By: Allan Bach
With the Indiana Pacers recently inking a deal with Motorola, the Oklahoma City Thunder are the only team in the NBA that does not have a jersey logo sponsor. A sponsored jersey allows for a brand to have a 2.5 inches by 2.5 inches patch displaying their logo on their designated team’s jerseys. Currently, in year two of a three-year pilot program, the NBA and its teams have found a new revenue stream. During the initial phase of the jersey logo program, the brands are only allowed to sign a deal up to three years. This year the total revenue generated from the jersey logo sponsorship exceeded $137 million. Studies have shown the return on investment for these brands have been well worth it. Some of the brands have been estimated to receive $250 million in the value of exposure. Due to the success, teams will be able to negotiate higher annual payouts from the brands at the end of this trial phase. At this rate, it will not be long before the Thunders broker their own deal for a jersey logo sponsor. Then, all NBA teams’ jerseys will have an advertisement logo sponsorship.
As these lucrative brand deals become more standard, the cross-brand appeal will become more relevant. Some of these brands undoubtedly will get the benefit of being associated not only with the team but also with Nike, the official uniform and apparel supplier of the NBA for the next eight years. The current list of jersey logo sponsors does not include a direct competitor with Nike, but as the short-term deals of the pilot program run its course, soon there can be a potential brand deal that may implicate a partnership capacity that Nike does not want. Nike pays a premium to be the exclusive on-court apparel provider. Since these agreements remain private, it is presumed that Nike has a provision in their contract similar to Adidas has with the MLS, where Nike or a direct competitor is not allowed to be a jersey logo sponsor. Direct competitors may be a non-factor, but, how much influence does Nike have over other potential sponsors?
Once the initial trial phase expires, the league will determine whether to continue to have ad sponsorships on the uniforms or not. The expectations are that the logo sponsorships are here to stay. Nike can maintain its stance against any potential unflattering cross-brand associations as the league refines and improves the guidelines and requirements of the logo sponsorships on jerseys. Negotiating for or maintaining certain provisions that give Nike some influence over potential unflattering cross-brand association will be important. Nike could look to soccer, as ads first appeared on soccer jerseys in the 1950s. However, a relevant distinction is that Nike is the official uniform supplier of a league compared to in soccer where they are the official uniform supplier of individual teams.
With the NBA green lighting sponsor logos on the jerseys, it creates opportunities for brand association. Each individual jersey sponsor of a team now gets the benefit of having their brand appear next to Nike for the world to see. Nike should be aware of these brand associations and ensure that any negative correlation is not harming their brand. Thus, having an influence on which brand logos appear on these NBA jerseys is crucial to the return on investment Nike made in becoming the official uniform and apparel supplier of the NBA. All in all, while the jersey logo sponsorship program appears to be a benefit for the league, the brands, and the teams, Nike potentially has the most at stake.
The NBA might have created a domino effect regarding sponsorships on jerseys across the four major sports leagues in America. It is not out of the question to now expect the NFL, MLB, and NHL to actively engage in jersey advertisement revenue discussions. Nike will continue to be a key player in all of this moving forward. By 2020, Nike will become the official uniform and apparel supplier for the NBA, NFL, and MLB, creating in sorts, a mini-monopoly on official uniform and apparel supplier of the leagues. Eliminating the potential issues that may arise in the NBA will go a long way in preparing for the same problems that may surface if the NFL and MLB decide to allow jersey logo sponsorships.
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