Why Nike Paid $1,000,000,000 For This
Summary
TLDRThe video script discusses the evolution of MLB jerseys, highlighting the controversial changes introduced by Nike and Fanatics. It reveals that despite the backlash from players and fans, these companies continue to profit due to exclusive deals and the significant exposure the Nike logo receives during games. The narrative also touches on the impact of 'Linsanity' on the sports merchandise market and how it influenced Nike's aggressive approach to securing jersey deals across major sports leagues.
Takeaways
- ð° Nike pays the MLB $1 billion to provide uniforms, despite the league not paying them for this service.
- ð¢ Fanatics manufactures the Nike jerseys for MLB and has exclusive deals with almost every major sports league.
- ð Nike's high uniform costs and exclusive deals have led to increased jersey production and sales.
- ð The new MLB uniforms introduced by Nike and Fanatics have been widely criticized for their design and quality.
- 𧥠Changes in the new MLB uniforms include lower placement of the MLB logo, off-white base color, smaller player names, and different logo attachment methods.
- ð The biggest complaints about the new uniforms are related to the pants, which can no longer be tailored and have a see-through effect.
- ð Jeremy Lin's unexpected success in 2012 led to a surge in demand for his jersey, highlighting the challenges of meeting sudden spikes in merchandise demand.
- ð€ Nike's agreements with sports leagues require them to sell a large volume of jerseys to justify their high rights payments.
- ð Fanatics' efficient production and distribution model allows for rapid jersey production and delivery, even for less-known players.
- ð¡ Nike's logo placement on jerseys is strategic to maximize brand exposure during games, which is a significant part of their marketing strategy.
- ð Despite criticisms, Nike's investment in sports jersey rights has yielded substantial brand exposure and revenue.
Q & A
How has the design of MLB jerseys evolved over time according to the transcript?
-MLB jerseys used to have a traditional design, but now they have been changed by Nike and Fanatics, with modifications such as a lower MLB logo, off-white base color, smaller player name letters, and logos changing from stitched to ironed on.
What is unique about Nike's deal with the MLB compared to traditional uniform agreements?
-Unlike traditional agreements where the uniform company pays the sports league, Nike's deal with MLB involves the league paying Nike $1 billion, despite Nike not being the actual manufacturer of the uniforms.
What were the initial complaints from players about the new Nike NFL and NBA jerseys?
-Players complained that the new Nike NFL jerseys did not fit well and made them look fat, while the NBA jerseys started ripping and falling apart on the court.
What specific changes did Nike make to the MLB uniforms that caused controversy?
-Nike made league-wide changes such as moving the MLB logo lower, changing the base color from white to off-white, reducing the size of player names, and switching from stitched to ironed-on logos, which many found to be of lower quality.
How did Jeremy Lin's sudden popularity, known as 'Lin-sanity', impact the sports merchandise market?
-Jeremy Lin's unexpected rise in popularity led to a high demand for his jerseys, which Adidas was unprepared for. This resulted in a rush to produce merchandise, which ultimately led to a significant loss for Adidas when Lin's fame quickly faded.
What is Fanatics' role in the production and distribution of sports jerseys?
-Fanatics is the company that manufactures the Nike jerseys worn in every MLB game. They have exclusive deals to distribute jerseys for almost every major sports league and are known for their efficient production and fast delivery of jerseys.
How has Nike's strategy of producing a large volume of jerseys impacted their sales and the leagues they partner with?
-Nike's strategy of producing a large number of jerseys has led to increased sales and exposure for the company. They have created over 438 different jerseys for the NBA in seven seasons and have significantly increased jersey sales across the leagues they partner with.
What is the significance of the Nike logo on sports uniforms?
-The Nike logo on sports uniforms is essentially an advertisement, providing Nike with billions of dollars in exposure. The logo is strategically placed to be highly visible during games, which contributes to the company's overall marketing strategy.
How much did Nike pay for the rights to make NFL jerseys for five seasons?
-Nike paid $1.1 billion for the rights to make NFL jerseys for five seasons, which amounts to $220 million per year.
What was the impact of Jeremy Lin's popularity on Adidas' decision-making?
-Adidas scrambled to produce Jeremy Lin merchandise during his peak popularity, leading to a massive overproduction when his fame quickly subsided, resulting in significant financial losses.
How quickly can Fanatics produce and deliver a jersey for a player who has just been traded?
-Fanatics can produce a jersey for a player who has just been traded and deliver it in only three business days.
What is the main reason Nike outbid other companies for the rights to make jerseys for sports leagues?
