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Shoes and Clothes: The Money Engine That Runs Sports

By BOB BAUM AP Sports Writer

April 10, 1996

BEAVERTON, Ore. (AP) - The top girls' high school basketball team in America wears Nike shoes, Nike warmups and carries Nike equipment bags. There's a Nike ''Swoosh'' on the coach's sweater.

''When kids get something free here, they go 'Man, this is fantastic,''' said Oregon City coach Brad Smith.

For the No. 1 ranked team in the country, Nike is happy to give. And Smith finds nothing wrong with exposing teen-agers to the commercialism that dominates sports today.

From impressionable preps in ponytails to surly superstars who fiercely protect their endorsement logo, athletes around the world have become human billboards.

Check out just about any sports photo, and there's the trademark of at least one famous shoe or apparel brand displayed only slightly more subtly than the Marlboro or Penzoil stickers plastered on race cars.

Reebok will supply 56,000 pairs of shoes to members of the U.S. Olympic team, games employees and volunteers this summer in Atlanta. Champion has paid a reported $40 million to have U.S. athletes wear its uniforms to Olympic news conferences and on the medals stand.

All four coaches who made it to this year's Final Four abundantly supplement their salaries with shoe contracts - three with Nike and national champion Kentucky with Converse. Kentucky is shopping around for a new deal. Expect the dollars to be staggering.

Logo cops prowl the sidelines in the NFL, protecting a $3 billion licensing business by making sure everyone is wearing the right cap when he's on the sidelines. A player caught wearing the wrong logo faces a $5,000 fine; $100,000 if he does it in the Super Bowl.

In the 1990s, it's not just whether you win or lose, it's what you're wearing at the time. The athletic shoe and apparel industry has exploded in the last two decades to become the multibillion-dollar machine that powers sports around the world.

Just as 19th century railroad tycoons divided up the West, the sportswear superpowers have carved up the athletic landscape, luring athletes, high schools and universities, even whole countries into their realm.

Nike has Penny, Reebok has Shaq. Nike has Ohio State, Reebok has UCLA. Nike has Kenya, Reebok has South Africa.

''Sports is the world culture,'' said Nike chairman and chief executive officer Phil Knight. ''It's on all over the world all the time. It's just gotten bigger and bigger and bigger.''

And the companies that make shoes and uniforms aren't just along for the ride. They're spurring this horse to run even faster.

''The United States really is ahead of the rest of the world in terms of the power of sports brands, but it's coming in Western Europe,'' Knight said. ''It's coming in Asia, and I think Latin America and Eastern Europe are going to be right behind them.

''It really does cut across international boundaries. Kids in Korea stay up till 3 o'clock in the morning to watch the NBA playoffs. The world will be watching the World Cup in '98 and the Winter Olympics in '98. It isn't just every four years. It's all the time.''

So the corporate influence of the companies that make the shoes and uniforms just keeps growing. Nike has bought Canstar Sports, the world's largest ice skate and in-line skate manufacturer, is taking on sunglasses giant Oakley, and has ventured into skiing and auto racing by signing Picabo Street and Michael Schumacher.

The money has multiplied phenomenally in recent years.

Nike's sales, which totaled $3.39 billion in fiscal 1993, are projected to top $6 billion this year.

Licensed sports merchandise sales totaled $11.4 billion in the United States in 1995, up from $4.41 billion in 1990.

The NFL led at $3.15 billion, followed by college sports at $2.75 billion, the NBA at $2.65 billion, Major League Baseball at $1.85 billion and the NHL at $1 billion.

Big money brings fierce loyalty.

On the victory stand at the Barcelona Olympics to receive his gold medal, Michael Jordan, the ultimate Nike man, draped a U.S. flag over the Reebok logo of the warmup suit that he'd been forced to wear.

This year, the U.S. Olympic Committee is requiring all its athletes to promise they won't hide the Champion logo.

''In our new code of conduct, which every athlete will sign ahead of time or they will not participate in the games, is a section on the official uniform,'' USOC spokesman Mike Moran said. ''It will spell out that you may not alter it or deface it. You may not hide logos or anything.''

