In The News

Nike Risks Millions Going All In With McIlroy

Forbes, January 15, 2013

By Tom Van Riper

Say this for Nike: when they see their man, they pounce. Risks? Bring ‘em on.

With a new endorsement deal with young golf superstar Rory McIlroy, one that could reportedly exceed $200 million for ten years, the sports apparel powerhouse is showing that it’s not backing off its “all in” strategy with a single superstar, despite the ultimate crashing and burning of two other such pitchmen, Tiger Woods and Lance Armstrong.

Nike “could have said ‘let’s spread the wealth,’ there are a number of good young golfers out there,” says Jim Andrews, a Senior VP with IEG, a sports sponsorship consultant, citing talent like Bubba Watson and Rickie Fowler. Call it a venture capital approach – spread some seed money around and hope that someone breaks out.

But that’s not the Nike way. “The company builds sports platforms though influencers,” says John Rowady, president of sports business firm Revolution. That single, dominant influencer brings a certain clarity, he notes, which inherently carries a lot of risk should the player not meet expectations over the long haul.

With Tiger’s problems of recent years, the company decided it needed a replacement. The sport’s rising star at 23, with two majors wins under his belt and a new $10 million home in Florida, McIlroy now ranks No. 1 in the world. Sports business experts say the Northern Ireland native is in LeBron James’ and Usain Bolt’s company as that rare athlete with a chance to build a major global brand. And talk about timing: he’ll be playing with Woods this week in the Abu Dhabi HSBC Golf Championship.

Despite the obvious risks, the “all in” strategy has generally served Nike well. It began with Michael Jordan, a smashing endorsement success that eventually led the way to an expanded NBA lineup. It also worked well with Woods, who, notes Andrews, gave Nike its money’s worth before he crashed a few years ago. “Nike Golf was nothing before Tiger,” he says.

And now it’s up McIlroy to carry on the tradition. On the face of it, he’s a good bet. With a pleasant smile and a “regular guy” persona, he appeals to both men and women. Other players on the tour respect him. The risk of scandal would seem to be low: then again, several years ago it seemed low for Woods and Armstrong too. In a way, their foibles may actually be good for McIlroy, who is able “to see the peaks and valleys of the guys that came ahead of him,” says Rowady.

Where McIlroy is not as strong as Tiger: crossover appeal. As a minority who burst onto the golf scene in the 1990s, Woods’ dominance helped expand the sport’s audience. McIlroy isn’t a groundbreaking athlete in that sense.

Still, with its golf revenue moving in sync with Woods’ appeal, Nike is at a point where it needs a hedge on the Tiger brand. A single hedge, with clarity, from the guy they see as the sport’s next influencer.

ESP Subscription Bundle

A bundled offering to our most valuable, turnkey intelligence. Learn more