Why Nike Paid $1,000,000,000 For This

Baseball Doesn't Exist
20 Mar 202413:01

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

  • πŸ’° Nike pays the MLB $1 billion to provide uniforms, despite the league not paying them for this service.
  • 🏒 Fanatics manufactures the Nike jerseys for MLB and has exclusive deals with almost every major sports league.
  • πŸ“ˆ Nike's high uniform costs and exclusive deals have led to increased jersey production and sales.
  • πŸ‘• The new MLB uniforms introduced by Nike and Fanatics have been widely criticized for their design and quality.
  • πŸ§₯ 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.
  • πŸ‘– The biggest complaints about the new uniforms are related to the pants, which can no longer be tailored and have a see-through effect.
  • πŸ€ 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.
  • 🀝 Nike's agreements with sports leagues require them to sell a large volume of jerseys to justify their high rights payments.
  • πŸš€ Fanatics' efficient production and distribution model allows for rapid jersey production and delivery, even for less-known players.
  • πŸ’‘ Nike's logo placement on jerseys is strategic to maximize brand exposure during games, which is a significant part of their marketing strategy.
  • πŸ† 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

00:00

πŸ“ˆ 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.

05:03

πŸ€ 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.

10:05

πŸ’° 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

πŸ’‘MLB jerseys

MLB jerseys refer to the uniforms worn by players in Major League Baseball games. The video discusses the evolution of these jerseys, highlighting changes in design and manufacturing, particularly under the influence of Nike and Fanatics. The jerseys have become a point of contention due to changes in materials and fit, as well as the introduction of new uniforms that have been criticized by fans, media, and players.

πŸ’‘Nike

Nike is a multinational corporation known for its sportswear and is the central company in the video's narrative regarding the design and distribution of MLB, NFL, and NBA uniforms. The video discusses Nike's business strategies, including paying large sums for the rights to manufacture jerseys for these leagues and their impact on the quality and reception of the uniforms.

πŸ’‘Fanatics

Fanatics is an e-commerce company that specializes in sports merchandise and has become the manufacturer of the Nike jerseys worn in MLB games. The company is known for its efficient production and distribution of sports apparel, but has faced criticism for the quality of the jerseys it produces, as highlighted by issues with the see-through pants and the overall fit of the uniforms.

πŸ’‘Uniform quality

Uniform quality refers to the standard of the materials, design, and construction of the jerseys and other attire worn by athletes in professional sports. In the context of the video, the quality of MLB uniforms has been a significant point of discussion, with complaints about the fit, materials, and durability of the new Nike and Fanatics-produced jerseys.

πŸ’‘Jeremy Lin

Jeremy Lin is a professional basketball player whose unexpected success in 2012, known as 'Linsanity,' led to a surge in demand for his jerseys. However, at the time, there were no official Jeremy Lin jerseys available for purchase, as he was not a well-known player before his breakout performances. This created a significant missed opportunity for Adidas, the then-manufacturer of NBA jerseys, and had a lasting impact on the sports merchandise industry.

πŸ’‘Linsanity

Linsanity was a term coined to describe the meteoric rise in popularity and success of basketball player Jeremy Lin in 2012. The phenomenon led to a surge in demand for Lin's merchandise, particularly jerseys, which caught manufacturers off guard and resulted in a missed opportunity to profit from the unexpected craze.

πŸ’‘Adidas

Adidas is a multinational corporation that designs and manufactures shoes, clothing, and accessories. In the context of the video, Adidas was the previous manufacturer of NBA uniforms before Nike took over. The company's experience with the 'Lin-sanity' phenomenon and the subsequent loss incurred from the rush to produce Jeremy Lin merchandise is discussed as a significant event affecting its business strategy.

πŸ’‘Reebok

Reebok is a sportswear company that was known for manufacturing NFL uniforms before Nike took over the contract. The video discusses the significant increase in the rights fee that Nike was willing to pay for the NFL jersey manufacturing rights, which was nearly ten times more than what Reebok had paid previously.

πŸ’‘Supply chain

A supply chain refers to the network of organizations, people, activities, information, and resources involved in the creation and distribution of a product. In the context of the video, Nike's supply chain is highlighted as being capable of quickly producing and distributing new jerseys to meet market demand, which is a key factor in their ability to sell more jerseys and justify the high rights fees they pay to sports leagues.