But what happens if Michael Johnson, Nike's biggest track and field name, completes his unprecedented 200-meter, 400-meter sweep and emerges as the undisputed star of the Atlanta Games? Will Knight, a track man himself in college, be able to bear to watch Johnson in Champion garb in his moment of triumph on the medal stand?

''We'll see what he wears,'' Knight said, smiling that mischievous Nike smile.

Nike has no aversion to stirring up trouble. By the end of the year, Nike expects to surpass Adidas as the No. 1 sports apparel seller worldwide. But for all its power, it's hard for Nike to shake its rebel roots.

When Cowboys' owner Jerry Jones defied the NFL last fall and signed his own contract with Nike, Knight was on the sidelines at the next Dallas game. That issue remains tied up in a lawsuit between the Cowboys and the NFL.

In the meantime, Nike has signed a contract with the NFL to become one of seven ''Pro-Line'' companies, meaning that four teams, including the Cowboys, will wear Nike uniforms and sideline apparel. It's an example of Nike being both a rebel and a big-time member of the establishment.

''Basically, Nike grew up as an anti-establishment company,'' Knight said. ''Now that we've reached the size and position we have within the sports world, it's still sort of our inclination. But we have to grow up a little bit and play with the establishment powers. I think we're making progress that way.''

At U.S. colleges and universities, Nike is the undisputed powerhouse. It has 200 to 250 colleges under contract for either football, basketball or both.

The deal Mike Krzyzewski of Duke signed with Nike is believed to be the biggest of any coach anywhere. Georgetown's John Thompson sits on Nike's board of directors.

Eleven colleges - Florida State, North Carolina, Miami, Colorado, Illinois, Michigan, Ohio State, Penn State, Oregon, Southern Cal and Alabama - have lucrative ''all-school'' contracts with Nike. Reebok has similar agreements with UCLA, Texas and Wisconsin.

The companies provide shoes and uniforms for all sports and pay the universities millions of dollars. In exchange, Nike and Reebok get worldwide marketing rights to the university's athletic merchandise.

Michigan is second only to Notre Dame in merchandise sales among U.S. universities. Notre Dame handles its own merchandising and has agreements with several companies.

In its deal signed last year, Ohio State will receive an estimated $9.25 million over five years. The university's coaches will divide $725,000 a year and Nike will pay $100,000 per year for marketing and advertising.

''If people could get away from this attitude that Nike is in this to control these universities, they would better understand what these things are all about,'' said Steve Miller, former Kansas State athletic director who is Nike's director of college sports marketing. ''They are outstanding business arrangements where we make money and the universities make money.''

The connections can be traced to the late 1970s, when Sonny Vaccaro, now with Adidas, worked for Nike. Vaccaro, well-connected with basketball coaches, told Knight that if Nike wanted to make its mark in college sports, it should start paying coaches to have their teams wear its shoes.

''What I opened up was a whole new business,'' Vaccaro said. ''That's a fact. Shoe contracts was a whole new industry. In most cases now, the coaches make more from their shoe contracts than their university pays them.''

Eventually, Nike decided it would be better to have an agreement with the entire university than just individual coaches. Most of its new deals with coaches, even for just one sport, are with the university and not the individual.

The only problem with these deals, Vaccaro said, is that none of the money goes to the athletes who are generating it.

''I don't think there's anything wrong with the universities making deals,'' he said. ''I think what's wrong is part of the money should be put in a fund to give to the student athletes when they graduate, and only if they graduate.''

With the endorsement pie being divided into smaller and smaller slices, it can create confusing requirements for the athletes.

Take the U.S. swimmers at the Atlanta Games, for example.

Speedo, the powerhouse in the sport, is the official sponsor of the U.S. Swimming Federation and will provide robes, T-shirts and sweatsuits.

Swimmers also must use Speedo swim caps ''unless they can prove that one cap has an advantage over another,'' said Mike Unger, marketing director for the U.S. Swimming Federation.

Swimsuits and goggles, though, are considered technical equipment, so individual swimmers can wear whatever they want. Most are under contract to Nike, Arena or Speedo.

