It was just announced on Wednesday that Nike and the NBA have agreed to an 8 year, $1 billion jersey deal that will begin in the 2017-18 season.
This deal will represent approximately a 245 percent annual increase from the previous deal that the NBA had held with Adidas. In 2006, the NBA announced an 11-year, $400 million deal with Adidas, who at the time had taken over for Reebok (a brand which it now owns). It was reported that Adam Silver and the NBA had become unhappy with Adidas after they fell to third in the United States in shoe and apparel sales, behind Nike and Under Armour. This past March, Adidas announced that they would not seek to extend its jersey deal with the league.
You might wonder why the NBA announced this so early in advance, as their current deal with Adidas is good through the 2016-17 season. The simple answer is that both sides have already mutually agreed to part ways at the end of the deal. Adidas still wants a return on their investment, so don’t expect to see any letdown from them in the coming years. They have done some new things, such as jerseys with sleeves and their special Christmas Day branded jerseys. With Adidas and the NBA coming to this decision to split early, there was no reason for the NBA to not go ahead and search for their next official jersey supplier.
A major win in this jersey deal for Nike is that the Nike Swoosh will appear on all NBA jerseys, a first for the league. Nike President and CEO, Mark Parker, is extremely excited about the deal, “In Nike, Jordan and Converse, we have three of the most connected brands in the world, and look forward to making the global growth of the game a successful strategy for both the NBA and Nike.” Since 1992, Nike has been a marketing partner of the NBA. At retail, they have been able to successfully produce replica NBA jerseys under their Swingman line. Furthermore, Nike and its affiliated brands, control more than 90% of the U.S. basketball shoe market at retail. The company holds endorsement deals with many of the league’s top stars: Lebron James, Kevin Duran, Kobe Bryant, Kyrie Irving and Russell Westbrook to name just a few.
In 2012, Nike was able to win the bidding war for the official uniform deal of the NFL, and they have extended those rights until the end of the 2019 season. Most industry experts would agree that Nike has been relatively conservative with their NFL jersey designs, excluding a few franchises like the Jaguars, Buccaneers and the Seahawks. NFL owners tend to be more conservative businessman compared to those owners of NBA franchises. It is expected that Nike may have a little more creative freedom with these NBA jerseys. Having said that, with the limitation of space on the NBA jersey canvas (no sleeves, shorts and not pants, no high socks, required number on the front of the jersey), Nike’s design team will have to be resourceful to create a groundbreaking design.
One issue of debate with the new Nike NBA jerseys is whether or not there will be advertising on the jerseys. That question may largely be tied to the television deal with Turner Sports. ESPN Sports Business Reporter, Darren Rovell, says, “With such a large and lucrative ESPN/Turner deal getting done, it brought into question the worry that there might be some companies who might try to cannibalize the business of TV and not buy television advertisements. I think that’s enough of a concern to keep advertisements off jerseys until the end of the TV deal and maybe forever.”
Now, Adam Silver shares a much different opinion on the NBA’s jerseys than former commissioner David Stern maintained. Stern felt strongly that there should be no other competing brands on the NBA jerseys besides the team brands, which is what negated Adidas putting their trademark logo on the jerseys. Silver, however, not only feels strongly about putting the supplier’s brand on the jerseys, but is also pushing for corporate advertising on the jerseys.
This new deal will have no impact on a few teams who have new uniform designs coming out. The Philadelphia 76ers will be unveiling new uniforms next week; while the Toronto Raptors and Atlanta Hawks will be announcing new uniform designs later this summer as well.
Regardless, this is a huge win for Nike. Nike will now have the official jersey deals for the two US professional sports leagues with the widest global marketing reach.