The NFL announced plans to split its apparel licensing rights among seven companies starting in April 2012, but the big winner was Nike, which was granted the highly-coveted — and visible — on-field uniform rights. The big loser was Reebok and parent Adidas Group, which has held the on-field license since 2001 and will be left out of the new deal when it commences for the 2012 season.
Other companies attaining licenses for certain items as part of the new five-year NFL licensing pact were New Era Cap, Under Armour, VF Corp., G-III Apparel, Forty Seven Brand, and Outerstuff Ltd. The league's prior ten-year deal with Reebok will expire following the 2011 season. The on-field headwear license, which had been part of the Reebok deal, will go to New Era. The NFL deal was viewed by many analysts as the crown jewel in the Reebok crown when it was acquired by Adidas Group in 2006.
The NFL's move to split more of its category licenses is expected to boost revenues for the league, which has been pressured by softer ticket sales amid the economic downturn. The deals are also likely hoped to buffer as the league faces a possible players' strike in 2011 and also as some teams work to pay off new and expensive stadiums.
“The new framework will provide fans with a wider breadth of merchandise from global category leaders in the sports licensed apparel industry,” said Eric Grubman, the NFL's executive vice president of NFL ventures and business operations in a statement. The NFL said it may award additional “niche” licenses in the future.
Financial terms of the NFL's deal with Nike and other apparel makers weren't disclosed although Matt Powell, senior retail analyst at SportsOneSource, estimated the league's new deals could be valued at around $1 billion. Reebok reportedly paid $300 million for its 10-year deal with the league.
Revenue for NFL-licensed apparel at retail in the U.S. totaled about $1.9 billion in 2009, but has stumbled a bit of late, according to retail point-of-sale data compiled by SportScanInfo.
Capitalizing on its huge cash reserves, Nike reportedly outbid both Adidas AG, the parent of Reebok, and Under Armour for the on-field uniform rights. With its staple of NFL player endorsements and pervasive commercials, gaining increased brand awareness from on-field uniforms was seen as less important than keeping the license from its two biggest rivals. Nike had been an NFL uniform supplier in the mid-1990s when four companies, notably Nike, Starter, Logo Athletic and Apex, split the teams for on-field presence. Reebok first got involved in 2005 and broadened its presence after Apex filed for Chapter 11 bankruptcy and could not supply its assigned teams.
“Nike's position in our largest market in the world will be stronger than ever,” said Nike Brand President Charlie Denson in a statement. “We believe our agreement with the NFL enhances the Nike brand, and provides significant opportunity to drive growth across the business.”
Nike will provide game uniforms and base layers as well as sideline personal apparel and fan gear. Nike already has a license to provide football cleats and gloves to NFL players and that will continue under the new agreement.
In an interview with CNBC, Denson said Nike expects to change NFL jersey's “dramatically” by bringing in its flashy Pro Combat uniforms, which recently debuted on several of the top college teams. Said Denson, “The NFL program hasn't had the same type of advancement in recent years.”
At the same time, market speculation spread on likely layoffs eventually at Reebok's Indianapolis plant that employs more than 1,000 people. The site manufactures, designs and distributes apparel for the NFL, NBA, NHL and the NCAA. SportsOneSource estimates Reebok had $500 million in NFL apparel sales last year.
Reebok issued a statement noting that NFL licensed sales have more than doubled during its tenure, and said it would focus on its existing sports licenses.
“Reebok has enjoyed a long and very successful NFL partnership. Over the last decade, we have revolutionized and modernized the sports licensing business,’’ Reebok's statement said. “We are extremely proud of what we have been able to accomplish together.’’
Reebok still has licensing partnerships with other major sports leagues, including the NHL, MLB and MLS as well as with NCAA universities. Adidas holds the NBA apparel license.
New Era , the on-field MLB cap since 1994, gains distribution rights and branding for all on-field, sideline and locker room caps, as well as co-exclusive rights for fan headwear worldwide. The Buffalo-based company, which owns Fifth & Ocean, also gains co-exclusive U.S. rights for women's apparel. Forty Seven Brand, formerly Twins Enterprise, also gains a license for fan headwear. Under Armour will continue as the apparel supplier of the league’s NFL Spring combine and also offer Combine apparel beginning in 2012.
VF Corp. will also continue as a “key apparel partner” manufacturing fan gear, including t-shirts and fleece wear, and for the first time, will gain international NFL rights. G-III gains exclusive rights to distribute outerwear to mass-market retailers and mid-tier department stores. In addition, G-III will also have rights to sell outerwear, sportswear, and swimwear to better department stores, specialty stores, stadiums and sporting good stores. Outerstuff will continue as the league's youth apparel provider.