How Michael Jordan's Nike deal changed sports marketing forever

EDGAR investigates how the jumpman paved the way for the likes of Usain Bolt and Roger Federer to make millions from sponsorship.

April 7, 2015

Five thousand dollars. That was the fine that the NBA slapped on a 21-year-old Michael Jordan every time he stepped foot on the basketball court in 1985. Given the choice, most people would deem being fined $5,000 every time they went to work a rather unwise investment – but most people aren’t Michael Jordan.

But what did the undeniably talented rookie from North Carolina University, who had only recently made the transition to professional sports after being drafted by the Chicago Bulls, do to incite the league’s wrath? What crime could he have committed that would cause him to be fined $410,000 for the season? The answer: his shoes.

Thirty years ago, American apparel company Nike took a risk. It was no secret that Michael Jordan was set to be a star, but while others balked at the idea of investing too much in the young rookie, Nike went the other way, offering him a deal that would earn him $7 million over five years. By comparison, up until that point the previous highest contract was James Worthy’s arrangement with New Balance, an eight-year deal worth $150,000 per year. Nike had well and truly placed their chips on the black and red uniform of Chicago’s number 23.

With such an investment, Nike threw their rather ingenious marketing machine behind their man. Mirroring the franchise’s colours, they launched the Air Jordan 1, breaking away from the status quo of white sneakers by opting for a rather maverick black and red. The lack of white on the shoe was not welcomed by then NBA Commissioner, David Stern, who fined Jordan every time he played a game with them on. Nike were only too happy to pick up the fine, using the notoriety of the punishment to their advantage – their advertising suggesting that the shoes gave you an unfair advantage and that whoever wore them had a certain edginess associated with outlaw activities. And with that, the legend was born. Nike Jordan 23. Jump – or perhaps stride, bound or leap – forward to today and for Philippe Tardivel, marketing director for the upscale Swiss watch company Hublot, the idea that, on first impressions at least, a watchmaker may have little in common with a world class sprinter poses no problems at all. Back in 2012, he was the man who masterminded the company’s business partnership with superstar athlete Usain Bolt.

“He’s the fastest man on the planet, the best in his category of sport, and so there seemed to be a strong symbolism there for us,” explains Tardivel - who has also established endorsement deals with many lesser known sportspeople who chime with more local markets, the likes of champions in alpine skiing and biathlon, for example. “We’re a niche company and don’t have many ambassadors, so we like to think of Bolt as part of the family. But, of course, there’s a commercial relationship.”

Unsurprisingly, he isn’t saying what that amounts to. Nor is Usain Bolt, though he is candid on why he – “never a watch fan,” as he confesses – plumped for Hublot over the many other companies vying for an association with him. “Celebrities get given stuff all the time of course, just because who you are makes it look good,” says Bolt, whose other endorsement deals have included Visa, Virgin Media, Gatorade, Nissan and Puma, the latter of which alone is worth in excess of $9m per annum. “But someone told me that Jay Z once picked two watches in a store and then stood there, seeming to expect them to be free. They said he’d have to pay. And that’s the kind of level of product I want to work with - it says it all.”

Whether or not this is PR puff is debatable – Bolt does at least seem genuinely excited by the Big Bang limited-edition timepieces he now wears just above those plate-sized hands. But perhaps, for him as for Michael Jordan before, it remains sound life planning to build his pension pot during that window in his inevitably short athletic career while he is in demand.

But why should a sportsperson be deemed such a valuable association for a company selling Internet services, or credit cards? The question may be a less obvious one now, given the ubiquity of such business arrangements, but certainly it occurred to many when, 30 years ago, Nike struck the Jordan motherlode.

The figures, even now, seem astronomical. In 1974 Nike had courted controversy by signing John McEnroe for what was, at the time, considered a scandalously large fee of $100,000. Ten year’s later the Jordan deal was signed, which would also see the player receive five per cent of the net wholesale price of every pair of Air Jordans sold. Launched in 1985, by 1991 sales amounted to some $200m a year. By 2012, the Jordan brand was selling $2.5bn of shoes a year, with Air Jordans comprising 58 per cent of all basketball shoes bought in the US. First Nike Jordan shoe. It was the moment when a world, divided by languages and culture but increasingly globalised in trade, really woke up to sport’s ability to unify, an ability that the Internet and social media has only exacerbated to unprecedented levels: sports people account for some 500m likes on Facebook and 200m Twitter followers, the single biggest share, in fact, of both platforms’ usage. And that’s individual sports people, not sports teams. While the latter still has power, today what matters are the perceived personalties within them, and their sometimes superhuman abilities.