πŸ’‘Exposure

Exposure in the context of the video refers to the visibility and presence of a brand's logo or products in the public eye, particularly during sports events. Nike's strategy of paying large sums for jersey rights is justified by the significant exposure their logo receives during games, which translates into billions of dollars' worth of advertising.

πŸ’‘Logo placement

Logo placement refers to the strategic positioning of a company's logo on products, such as sports uniforms, to maximize visibility and brand recognition. In the video, the placement of the Nike logo on MLB jerseys is mentioned as a key aspect of the deal between Nike and the league, ensuring that the logo is prominently displayed during games.

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

00:00

MLB jerseys used to look like this they

00:02

were supposed to look like this but now

00:04

they look like this but these Nike

00:06

jerseys Wen in every single M Mo game

00:09

aren't even made by Nike that is done by

00:13

a completely different company

00:15

traditionally if you wanted uniforms for

00:17

your team you would need to find a

00:18

company that makes uniforms pay that

00:20

company and in exchange they will give

00:23

you uniforms not in this case Nike is in

00:26

charge of providing MLB uniforms but MLB

00:29

pays nothing and actually makes Nike pay

00:33

them $1 billion and somehow this

00:36

exchange still ends up making Nike

00:39

millions they paid another billion to

00:41

make every single NFL jersey players

00:43

immediately complained they didn't fit

00:45

and made them look fat they paid another

00:47

billion to make every single NBA jersey

00:49

and immediately they started ripping and

00:51

falling apart on the court and now MLB

00:53

is having similar issues this spring

00:55

Nike just made League wide changes and

00:57

introduced new uniforms that many fans

01:00

media members and players are calling

01:02

the worst uniforms of all time everyone

01:05

seems to want to blame Nike and Fanatics

01:07

for making these terrible uniforms but

01:10

in reality it's actually Jeremy Lynn's

01:14

fault yes because 12 years ago Lin

01:16

sanity created a chain reaction and

01:19

because of it this spring Niki moved the

01:21

MLB logo lower changed the base color

01:24

from white to off-white made the letters

01:26

of players names noticeably smaller and

01:29

even some jerseys seem to have switched

01:31

from stitched logos to ironed on logos

01:34

when they introduced these jerseys one

01:36

player immediately said they felt like

01:38

they were from TJ Maxx another player

01:40

called them papery the biggest

01:42

complaints about them were the pants

01:44

because they can no longer be tailored

01:46

many players hated the fit and entire

01:48

teams just started wearing their pants

01:50

from previous Seasons during games more

01:53

issues arose on picture day when images

01:55

of players wearing these pants showed

01:58

that the pants were seethrough and

02:00

multiple awkward pictures of players

02:02

junk were being shown and spread online

02:05

adding more fuel to the fire as people

02:08

online joked about M Mo games having to

02:10

be broadcasted like this because the

02:12

pants were see-through Fanatics the

02:15

company that manufactures the jerseys

02:17

downplayed the changes saying the pants

02:19

material hadn't changed and the

02:21

see-through effect is something that

02:24

always happens on picture day however

02:26

when one fan tagged Fanatics in a

02:29

picture of a jersey they responded by

02:31

saying quote looks like we dropped the

02:34

ball on this one send me a DM so I can

02:36

learn more about it turns out this

02:39

jersey that fanatic's Twitter

02:41

acknowledged was a mistake was an actual

02:44

game issued uniform given to Michael

02:47

Chavez to wear an a game shortly after

02:50

Fanatics deleted the Tweet Fanatics is

02:53

the company who manufactures the Nike

02:55

jerseys worn in every MLB game Nike

02:57

designs the jerseys tells them what what

03:00

to make what materials to use and

03:02

Fanatics uses their factories to produce

03:04

them and send them to teams they have

03:07

exclusive deals to distribute jerseys

03:09

for almost every major sports league in

03:11

the world they are a $31 billion company

03:15

are praised in the business world for

03:17

changing the sports merchandise game and

03:19

their CEO recently won the Athletics

03:22

Sports person of the year award but many

03:25

consumers hate them they are constantly

03:27

being blamed for making replica Jersey

03:30

worse and worse there are entire social

03:32

media accounts calling them out for

