
While Reebok paid just $250 million for its 10-year deal, Nike is paying nearly that much per year with its five-year, $1.1 billion contract.
Citigroup analyst Kate McShane estimated Reebok’s NFL contract accounted for $350 million to $565 million per year in apparel sales. Losing the deal to Nike is a significant loss for the company.
Nike may be able to capitalize on the apparel-maker switchover, which has left some items low in stock in recent weeks as Reebok’s contract drew to a close.
A highly publicized dispute between Nike and Reebok over Tim Tebow New York Jets jerseys also won’t hurt Nike business. During March, Reebok maintained rights to the league’s trademarks, while Nike’s deal with the players’ association had already begun for the use of players' names.
While the league produced Denver Broncos jerseys emblazoned with Peyton Manning’s name and number using its in-house label to capitalize on the biggest free agent signing of the off-season, new Tebow jerseys were initially available on nflshop.com only from Reebok. Last week, a judge issued an injunction, forcing Reebok to stop selling the jerseys and recall stock sent to retailers.
Currently, nflshop.com has no jerseys available for either Manning or Tebow with their new teams.