-Nike outbid other companies to secure the rights to make jerseys for sports leagues primarily to force leagues to put their logo on each jersey, which provides them with significant advertising exposure.
Outlines
ð Nike's Multi-Billion Dollar Sports Jersey Deal
This paragraph discusses Nike's significant involvement in the sports apparel industry, particularly focusing on their multi-billion dollar deals with major leagues like MLB, NFL, and NBA. It highlights the unique business model where Nike not only designs the jerseys but also has MLB pay them $1 billion. Despite the high costs and issues with fit and quality, Nike manages to make a profit. The paragraph also touches on the problems faced by the NFL and NBA with their new uniforms, such as complaints about fit and durability, and the public backlash against the 'worst uniforms of all time'. The narrative then shifts to Jeremy Lin's impact on the industry, with his sudden rise in popularity leading to a surge in demand for his jersey, which inadvertently set off a chain reaction affecting the sports apparel market dynamics.
ð Jeremy Lin's Unexpected Impact on Sports Merchandise
This paragraph delves into the unexpected influence of Jeremy Lin's rise to fame, known as 'Linsanity', on the sports merchandise industry. It explains how Lin's sudden popularity led to a massive demand for his jersey, which Adidas was unprepared for, resulting in a significant loss for the company. The narrative then connects this event to Nike's aggressive market strategy, highlighting their high-stakes deals with sports leagues and their focus on increasing jersey production and sales. The paragraph also discusses Fanatics' role in the industry, emphasizing their rapid production capabilities and exclusive deals with numerous sports leagues, which have revolutionized sports merchandise distribution and contributed to the growth in jersey sales.
ð° Nike's Strategic Logo Placement and Advertising
This paragraph examines Nike's strategic use of logo placement on sports jerseys as a form of advertising. It details how Nike's payment for exclusive rights to display their logo on jerseys across various leagues results in significant exposure during games, leading to billions of dollars' worth of advertising. The paragraph highlights the visibility of the Nike logo during NFL, NBA, and MLB broadcasts, emphasizing the company's success in leveraging these sports platforms for brand promotion. It also touches on the impact of this visibility on consumer behavior, with the Nike logo becoming a ubiquitous presence in sports broadcasting and merchandise, reinforcing the brand's dominance in the sports apparel market.
Mindmap
Keywords
ð¡MLB jerseys
ð¡Nike
ð¡Fanatics
ð¡Uniform quality
ð¡Jeremy Lin
ð¡Linsanity
ð¡Adidas
ð¡Reebok
ð¡Supply chain
ð¡Exposure
ð¡Logo placement
Highlights
MLB jerseys have undergone significant design changes over the years.
Nike manufactures MLB jerseys but doesn't bear the production costs; MLB pays Nike $1 billion.
Despite the investment, Nike still makes millions from the MLB jersey contract.
Nike has faced criticism for the quality of jerseys produced for various sports leagues.
The introduction of new MLB uniforms by Nike has been met with widespread disapproval.
Fanatics, not Nike, manufactures the Nike jerseys worn in MLB games.
Fanatics is a major player in the sports merchandise industry, with exclusive deals for almost every major sports league.
The 2012 'Linsanity' phenomenon had a significant impact on the sports merchandise industry.
Jeremy Lin's sudden rise to fame in 2012 led to a surge in demand for his jersey, which Adidas was unprepared for.
Nike's high payment for jersey rights has led to a strategy of producing a large volume of jerseys to recoup costs.
Fanatics' efficiency in jersey production has revolutionized the sports merchandise industry.
Nike's strategy involves placing its logo prominently on jerseys to maximize brand exposure.
Nike's jersey deals across major sports leagues provide significant airtime for the brand.
The visibility of the Nike logo on MLB broadcasts is strategically planned for maximum exposure.
Nike's investment in sports jersey rights has been a lucrative marketing strategy.
