Editor’s Note: Welcome to a daily column breaking down the day’s biggest stories in sports finance. It comes to us via our friends at JohnWallStreet, publisher of a free e-mail newsletter (you can sign up here). It’s sports business with a financial spin. Howie Long-Short and Fan Marino will be providing their expert opinions on each story. They have slightly different areas of expertise. Fan Marino is a firm believer that the SEC is the premier football conference. Howie Long-Short knows it as the Securities & Exchange Commission. Fan Marino lives and dies with the college selection of 5 star , blue chip recruits. Howie Long-Short spends his days analyzing blue chip stocks. Howie Long-Short knows that Black Monday occurred on October 19th, 1987. Fan Marino swears it happens every January after Week 17. You get the point.
Nike Makes Wise Business Decision, Kaepernick Face of 30th Anniversary Ad Campaign
Colin Kaepernick has extended his relationship with Nike (has been with company since ’11) and become the face of their new 30th anniversary “Just Do It” campaign. The campaign debuted on Monday with a simple message that read “believe in something, even if it means sacrificing everything” over a picture of Colin’s face. Kaepernick, who has been portrayed as the leader of the NFL player protest movement, has been unsigned (by NFL teams) since the end of the 2016 season. While financial terms of the deal were not disclosed, it’s been reported that Kaepernick’s deal is worth “millions per year” + royalties, putting it on par with the contracts held by the NFL’s top players. The deal is expected to include a “Kaepernick 7” line of shoes and apparel.
Howie Long-Short: Nike made the decision to extend Colin and make him the face of this campaign anticipating backlash from the political right, but the company is wisely playing the long game here understanding any negative short-term noise will be far outweighed by future sales gains. Nike’s target client is America’s youth (18-29), not the 60-year-old racist white guy cutting swooshes off his socks, and Colin remains popular with the younger demographic; in fact, his jersey ranked as the 39th (as of Q2 ’17) best-seller among all NFL players despite his absence from an NFL roster. Sacrificing older, low discretionary-income red state buyers for younger, affluent, progressive buyers in blue states seems like a wise decision; even if most Wall Street analysts refuse to say so because they’re avoiding the divisive topic.
Sadly, Nike’s decision to sign Colin wasn’t about protesting racism or social injustice (though, the company would like the media to position it as such), but about the bottom line; as Twitter user @MichaelMirer so perfectly put it, “democratic socialists buy sneakers, too”. If the snark went over your head, Mirer is playing off Michael Jordan’s famous line when asked why he avoids discussions about politics - because “republicans buy sneakers, too.”
Nike (NKE) shares declined -3.16% on Tuesday (to $79.60), making it the worst performer within the Dow Jones industrial average, but the decline is not tied to fears over boycotts related to the Kaepernick news. Adidas (ADDYY, -2.4%) and Puma (PMMAF, -2.62%) were also down on Tuesday, leading us to believe the downturn is more closely related to the NAFTA negotiations.
For what it’s worth, according to Apex Marketing Group, the “Just Do It” campaign generated $43 million in media exposure over its first 19 hours; less than one quarter of the responses were negative.
Fan Marino: Nike’s decision to place Kaepernick at the center of a campaign that kicked off just 3 days before the start of the NFL season can’t be sitting well with league owners. Nike is among the league’s top partners and signed a 10-year deal (through ’28) to become the NFL’s game-day uniform and sideline apparel provider back in February; the same league Kaepernick is currently suing in court over allegations its owners have colluded to keep him unemployed because of his activism. Last Thursday, Colin earned a small victory in his grievance against the league as an arbitrator ruled the case can advance.
While Kaepernick’s involvement will certainly draw the most attention, he’s just one of several athletes represented in the 30th anniversary “Just Do It” anniversary campaign. Serena Williams, Odell Beckham Jr., Shaquem Griffin (Seahawks) and Lacey Baker (skateboarder) are all also featured.
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NASCAR’s Defending Championship Team to Cease Operations at End of ’18 Season
Furniture Row Racing (FRR) has announced that it plans to cease operations at the completion of the 2018 NASCAR season. The Denver based single-car racing team lost its ability to fund the #78 car following 5-Hour Energy’s July decision to drop its co-primary sponsorship (along with Bass Pro Shops) and amidst an ongoing struggle to re-sign its technical alliance with Joe Gibbs Racing (due to rising costs). Team Owner Barney Visser explained, “the numbers just don’t add up. I would have to borrow money to continue as a competitive team and I’m not going to do that.” FRR GM Joe Garone called FRR’s plight from champions to out of business in 10 months a “wake-up call” for the sport.
Howie Long-Short: Furniture Row Racing didn’t fail because of a lack of success on the track, they’re the defending Cup Series championship team and currently running 3rd in the standings, which makes their inability to make ends meet particularly concerning for the sport. If one NASCAR’s most successful teams can’t find sponsorship partners and is unable to churn a profit, the business model no longer works. It doesn’t sound as if wholesale changes are coming though, the sanctioning body issued a statement saying, “NASCAR will continue to work with the race teams on competitive and operational excellence. Much of those efforts have already been put in place, and will continue to be a focus.” If that’s the case, why is FRR shutting its doors?
Garone said that teams that rely on sponsorship revenue to operate have “no runway if something goes wrong” (i.e. loss of a major sponsor). If that’s true and there’s more teams in that position then one’s backed by billionaire owners willing to eat losses, I’m concerned FRR won’t be the last to leave the sport.
Fan Marino: FRR’s decision to close up shop has to be disappointing to Toyota, as the company wants to run 5 or 6 cars in the Cup Series field; should Truex Jr. decide to sign with someone other than Joe Gibbs Racing, the manufacturer would have just 4 cars racing on the circuit. With that said, many suspect that Truex Jr. (and crew chief Cole Pearn) will end up with JGR in the #19 car; if the team can find a home for Daniel Suarez (the JGR driver most assume will be moved) on a Toyota satellite. If he doesn’t, expect him to land with Stewart-Haas Racing (strong relationship with Bass Pro Shops, Kurt Busch is free agent) or Leavine Family Racing (contemplating move from Chevy to Toyota).
Last Update: Sep 05, 2018 7:14 am CDT