“People want to identify with champions - and because they’re unique people, embodying human achievement, that sense of creating firsts,” as Hublot’s Tardivel puts it. “And I think they’re easier for people to engage with than, say, Hollywood types. Hollywood people may have talent, but they’re hardly putting their lives on the line to achieve the seemingly impossible.”

Nancy Lough is a professor at the University of Nevada, Las Vegas, where she specialises in sports marketing – and she has no doubt as to why these days sports people have such resonance, and hence such commercial power, to the extent that, as she puts it, there is now an arms race in sponsorship deal-making even at college sports level, at least in the US.

“Certainly it’s not about getting sportspeople to talk about a product’s benefits,” she adds. “It’s more about the consumer’s unconscious interpretation of what the sports person represents. With Jordan it was summed up in Nike’s line ‘Be Like Mike’ and that notion in the jumping man icon of transcending boundaries.

“Brands want to leverage their profile via the image of the athletes they endorse, so a likable image is important – if Roger Federer is showing me he wears Rolex, I might well like the brand because I like him. But under that there is still a deeper emotional connection at play: he is, after all, the greatest tennis player of all time, so maybe Rolex is the greatest watch too. It tends to work – but not always.” Roger Federer Rolex. A report by Catalyst for the SportsBusiness Journal last year revealed, for instance, that avid soccer fans in the US are more likely than fans of others sports to engage with brands aligned with the sport, with a whopping 84 per cent connecting and then taking action with a brand that was in some way involved with soccer, with 36 per cent actually buying its products. Some 31 per cent of basketball fans did the same. Sometimes that alignment can become so culturally deep as to defy sense too.

“Some brands just do such a great job,” says Lough. “People here think they have to be drinking beer when watching American football because of Budweiser, though clearly beer and football don’t naturally go together. Similarly, it’s perhaps odd when McDonald’s and Coca-Cola are among the biggest Olympic sponsors, such is the way in which sport is now looked on as a business.”

Yet, people being people, some endorsement deals don’t always end happily. Lough stresses how, after a series of high-profile cases in which sportspeople’s mismanaged private lives have revealed them as being less-than-super heroic – Tiger Woods’ infidelities being only the most notable example – brands are now looking more to the safer bets of those star players past their playing prime but still with iconic status, or have grown more skilled in their research and contract writing. Tiger Woods Nike. “Working with a star player is a risk of course. As a brand that has invested tonnes of money in a player you may come out publicly to say you support your troubled sportsperson regardless – and maybe controversy can create the kind of attention that a company feels is still beneficial,” says Lough. “But a sportsperson with a problem image is likely to see a real drop in their endorsements. And they might well expect it – there’s a sense that players today know how endorsement deals work. It’s why so few athletes take a stand on politics or cultural issues, for instance. That’s too risky for them.”

On both sides, the exchange of profile for income, of good behaviour for the money that ensures a very comfortable life beyond a career easily cut short by injury or inconsistency, would seem to be well-understood and valued: “Show me the money!” as Cuba Gooding Jr’s football player shouts at his would-be agent, played by Tom Cruise, in ‘Jerry Maguire’.

“But it’s necessary for many players who end up opening supermarkets when their careers are over. And sometimes it works very well for them – George Foreman’s probably earns more from his grill than he did from his entire boxing career,” suggests Robert Tuchman, president of sports marketing company Goviva.

“We’re certainly seeing similar endorsement deals in other lifestyle areas now – with celebrity chefs, for example – especially since so many sports people become icons and then fallen icons, or are so over-exposed they get played out.

“The culture used to be that entertainment was dominated by sports, but interests are much wider today. The question is whether anything can ever attract the same kind of passionate, die-hard following that sport and its big players do, or match the opportunities they give to a brand or a product affiliated with them. And I doubt it.”