Essay about NFL Exclusive Rights Deal has Every One in Court

Submitted By steviinicks
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NFL Exclusive Rights Deal has Every One in Court!
Nike vs Reebok
American Needle vs The NFL (Sherman Anti-Trust Act Section 1)

Back in 2010, Nike beat out Adidas’ Reebok unit on the $1.1 billion deal for exclusive rights to sell NFL jerseys, and the payoff should be strong. Analysts have predicted that Nike will add $500 million in annual revenue from the deal -- not insignificant even for a company with revenues of $22.7 billion a year. Although terms of the five-year Nike contract were not released -- Bloomberg Businessweek estimated the deal could have been worth as much as $35 million per year. Whatever the deal was, it's obviously a better one than they had with Reebok. While Reebok had been a tremendous partner, the league has always sought to improve and wanted to show it could do even better with Nike. Nike's long heritage of being innovative and performance driven, are two of the hallmarks of the NFL. Nike has phenomenal distribution and they sought to permeate ventures where the NFL had never gone before.

Reebok, which has had that exclusive licensing deal for the past decade, recently said the loss of the deal will cost the company $200 million to $250 million a year in lost revenue. Reebok maintained its rights to the uniforms until its 10-year, $300 million deal expired just prior to the 2012 season. Shares of Adidas, which owns Reebok, fell the sharpest in more than three months when the news was released that Reebok would be out of the NFL business. Once the deal was announced however, Nike’s shares hit an all-time high of $83.40.

While Nike has had deals with individual NFL teams in the past, the exclusive license that took effect on April 1, 2012 marked the first time its on-field uniforms and sideline gear were worn by the entire league’s players, officials, coaches and assistants. Nike began producing all on-field apparel such as game uniforms and base layer, as well as sideline personnel apparel and fan gear. Eric Grubman, the NFL’s executive VP of NFL Ventures and Business Operations, said the NFL had spent considerable time, rigorously evaluating their business apparel business before making the deal with Nike. Grubman said he believed the new framework would provide fans with a larger selection of merchandise from global category leaders in the sports licensed apparel industry.

Nike was not the sole merchandiser of NFL apparel. At the time the NFL announced its pending agreement with Nike, it also said it was extending agreements with these companies: Under Armour (which sponsors the NFL Scouting Combine in Indianapolis every year); G-III, former NFL player Carl Banks' company (outerwear); VF (T-shirts and fleeces); and Outerstuff (youth apparel). The league also has agreements with New Era (hats for sideline personnel and fans) and '47 Brand (hats for fans).

Of course, there had to be a little intrigue involved in the NFL's move from Reebok to Nike. After quarterback Tim Tebow was traded from the Broncos to the Jets, Reebok rushed to market withTebow Jets merchandise, including a jersey. Nike responded by filing suit in a federal court in New York after the unit Adidas AG began offering Jets jerseys and T-shirts featuring Tim Tebow’s name and number in March 2012.

Reebok previously had separate agreements with the NFL and its players to sell player apparel, but those agreements had since expired. A sell-off provision in those agreements gave Reebok a limited window to sell its remaining stock of NFL jerseys and apparel, such as Tebow’s jerseys from his old team, the Denver Broncos.

The apparel maker had hoped to add Tebow’s name and number to its existing inventory of blank Jets jerseys and other apparel after he was traded to New York and had considered doing the same for Peyton Manning and other traded players. However, Nike, which reportedly paid more than $1 billion for the right to be the league’s official supplier, challenged the move in court, saying