The logo cannot be larger than 16 square centimeters, but that's big enough for priceless advertising in televised closeups beamed around the world.

If a U.S. swimmer wins a medal, it's time for a quick change to those Champion suits.

''We're told that there will be logo police and they'll be checking it out and you could be thrown out of the Olympic Games if you don't follow the rules,'' Unger said.

Reebok, Nike's biggest U.S. rival, plans to use the Olympics to increase its profile on the world stage. In addition to its shoe deal with the USOC, Reebok has seven national Olympic teams under contract, including Russia.

''We'll surprise a lot of people by the exposure that we'll have at the games, when you think about history,'' said Liz O'Reilly, Reebok's director of global sports marketing. ''In 1988 in Seoul, we may have had about 10 athletes wearing our footwear. In Barcelona, we had the U.S. athletes but that was just on the podium, and we had 200 or 250 athletes wearing our footwear. But in Atlanta, we'll have over 3,000 athletes wearing a combination of Reebok uniforms and footwear.''

Nike estimates that athletes from 44 countries will wear its footwear at the games. Nike sponsors the national track and field teams of the United States and six other countries; the national basketball teams of Croatia and Yugoslavia, among others; and even the national handball teams of Norway and Switzerland.

But Nike's real power is in its contracts with individual Olympic athletes, including Johnson, Gail Devers, Carl Lewis, Sergei Bubka, Scottie Pippen, David Robinson, Penny Hardway and Reggie Miller.

''They own the world,'' Vaccaro said. ''Anything that you're competitive in, they'll just buy it.''

Nike has refused to become an official Olympic sponsor, saying its money is better spent on the athletes themselves, leading to criticism that the company takes advantage of Olympic publicity without supporting the Olympic movement.

''We don't rent an event once every four years,'' said Liz Dolen, Nike's vice president for marketing. ''We're the ones who are there all day, every day, all year, every year.''

Endorsements have become major sources of income for the athletes, sometimes far exceeding what they get from their teams. Shaquille O'Neal is, quite literally, the biggest example.

''Shaq was thought to be making $100 million a year in endorsements before he actually really even played his first game in the pros,'' said Rick Burton, assistant director of the Warsaw School of Sports Marketing at the University of Oregon.

''He came out of LSU and his management group put together packages that had him signing with Pepsi, Reebok, Spalding, Scoreboard, Skybox, Kenner Toys and Tiger Electronics before he even finished his first professional season.''

The NFL has shoe contracts with Nike and Reebok, uniform deals with six companies and sideline apparel contracts with four manufacturers.

Champion, Nike, Reebok, Russell, Starter and Wilson each have specific teams in their uniforms, but all six companies can sell jerseys and other clothing from all 30 NFL teams at retail stores.

Teams have specific deals for caps worn on the sidelines, but each team has 20 exemptions for big-name players who have individual contracts. For example, the 49ers as a team are to wear Reebok caps, but Jerry Rice is a Nike athlete, so he wears a Nike cap. To make matters more confusing, some players are under contract to one company for footwear and another for apparel.

Heaven help the poor equipment manager who has to keep it all straight.

The bottom line is authenticity, to show the world, through a logo subtly but strategically placed, that the brand is so good that it's used by the best.

Many of the products sold at retail are made with cheap labor from Indonesia, China and other parts of Asia.

Knight defends Nike's presence in those lands, saying his company has helped other countries, such as South Korea, develop an industrial base, and is doing the same in Indonesia and China. The money and conditions in Nike factories are far better than the country's average, he said.

''We have thousands of people in lines for the jobs that we have,'' Knight said, ''and they're the best shoe factories in the world, the best conditions.''

Far from being a greedy opportunist on the sports scene, the shoe and apparel industry sees itself as a savior of sports and fitness around the world, growing rich by doing good for humanity.

''That's where we use our power, as a voice for the importance of participation in sports,'' Dolen said. ''In the end, the worst thing people can say about us is that we got more people up off the couch and out to go for a run or shoot some hoops or play some tennis.

''That's our definition of success. Obviously we benefit if more people participate in sports. Is that so wrong?''

End advance for April 13-14