Transcripts
MLB jerseys used to look like this they
were supposed to look like this but now
they look like this but these Nike
jerseys Wen in every single M Mo game
aren't even made by Nike that is done by
a completely different company
traditionally if you wanted uniforms for
your team you would need to find a
company that makes uniforms pay that
company and in exchange they will give
you uniforms not in this case Nike is in
charge of providing MLB uniforms but MLB
pays nothing and actually makes Nike pay
them $1 billion and somehow this
exchange still ends up making Nike
millions they paid another billion to
make every single NFL jersey players
immediately complained they didn't fit
and made them look fat they paid another
billion to make every single NBA jersey
and immediately they started ripping and
falling apart on the court and now MLB
is having similar issues this spring
Nike just made League wide changes and
introduced new uniforms that many fans
media members and players are calling
the worst uniforms of all time everyone
seems to want to blame Nike and Fanatics
for making these terrible uniforms but
in reality it's actually Jeremy Lynn's
fault yes because 12 years ago Lin
sanity created a chain reaction and
because of it this spring Niki moved the
MLB logo lower changed the base color
from white to off-white made the letters
of players names noticeably smaller and
even some jerseys seem to have switched
from stitched logos to ironed on logos
when they introduced these jerseys one
player immediately said they felt like
they were from TJ Maxx another player
called them papery the biggest
complaints about them were the pants
because they can no longer be tailored
many players hated the fit and entire
teams just started wearing their pants
from previous Seasons during games more
issues arose on picture day when images
of players wearing these pants showed
that the pants were seethrough and
multiple awkward pictures of players
junk were being shown and spread online
adding more fuel to the fire as people
online joked about M Mo games having to
be broadcasted like this because the
pants were see-through Fanatics the
company that manufactures the jerseys
downplayed the changes saying the pants
material hadn't changed and the
see-through effect is something that
always happens on picture day however
when one fan tagged Fanatics in a
picture of a jersey they responded by
saying quote looks like we dropped the
ball on this one send me a DM so I can
learn more about it turns out this
jersey that fanatic's Twitter
acknowledged was a mistake was an actual
game issued uniform given to Michael
Chavez to wear an a game shortly after
Fanatics deleted the Tweet Fanatics is
the company who manufactures the Nike
jerseys worn in every MLB game Nike
designs the jerseys tells them what what
to make what materials to use and
Fanatics uses their factories to produce
them and send them to teams they have
exclusive deals to distribute jerseys
for almost every major sports league in
the world they are a $31 billion company
are praised in the business world for
changing the sports merchandise game and
their CEO recently won the Athletics
Sports person of the year award but many
consumers hate them they are constantly
being blamed for making replica Jersey
worse and worse there are entire social
media accounts calling them out for
their poor jerseys when news broke they
would be making the new NHL uniforms
hockey fans revolted leading to backlash
everywhere and now they're being blamed
for making MLB uniforms look like
they're from TJ Maxx but the reason
Fanatics is in this position may come
down to one moment in February 2012
Jeremy Lynn had already been cut by two
teams in this season alone his current
team was considered in cutting him
before they randomly put him into a game
and he scored 25 points had five
rebounds and seven assists in only 36
minutes at the time Adidas made NBA
uniforms Reebok made NFL uniforms and
Majestic made MLB jerseys each company
had exclusive deals with each league
back then these companies like Adidas
would pay to manufacture jerseys for the
league because it also gave them the
right to make replica jerseys so every
time a fan bought a jersey Adidas would
get a cut these three companies were
spending a fortune for the rights to
manufacture these uniforms until
something changed in 2012 Nike entered
the market paying $1.1 billion for the
rights to make NFL jerseys for Five
Seasons that is
$220 million a year nearly 10 times more
than Reebok had paid for the same rights
just a year earlier even when accounting
for inflation Nike outbid Reebok by over
$250 million but they didn't want to
stop at football they wanted baseball
and basketball too so for a company like
Adidas to compete with this insane
amount of money Nike was willing to
spend they needed to sell a lot more
jerseys that year Jeremy Lynn gave them
that opportunity he followed his first
game with another 28 points against the
Jazz a few days later he lined up
against John Wall and dominated putting
up another 23 points the entire world
all of a sudden knew and was heavily
invested in Jeremy Lynn and with his
next game against Kobe Bryant and the
Lakers at Madison Square Garden it was a
perfect storm he was the biggest name in
American Sports and people across the
world rushed to get his jersey
unfortunately for them there were none
just a week before Lynn was a nobody so
Adidas had no reason to make a Jeremy
Lynn Jersey Lynn torched Kobe Bryant
putting up 38 points as the entire MSG
crowd cheered him on like he was their
savior this was the height of Lin sanity
yet Jeremy Lyn jerseys didn't even exist
