Photographer: Robbie McClaran/Bloomberg Businessweek

Nike's Football Business Depends on Adults Playing Dress-Up

Armchair quarterbacks will pay handsomely for the futuristic fabric in Nike's new NFL jerseys

Nike pays a fortune for the privilege of making all of the gear worn in the National Football League, and most of it will be bought by almost nobody. Professional and college players get their equipment for free, and few fans have enough enthusiasm to buy the same $100 gloves worn by their favorite wide receiver. But grown men and women have proved eager in the past decade to pay as much as $300 for jerseys identical to those worn on the field. The same feats of fabric wizardry meant to enhance the performance of elite athletes see more use by fans rushing the beer vendor at halftime and blitzing platters of chicken wings in front of the TV.

Last week, in the middle of its fourth year as the league’s gear supplier, Nike unveiled yet another futuristic football uniform. The shirts and pants players will wear next season, dubbed Vapor Untouchable, are almost a third lighter than the current uniform. “The feedback from the athletes is, ‘I’ve got better range of motion, and I feel faster,’” said Todd Van Horne, Nike’s creative director for football. Fans probably aren't concerned with how much their shirts weigh, but they will need to spend again to match the on-field look—and that’s exactly what Nike was counting on when it bet heavily on football.

Todd Van Horne, creative director for Nike football, explains how designers made NFL uniforms lighter by stripping out seams.
Todd Van Horne, creative director for Nike football, explains how designers made NFL uniforms lighter by stripping out seams.
Photographer: Robbie McClaran/Bloomberg Businessweek

The Nike of old regularly passed up official sponsorship opportunities for the FIFA World Cup, the Olympic Games, and the National Basketball Association,1 preferring instead to sign individual athletes to endorsement contracts. In an example of Nike’s classic strategy, a player like LeBron James is considered a sport unto himself when it comes to selling gear, and therefore merits a lifetime sponsorship deal.

Nike’s first five-year deal to become pro football’s official gearmaker in 2012 pushed Adidas’s Reebok brand out of that role. The contract reportedly called for an average annual payment of $220 million.2 In its wide world of sports that year, Nike spent $2.7 billion on advertising, player endorsements, and sponsorships. Football wasn’t even one of the company’s core lines of business.3 Financial statements lumped football apparel and gear together with baseball under a catchall category called “men’s training,” a grouping that perennially lags behind basketball and running, the company’s No. 1 sport.

In the 2013 fiscal year, just after Nike introduced its first NFL uniforms in a publicity extravaganza, its men’s training line managed $2.5 billion in sales. All of the sudden, with its very first foray into the NFL, Nike committed almost one-tenth of its marketing dollars to a sport that accounted for a far smaller share of its business.4

Nike and the league declined to discuss revenue from NFL gear, but the few numbers that offer a glimpse of jersey sales aren't overly impressive. The NFL Players Association, which collects a royalty on league apparel, said jersey revenue reached $150 million in the first year of the Nike era. The business has been fairly flat since then, said Matt Powell, vice president for industry analysis at NPD Group. The reported revenue in Nike’s entire men’s training category ticked up just 4.3 percent in 2014 and 2.2 percent in the most recent fiscal year.

Powell estimates that Nike is still losing money on its NFL deal from a product sales standpoint. That doesn’t make it a bad strategy—there’s major value in displaying a Nike logo on every uniform and shred of sideline apparel during broadcasts that consistently draw more than 20 million viewers.5 “These deals are really about marketing as much as anything,” Powell said.

Nate Retzlaff, design director of Nike football, said his team took a minimalist approach in making the new NFL uniforms.
Nate Retzlaff, design director of Nike football, said his team took a minimalist approach in making the new NFL uniforms.
Photographer: Robbie McClaran/Bloomberg Businessweek

One thing Nike’s NFL contract hasn’t been about is amateur athletes, the backbone of the company’s far larger divisions selling running clothes, soccer cleats, and basketball sneakers. “The equipment part of the business is pretty small,” Powell said.

While football has never been stronger in terms of fandom, it’s never been weaker in terms of participation. In the past five years more than 25,000 players have disappeared from high school football rosters, according to the National Federation of State High School Associations.6 David Schriber, Nike’s vice president for North American brand marketing, isn’t worried about losing youth players over health concerns. “We see football connecting strongly today,” he said, “and we want to make sure we’re using that to connect to athletes.”

In one respect, however, Nike’s uniform deal is profiting from the punishing toll of football. As playing careers grow short, jerseys featuring the name and number of stars turn over frequently. A fan determined to dress like her favorite team’s new starting running back needs to make a purchase every three or four years now.7 “When a player moves, or gets hurt, or retires, that’s always a sales opportunity,” Powell said.

Nike has responded by building a supply chain geared for speed. When a second- or third-string player takes over for an injured star, the company can get the player’s jersey in stores in a matter of weeks. Oddball fans who have a thing for the backup punter can custom-order his jersey. This faster supply chain was a big part of Nike’s pitch to the NFL, and the company hustled to streamline its relationships with suppliers and dial in its shipping strategies. “It a hot player comes on, they’re very quick to respond,” said Leo Kane, the NFL’s senior vice president for consumer products.

