Adidas Will Take Its NBA Jerseys And Go Elsewhere After 2017

With the clock winding down on its contract to provide the National Basketball Association with team uniforms, Adidas said yesterday that it would sit out negotiations for a deal past the one it has through the 2016-17 season.

“We haven't been able to elevate our brand for the basketball consumer that we're targeting,” Chris Grancio, Adidas' global basketball general manager, tells the Portland Business Journal’s Matthew Kish, who broke the story that the company would instead “focus on developing new products, endorsing more amateur teams and doubling its roster of NBA players” in advance of the official announcement yesterday.

“We ultimately decided that we would change our investment strategy and invest more in players on the court,” Grancio says. 



As Kish points out, “Adidas has been unable to make up lost ground with Nike and its Jordan brand, which account for roughly 96% of the basketball shoe business.”

On the other side of the court, “the NBA has in recent months become concerned about Adidas’s sliding market position in the U.S. and the manufacturer’s management structure, according to a person familiar with the negotiations,” write Sara Germano and Ellen Emmerentze Jervell in the Wall Street Journal.

“The league has been troubled by the fact that Adidas last year fell to third place in retail sales of sports apparel and footwear, behind Nike Inc. and Under Armour Inc.,” they continue. “The league has also been concerned about ongoing efforts to find a successor to longtime Chief Executive Herbert Hainer, whose contract with Adidas expires around the same time as the NBA rights end in 2017.”

As a result, “the league informed Adidas last week that it was going to open up the bidding to other companies, and the NBA is expected to announce a new partner by mid-April,” a source tells Hiroko Tabuchi and Ken Belson in the New York Times

“Adidas became the exclusive outfitter for the NBA, WNBA and NBA Development League in 2006 under an 11-year deal,” the Associated Press’s Brian Mahoney reports. “Adidas supplies the NBA with uniforms and holds the rights to NBA-branded merchandise worldwide.”

That deal was reported to be “in excess of $400 million,” ESPN’s Darren Rovell reported at the time. It replaced a 10-year contract that Reebok, which was acquired by Adidas in January of that year, negotiated with the league in 2001.

“It’s an enormously high-profile license,” Ira Mayer, a consultant to the licensing business and former owner of The Licensing Letter, tells the NYT’s Tabuchi and Belson. “But once they did the math, it looked like it was going to be expensive.”

“The move comes just a few years after Adidas’ Reebok unit lost out on an agreement to design and sell jerseys for the National Football League, a contract that is now controlled by Nike,” points out John Kell in Fortune. “The loss of that business was estimated at $200 million to $250 million a year, Adidas warned at the time, and conversely resulted in a big boost to Nike’s apparel business in the U.S.”

In a blog post last week carrying the hed, “Why Adidas Needs the NBA … and Why Nike, Under Armour Want To Take It Away,” Barron’s Ben Levisohn quotes from a note by Citigroup’s Kate McShane and Corinna Van der Ghinst: “while [Adidas] has invested in a handful of key NBA players and college teams, our industry contacts note that these are not assets that sporting goods retailers need to drive sales, making the NBA contract a critical part of its U.S. strategy…”

Well, Adidas, which is based in Herzogenaurach, Bavaria, Germany, saw it differently in a statement yesterday: “We are re-imagining and reshaping our business and have evolved our strategy to look at new, cutting-edge ways to drive our brand and support our business over the long term,” it said, according toUSA Today’s Jeff Zillgitt. “We will invest more in telling stories that matter to our consumer, building category-disrupting innovative products …”

On that note — and on the positive side of the PR ledger — “Kanye West delivered a big confidence boost to his fans” over the weekend, Rachel Maresca writes in the New York Daily News, when a video hit YouTube of the “the 37-year-old rapper” and “Kim Kardashian's other half” hand-delivering his Yeezy Boost shoes for Adidas Originals to awed customers at the company’s flagship store in New York City last month. 

“I want people to think more, I want people to feel like it's okay to create and follow what their dreams are and not feel boxed in,” West says in a voiceover. “I want people to feel like awesome is possible.”

Even without the NBA.

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