yet the Knicks quickly put t-shirts on
their website but warned consumers they
wouldn't be delivered for weeks
desperate to take advantage of the
demand Modell's pulled Jeremy Lyn
jerseys off the assembly line early but
were only available in two of the 150
locations the Knicks themselves couldn't
even get jery ly jerseys finally making
an announcement that they'd be available
at the team store but admitting they
only had 200 of them available Adidas
scrambled to make as much Jeremy ly
merch as possible and made a ton of it
however Lin sanity ended almost as
quickly as it started he finished the
season injured and that offseason then
Nicks decided to let Lynn leave in free
agency and now the insane amount of
Jeremy Lyn Nicks merch Adidas rushed to
make was worthless according to Modell
following his departure they sold about
40,000 Jeremy Lyn jerseys and t-shirts
for as low as $1 each resulting in a
massive loss and profit this likely cost
the NBA millions of dollars the deal
with MBA itself may have cost Adidas
millions of dollars by the end of under
the contract their share of basketball
Footwear in America was only 3% thinking
the agreement wasn't worth it Adidas
didn't even make an offer once the
contract was up yet for some reason Nike
agreed to essentially the exact same
agreement for $1 billion paying $125
million a year which was nearly three
times more money than Adidas paid for
the exact same deal and to justify this
they had to sell a lot more jerseys and
to do this they started making a sh ton
of new jerseys in Seven Seasons with the
NBA Nike has made
438 different jerseys that is over 150
more jerseys than Adidas made in the
previous Seven Seasons before Nike took
over by pumping out New Jersey after New
Jersey Nike has helped NBA increase
their jersey sales by double digit
percentage points in five of their first
six seasons Nike did the same thing with
NFL in the 9 years prior to the Nike
deal there were 126 NFL jerseys in the 9
years since there's been
180 within a few years Nike was selling
up to four times as many jerseys as
Reebok was a decade before Nike bragged
about building a supply chain that could
create a new jersey and have it ready
for consumers in weeks but as we saw
with Lance sanity even this is too too
slow and that's where Fanatics comes in
originally in e-commerce business
Fanatics sold sports merchandise online
they were so good at this when mob
signed an exclusive deal to sell all
online M Mo apparel through Fanatics
their sales went up
67% in one year soon Fanatics had deals
with NBA NFL MLS Formula 1 NASCAR and
pretty much everyone the Fanatics
production line has become so fast and
efficient if a player gets traded to
tomorrow Fanatics can make their Jersey
on their new team and have it delivered
to you in only three business days
Jersey makers used to only offer jerseys
of the team's best players because the
cost of making them only Justified
selling the best sellers now Fanatics
can make a jersey for anyone whether
they're on the team or not and get it to
you in 3 days and this has exploded
jersey sales Fanatics has been such an
asset for major sports leagues MLB even
went as far as to allow them to make
their game worn uniforms Nike designs
the jerseys gives instructions on how to
make them sends them the materials and
Fanatics does the rest and Nike still
gets their patented swoosh on every
single Jersey which in reality may be
the only thing they care about Nike
outbid every other company by hundreds
of millions of dollars just to force
leagues to put this logo on each and
every Jersey the NBA refused to put the
Adidas logo on game War jerseys but
couldn't deny Nike because they paid
them three times more MLB hid the
Majestic logo on the sleeve and teams
like the Yankees were exempt from
putting them on the jerseys at all to
protect the purity of the brand but when
Nike offered the league twice as much
money as Majestic paid they had no
choice but to slap a Nike logo right on
the front these jerseys are essentially
advertisements which earn Nike billions
of dollars in exposure last year Super
Bowl generated
$285 Million worth of exposure for
Brands Nike alone accounted for 60% of
this during a typical NFL game the Nike
logo is visible on screen for around
half the game that is over 4,000 seconds
that same game companies paid $7 million
for a 30 second ad that is around
$233,000 per second meaning if they
wanted as much airtime as Nike got they
would have to pay
$964 million for their Jersey deal Nike
only has to pay $300 million a year and
not only gets that much airtime during
the Super Bowl they get that much
airtime during all
272 NFL games a year they also have this
deal in the NBA where a Nike logo is
visible for around 24 minutes every
single game when you watch an MLB game
Nike logos are strategically placed on
the chest so every time the camera Zooms
in on a player's face the Nike logo is
in the shot if a player turns around
another logo is strategically placed on
their pants to maximize exposure all the
team gear is also made by Nike so when
they cut to a coach or The Dugout
there's a Nike logo and all the replica
jerseys are also made by Nike so if
there's a fan shot the Nike logo is
still there the logo dominates the game
and a ful length playoff broadcast the
Nike logo was visible
66% of the time that is an hour and 40
minutes of exposure extrapolate this
over an entire MLB season and Nike gets
14.5 million seconds of airtime
243,000 hours of airtime which
essentially is the equivalent to paying
for
486,000
302 commercials and that is why Nike
spent 1 billion
for this
5.0 / 5 (0 votes)
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