A speedy supply chain is less critical when it comes to other sports. Basketball, baseball, and hockey have far fewer athletes and injuries. Soccer jerseys, meanwhile, are less intricate; retail stores typically receive blank shirts and use their own machines to press players’ names on the back.

Nike’s agility has allowed the NFL to highlight more games with unique uniforms. Throwback jerseys are common, as are camouflage-trimmed versions honoring the U.S. military. This season, for instance, Nike sewed up eight so-called Color Rush jerseys, garish uniforms that helped the league draw interest to Thursday night games. “All of that gives a little bit more reason for the fan to buy,” said Jack Boyle, director of merchandising at Fanatics.com, a massive online retailer of sports apparel. “And on the Web, we have unlimited shelf space.”

Nike designed eight garish, "Color Rush" jerseys this season, to help the league draw attention to Thursday night games.
Nike designed eight garish, "Color Rush" jerseys this season, to help the league draw attention to Thursday night games.
Photographer: Robbie McClaran/Bloomberg Businessweek

Adult fans didn’t always get a thrill by dressing themselves in the jerseys of football stars. For decades, a guy in the stands would clothe himself more like Vince Lombardi than like Bart Starr. Gradually, the sea of wool overcoats and fedoras gave way to logo-plastered sweatshirts and jackets. The NFL jersey didn’t become “official” until 2000, when the league cut a deal with Reebok for the exclusive rights to on-field apparel. For the first time, fans could pay for the privilege of donning the exact garment worn by players, and just at the moment when online shopping arrived in earnest.

The market for authentic football jerseys “exploded,” the NFL’s Kane said of the period after the Rebook deal. “All of a sudden, if you were going to a game, you were wearing a jersey,” he said. “It has really become the uniform of the fan.”

When Nike was bidding on the NFL gear business, it saw some gaps in the field that Reebok had largely left open. Female fans, for one, had never been offered a chance to buy an official jersey with a cut that wasn’t intended to flatter massive men with shoulder pads, or Cheesehead hats. Nike made better-fitting women’s jerseys and helped the league move beyond what Kane describes as the “shrink-it-and-pink-it” approach. Today, women’s and kids’ styles account for almost half the jerseys sold at Fanatics.com.

Nike also took control of the official jersey business just as the fantasy football phenomenon was beginning to build. The traditional boundaries of fandom were shifting from geographies and teams to individual stars. In the 2012 season, for example, Saints quarterback Drew Brees made a lot of money for fans who couldn’t care less about New Orleans, and his jersey sold accordingly

Nike is now selling three or four times as many jerseys as Reebok was 10 years ago, according to the NFL. People are buying more jerseys in part because there are more to buy. Boyle, of Fanatics, said Nike expanded the number of named players per team to five or six from two or three.

Nike's new uniforms debut at the NFL Pro Bowl in January and will hit stores this summer.
Nike's new uniforms debut at the NFL Pro Bowl in January and will hit stores this summer.
Photographer: Robbie McClaran/Bloomberg Businessweek

In March, after its third season of outfitting the NFL, Nike reached an agreement with undisclosed terms to extend its contract three years. Now the swoosh will appear on football jerseys through the 2019 season. Analysts and shareholders badly want to know how much the company is paying and what it’s getting for its investment. Morningstar analyst Paul Swinand described Nike’s original contract as “astronomical,” unless one factors in potential growth. “They’re wondering: How can we export American culture to the world?” he said. “How do we pull off another basketball?”

The NFL has steadily been hosting more games in London and even talking about sparking up a British franchise. Jarryd Hayne, a professional rugby player from Australia, made the San Francisco 49ers squad as a running back earlier this season. His jersey immediately became the top seller at Fanatics and remained so for seven weeks; the majority of those purchases were shipped to the Southern Hemisphere, according to Fanatics.

The Players Association, meanwhile, is focused on helping each of its members cash in during what might prove to be a short career. Of the union royalties collected on a  jersey sale, 75 percent goes directly to the player whose name is on the shirt, while the remainder is split among other players and the association itself. Hayne, for example, should be thankful for his early-season jersey blitz, as he was quickly bumped to the 49ers’ practice squad. Getting more names on more jerseys is a big part of the union’s plan, said Steven Scebelo, vice president for licensing and business development. The league’s most promising rookies get their own jerseys every May at an event hosted by Nike.

In a moment, they make the transition from prospect to product. “To see the looks on their faces is great,” Scebelo said. “It’s like they made it.”

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  1. 1 Nike picked up the NBA contract earlier this year, but only after Adidas bowed out of the bidding.
  2. 2 A figure that Nike will neither confirm nor deny.
  3. 3 Executives discussing “football” on conference calls with analysts are referring to the version with a round ball.
  4. 4 The men’s training category, including baseball, accounted for 11 percent of Nike’s revenue that year.
  5. 5 Michigan-based Apex Marketing Group estimates that exposure is worth $105 million a year.
  6. 6 Two physicians at the University of Minnesota recently called for all U.S. public schools to shut down their football programs.
  7. 7 At its unveiling event, Nike had University of Oregon standout LaMichael James crowing about the new gear. James is still a big deal in Oregon, but he was recently cut by the Miami Dolphins in his fifth season, and his jersey has all but disappeared from stores.