03:33

their poor jerseys when news broke they

03:35

would be making the new NHL uniforms

03:37

hockey fans revolted leading to backlash

03:41

everywhere and now they're being blamed

03:43

for making MLB uniforms look like

03:45

they're from TJ Maxx but the reason

03:47

Fanatics is in this position may come

03:50

down to one moment in February 2012

03:53

Jeremy Lynn had already been cut by two

03:56

teams in this season alone his current

03:58

team was considered in cutting him

04:00

before they randomly put him into a game

04:02

and he scored 25 points had five

04:05

rebounds and seven assists in only 36

04:09

minutes at the time Adidas made NBA

04:12

uniforms Reebok made NFL uniforms and

04:15

Majestic made MLB jerseys each company

04:18

had exclusive deals with each league

04:20

back then these companies like Adidas

04:22

would pay to manufacture jerseys for the

04:24

league because it also gave them the

04:26

right to make replica jerseys so every

04:29

time a fan bought a jersey Adidas would

04:32

get a cut these three companies were

04:34

spending a fortune for the rights to

04:37

manufacture these uniforms until

04:39

something changed in 2012 Nike entered

04:42

the market paying $1.1 billion for the

04:45

rights to make NFL jerseys for Five

04:47

Seasons that is

04:48

$220 million a year nearly 10 times more

04:53

than Reebok had paid for the same rights

04:56

just a year earlier even when accounting

04:59

for inflation Nike outbid Reebok by over

05:02

$250 million but they didn't want to

05:06

stop at football they wanted baseball

05:08

and basketball too so for a company like

05:10

Adidas to compete with this insane

05:13

amount of money Nike was willing to

05:15

spend they needed to sell a lot more

05:18

jerseys that year Jeremy Lynn gave them

05:21

that opportunity he followed his first

05:23

game with another 28 points against the

05:26

Jazz a few days later he lined up

05:28

against John Wall and dominated putting

05:31

up another 23 points the entire world

05:34

all of a sudden knew and was heavily

05:36

invested in Jeremy Lynn and with his

05:38

next game against Kobe Bryant and the

05:41

Lakers at Madison Square Garden it was a

05:45

perfect storm he was the biggest name in

05:48

American Sports and people across the

05:50

world rushed to get his jersey

05:52

unfortunately for them there were none

05:55

just a week before Lynn was a nobody so

05:58

Adidas had no reason to make a Jeremy

06:01

Lynn Jersey Lynn torched Kobe Bryant

06:03

putting up 38 points as the entire MSG

06:07

crowd cheered him on like he was their

06:10

savior this was the height of Lin sanity

06:13

yet Jeremy Lyn jerseys didn't even exist

06:16

yet the Knicks quickly put t-shirts on

06:18

their website but warned consumers they

06:21

wouldn't be delivered for weeks

06:22

desperate to take advantage of the

06:24

demand Modell's pulled Jeremy Lyn

06:26

jerseys off the assembly line early but

06:29

were only available in two of the 150

06:33

locations the Knicks themselves couldn't

06:35

even get jery ly jerseys finally making

06:38

an announcement that they'd be available

06:39

at the team store but admitting they

06:42

only had 200 of them available Adidas

06:45

scrambled to make as much Jeremy ly

06:48

merch as possible and made a ton of it

06:51

however Lin sanity ended almost as

06:54

quickly as it started he finished the

06:56

season injured and that offseason then

06:59

Nicks decided to let Lynn leave in free

07:01

agency and now the insane amount of

07:04

Jeremy Lyn Nicks merch Adidas rushed to

07:07

make was worthless according to Modell

07:10

following his departure they sold about

07:13

40,000 Jeremy Lyn jerseys and t-shirts

07:16

for as low as $1 each resulting in a

07:20

massive loss and profit this likely cost

07:22

the NBA millions of dollars the deal

07:25

with MBA itself may have cost Adidas

07:28

millions of dollars by the end of under

07:29

the contract their share of basketball

07:31

Footwear in America was only 3% thinking

07:35

the agreement wasn't worth it Adidas

07:38

didn't even make an offer once the

07:40

contract was up yet for some reason Nike

07:44

agreed to essentially the exact same

07:47

agreement for $1 billion paying $125

07:51

million a year which was nearly three

07:54

times more money than Adidas paid for

07:56

the exact same deal and to justify this

07:58

they had to sell a lot more jerseys and

08:01

to do this they started making a sh ton

08:04

of new jerseys in Seven Seasons with the

08:07

NBA Nike has made

08:10

438 different jerseys that is over 150

08:14

more jerseys than Adidas made in the

08:17

previous Seven Seasons before Nike took

