The economics of sports: Did you already know..? Volume III
Nike vs. Adidas. I have been talking about each the last two weeks, now it´s time to focus on the rivalry between these two global players. To briefly recapture what has been going on: Nike prevailed the sports industry overall by 1989. Nevertheless, Adidas was still far ahead of Nike at one particular sports (and the most important one if you ask me): soccer. The German company has been the undisputed leader in the soccer market for decades but its leadership is now under attack by the aggressive US entrant, especially since the mid-ninties. Both sides claim superiority. Even today, Nike is struggling to beat Adidas in its traditional strength.
As an official partner of the FIFA and sponsor of the World Cup – the world´s most watched sporting event – Adidas enjoys exclusive marketing and advertising rights. This is undeniably a tremendous advantage over the “Swoosh” company.
Most importantly, Adidas is the official sponsor of the German soccer team since the World Cup Final in 1954 (“Miracle of Bern”). According to Wikipedia, “Adidas produces the kits of many Association football teams around the world, as well as the balls used in the UEFA Champions League matches and FIFA World Cup tournaments since 1970.” An exhaustive list of Adidas´sponsorships reveals that especially in the soccer branch, Adidas has obtained predominance due to its deep-rooted history.
So knowing all this, how can you effectively fight such a huge enemy? Nike follows one concept to do so: sponsoring the best teams and superstar athletes in that particular sport. The first big coup was in 1996, when Nike signed an agreement on the sponsorship of Brazilian national team, a team that rarely misses the semi-finals in the world cup. Nike has also launched its “Joga Bonito” campaign, which means “The Beautiful Game” in Portuguese. This phrase is being used by Nike as a slogan for its association football products that are promoted by some of the most well-known players on the market.
In 2007: 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.
Another popular Nike-strategy is to sign athletes who play for adidas-sponsored teams. Example: Lukas Podolski plays for Cologne (sponsored by Reebok, adidas subsidiary). Nike offered him one million Euros. Adidas raised his wage and thus could avoid this to happen. But adidas does this as well: Messi was Nike-sponsored for four years until adidas signed him at the age of 18.