Monday, February 23, 2004
NFL drinks up Gatorade money
By Darren Rovell ESPN.com
In 1968, Gatorade signed a deal with the NFL worth $25,000 a year.
A little more than 35 years later, the sports drink giant has agreed in principal to a record sports sponsorship deal totalling nearly $500 million.
The Gatorade deal will pay the NFL more than $45 million annually over the next eight years, according to a league source.
That doesn't include $16 million a year in guaranteed marketing commitments and $1.2 million per year to supply the league's teams with Gatorade, the source said. Despite the league's long-term relationship with the brand, teams still had to pay for their Gatorade until the current agreement, which will begin in April, was structured.
"This is the most valuable real estate in sports," said Tom Fox, Gatorade's senior vice president for sports marketing, who declined to confirm specifics of the deal. "Our product was founded on the football field so this is critically important to our business."
Despite that fact that Gatorade looks forward to even more exposure on the sidelines, the company is careful not to barrage the live-viewing or television audience with Gatorade logos.
Fox pointed out that the number of coolers on the sidelines as well as the placement of the coolers was not negotiated. That decision will continue to be at the discretion of each team's trainer. Fox also said that the size of the logo on the Gatorade cooler has not grown bigger over time.
The deal is good news to the Gatorade Trust, a group of Gatorade inventors and their families that collects 80 percent of the royalties on sales of Gatorade and has netted more than $370 million.
"I'm amazed at the number, but I'm sure glad they did it," said Dr. Dana Shires, one of four doctors at the University of Florida who invented the formula in 1965 to help the school's dehydrated football players. "It's funny, considering at the time we weren't being driven by commercial interest."
Gatorade, which is now owned by PepsiCo, has more than an 80 percent share of the sports drink market and grosses more than $2 billion in annual sales. The University of Florida, which collects a 20 percent royalty, has collected more than $94 million over the years, according to a university source.
As part of the deal, Gatorade-logoed coolers, cups and towels will continue to be on the NFL's sidelines, where they have been in an official capacity since 1983.
While Nextel's 10-year deal as the title sponsor of NASCAR is a larger commitment than Gatorade's deal with the NFL in terms of total value, the Gatorade deal is worth more on an annual rights fee basis.
Nextel's deal with NASCAR is worth between $30 million to $40 million a year in rights fees, with an additional $30 million to $40 million annually committed to marketing.
"The difference between our deal and Nextel's deal is that when fans see their logo, they will have to make the connection between their name and their products," Fox said. "When fans see Gatorade on the sidelines, they are actually seeing the brand being used."
Gatorade is also the official sports drink of the NBA, Major League Baseball and Major League Soccer. Its most high-profile endorsers include Indianapolis Colts quarterback Peyton Manning, Houston Rockets center Yao Ming and New York Yankees shortstop Derek Jeter.
Darren Rovell, who covers sports business for ESPN.com, can be reached at Darren.Rovell@espn3.com