08:19

over by pumping out New Jersey after New

08:22

Jersey Nike has helped NBA increase

08:25

their jersey sales by double digit

08:27

percentage points in five of their first

08:30

six seasons Nike did the same thing with

08:32

NFL in the 9 years prior to the Nike

08:34

deal there were 126 NFL jerseys in the 9

08:38

years since there's been

08:40

180 within a few years Nike was selling

08:43

up to four times as many jerseys as

08:46

Reebok was a decade before Nike bragged

08:50

about building a supply chain that could

08:51

create a new jersey and have it ready

08:54

for consumers in weeks but as we saw

08:56

with Lance sanity even this is too too

08:59

slow and that's where Fanatics comes in

09:02

originally in e-commerce business

09:05

Fanatics sold sports merchandise online

09:07

they were so good at this when mob

09:09

signed an exclusive deal to sell all

09:11

online M Mo apparel through Fanatics

09:14

their sales went up

09:17

67% in one year soon Fanatics had deals

09:20

with NBA NFL MLS Formula 1 NASCAR and

09:23

pretty much everyone the Fanatics

09:25

production line has become so fast and

09:27

efficient if a player gets traded to

09:29

tomorrow Fanatics can make their Jersey

09:31

on their new team and have it delivered

09:33

to you in only three business days

09:36

Jersey makers used to only offer jerseys

09:39

of the team's best players because the

09:41

cost of making them only Justified

09:44

selling the best sellers now Fanatics

09:46

can make a jersey for anyone whether

09:49

they're on the team or not and get it to

09:51

you in 3 days and this has exploded

09:54

jersey sales Fanatics has been such an

09:56

asset for major sports leagues MLB even

09:59

went as far as to allow them to make

10:01

their game worn uniforms Nike designs

10:04

the jerseys gives instructions on how to

10:07

make them sends them the materials and

10:09

Fanatics does the rest and Nike still

10:12

gets their patented swoosh on every

10:14

single Jersey which in reality may be

10:17

the only thing they care about Nike

10:20

outbid every other company by hundreds

10:22

of millions of dollars just to force

10:24

leagues to put this logo on each and

10:26

every Jersey the NBA refused to put the

10:28

Adidas logo on game War jerseys but

10:31

couldn't deny Nike because they paid

10:33

them three times more MLB hid the

10:36

Majestic logo on the sleeve and teams

10:38

like the Yankees were exempt from

10:40

putting them on the jerseys at all to

10:42

protect the purity of the brand but when

10:44

Nike offered the league twice as much

10:47

money as Majestic paid they had no

10:49

choice but to slap a Nike logo right on

10:52

the front these jerseys are essentially

10:54

advertisements which earn Nike billions

10:57

of dollars in exposure last year Super

10:59

Bowl generated

11:02

$285 Million worth of exposure for

11:05

Brands Nike alone accounted for 60% of

11:10

this during a typical NFL game the Nike

11:13

logo is visible on screen for around

11:15

half the game that is over 4,000 seconds

11:19

that same game companies paid $7 million

11:22

for a 30 second ad that is around

11:26

$233,000 per second meaning if they

11:29

wanted as much airtime as Nike got they

11:31

would have to pay

11:34

$964 million for their Jersey deal Nike

11:38

only has to pay $300 million a year and

11:41

not only gets that much airtime during

11:43

the Super Bowl they get that much

11:44

airtime during all

11:48

272 NFL games a year they also have this

11:51

deal in the NBA where a Nike logo is

11:53

visible for around 24 minutes every

11:56

single game when you watch an MLB game

11:58

Nike logos are strategically placed on

12:00

the chest so every time the camera Zooms

12:03

in on a player's face the Nike logo is

12:05

in the shot if a player turns around

12:08

another logo is strategically placed on

12:10

their pants to maximize exposure all the

12:13

team gear is also made by Nike so when

12:15

they cut to a coach or The Dugout

12:18

there's a Nike logo and all the replica

12:20

jerseys are also made by Nike so if

12:22

there's a fan shot the Nike logo is

12:25

still there the logo dominates the game

12:27

and a ful length playoff broadcast the

12:30

Nike logo was visible

12:32

66% of the time that is an hour and 40

12:36

minutes of exposure extrapolate this

12:38

over an entire MLB season and Nike gets

12:42

14.5 million seconds of airtime

12:47

243,000 hours of airtime which

12:49

essentially is the equivalent to paying

12:51

for

12:53

486,000

12:55

302 commercials and that is why Nike

12:58

spent 1 billion

12:59

for this

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