Is Reebok Tough Enough for the NFL?

The sports-apparel maker hopes its exclusive licensing deal will help it create a whole new brand. That'll be tough yardage

When the National Football League tapped Reebok as its 10-year, exclusive apparel-licensing partner last December, many in the industry were taken by surprise. After all, Reebok had taken itself out of the licensing game in 1997. And it seemed puzzling that a sports-apparel company widely known for footwear and women-friendly fashion would want to partner with the all-male football behemoth.

But Reebok didn't sign just another plain-vanilla licensing agreement with the league, it went the whole nine yards. The deal, which analysts estimate has Reebok paying between $200 million and $250 million in royalties annually, gives Reebok the rights to sell not only all on-field apparel that is visible during games and practice, including uniforms, but a new line of NFL-branded casual sportswear as well. The company will carve out a new licensing division inside its Stoughton (Mass.) headquarters dedicated to designing and marketing for the NFL brand.


  Sure, a deal with the NFL sounds good, but the sports-licensing industry isn't exactly a golden goose. Sports licensing for all kinds of merchandise has shrunk from a $13 billion business in the early 1990s to less than half that now, according to BrandWeek. Part of the problem is a marketplace saturated with branded sports goods -- everything from team mugs to sweatshirts. Retailers have been slashing shelf space to make way for new products as consumers' tastes shift. Many licensees have been missing their sales quotes and are unable to turn a profit. Some, such as Apex One and Starter, have filed for Chapter 11 protection. Still, NFL goods total about $900 million in retail value, according to analysts -- all of which Reebok gets to market to merchandisers.

Signing an exclusive, across-the-board deal with the NFL is a leap of faith for Reebok Chairman and CEO Paul Fireman, who personally negotiated the deal with NFL Commissioner Paul Tagliabue. Fireman took a look at the success of Reebok's other three major brand groups: Rockport, Ralph Lauren Footwear, and Greg Norman. With the NFL, the CEO saw an opportunity to build an entire new brand from the ground up and tie the Reebok name to yet another fashion icon.

But private branding isn't a common concept for sports leagues. In the past, the NFL has been up for grabs among a jumble of licensing specialists and sneaker giants who vied for deals with popular teams to gain more onfield exposure. Nike and Adidas were never interested in pushing the NFL brand. Instead, they saw licensing as part of their overall marketing efforts. "It's not about buying onfield exposure, as it was in the past," Fireman says. "We are creating a unit rather than just licensing."


  The NFL endorsement means that all of the league's 32 teams will boast the Reebok trademark on their uniforms, hats, and equipment by 2002. The first visible signs of the deal will appear this summer. Plans call for Reebok to provide uniforms for 25 teams for the upcoming football season, mostly branded jerseys and T-shirts that have the new look of the NFL. The rest of the teams will be outfitted in the 2002 season. The company will roll out its sportswear line during the back-to-school season in July, 2002.

A key piece of the deal lets Reebok eliminate the NFL's existing Pro-Line brand and start a new line of NFL-branded clothing from scratch. Reebok's plans include two collections: a new sportswear label called NFL Equipment that will create the players' on- and off-field gear, and a collection for coaches and other team personnel that is more tailored to the average fan and sportswear buyer.

Surprisingly, footwear isn't a big part of the deal. There will be a long phase-in period before players are required to wear Reebok shoes on the field. Teams will have the option of wearing Nikes for a five-year period based on an existing footwear contract between Nike and the league. Adidas' contract expires at the end of the 2001 season.


  Fireman's vision goes even further. He hopes he has found a way to connect the masculine world of professional football with Reebok's well-developed women's market, which makes up a third of Reebok's $2.9 billion in annual sales. The new division will create NFL merchandise and more workout gear aimed at women shoppers. Women represent 35% of the NFL's weekly television viewing audience, and Fireman thinks he can lure women shoppers through a new fitness line represented by NFL team trainers who prepare players for the game.

A three-man group with solid retail experience will lead the new unit, code named On-Field. There's Chief Executive Jay Margolis, who came to Reebok in January. His previous experience includes a 12-year stint as vice-chairman of Liz Clairborne Co., the presidency of Tommy Hilfiger Mens' Group, and, most recently, the top job at Esprit Corp. David Baxter, previously the president of Logo Athletic, will head operations. And Ed Lucier will report to Margolis as the chief product and marketing officer. One big question about the deal is how long it will take consumers to warm up to all these new NFL-branded goods -- they're already disoriented by seeing so much NFL merchandise on the market. Also, new sideline apparel such as slacks and sports shirts pits Reebok against companies with more experience in casual sportswear, such as Nike and Tommy Hilfiger.


  With Reebok at the helm, the NFL hopes its products' quality and design will improve. The league's new "quality, not quantity" creed means it also won't sell to just about any discount retailer, as it did in the past. The idea now is to make inroads in midscale markets such as sporting-goods and department stores. "It will be more like a franchise for those retailers that are selected and who wish to participate rather than the previous model of having many licensees and as many different retailers as possible," Fireman says.

The NFL has even more reason to hope the new lines are a hit. Reebok also may have to give up some of its unit to the NFL under a new equity-sharing option that changes the deal to a joint venture if the scheme is successful.

Will it work? From a weak performance in 1999, Reebok's earnings were up more than sevenfold last year, to $88.9 million. Now, CS First Boston apparel analyst Dennis Rosenberg says he expects a positive financial impact from the NFL deal in 2002. "This is a new model for what I believe is the future of sports leagues," Fireman says. And if it creates a new financial model for his company, with steep increases in sales and profits, well, so much the better.

By Suzanne Robitaille in New York

Edited by Thane Peterson