The economics of sports: Did you already know..? Volume II
So what did I say last week? Right – before Nike, there was Adidas. And what was my conclusion? That everybody has to start off somewhere to get anywhere.
Where it all started
Adidas – what does that actually mean? Adolf Dassler, the founder has simply taken his nickname and the first three letters of his last name, voilà: Adidas was born. In 1926, Dassler Brothers Adolf and Rudolf started to make athletic shoes, particularly soccer shoes in their mother´s laundry room. The company was named “Gebrueder Dassler Schufabrik” – Dassler Brothers Shoe Factory.
Ten years later, in the Olympic Games, American runner Jesse Owens won gold. He was wearing shoes manufactured by the Dassler Brothers. They had two stripes. Then comes the war, and the Dassler Brothers eventually disputed in 1948. None of them has ever talked about the dispute, but according to speculations it concerned the war.
Adolf founded Adidas, Rudolf founded Ruda, later traded as Puma. Both Adidas and Puma are still headquatered in the small town of Herzogenaurach in Bavaria – the birthplace of their founders. After “the Miracle of Bern” sponsored by Adidas, the German Soccer Association has always been sponsored by the three stripes. Why? The German soccer team wore Adidas shoes that were highly innovative having removable studs. Germany defeated Hungary. Soon after the 1954 championship, Adidas’ production exploded from 800 to 2’000 pairs of shoes per day. Thus ever since, the German soccer team has been sponsored by Adidas.
Two giants competing to be number one sports manufacturer
This almost changed in 2007. Nike came in. Ever since the soccer world championship took place in the United States in 1994, Nike has also been making great efforts to establish in the soccer market, realizing that “[i]f we were going to be the world’s biggest and best sports brand then we have to be number one in soccer” (President of the Nike brand Charles Denson). Herbert Hainer´s (Adidas’ CEO) response was: “Nike has no chance against us on the soccer market”.
So what happened in 2007 was that Nike offered the DFB a 600 million contract for eight years – which is a huge difference to the 11 million per year paid by Adidas. In the end, Adidas could raise the money to 25 million per year, still far away from Nike´s offer. But the DFB decided to stick with Adidas, though making a total “loss” of 250 million. This was a divisive issue since the German team is traditionally sponsored by adidas, being mostly associated with the three stripes.
Reebok is a subsidiary of Adidas since 2007. Until 2011, Reebok sponsored all NFL teams. Adidas is a key sponsor of the NBA – challenging Nike in its “own” field. So the point is, Adidas tries to approach Nike overall, whereas Nike tries to close the gap with adidas in the soccer market. What this feud looks like more detailed will be revealed in the third and at the same time last part of my The economics of sports blog next week. Until then, do not forget, it all started in a laundry room. Therefore, always keep in mind that “impossible is nothing”!