Business of Sport: Nike defining the future of sport

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Roger Federer has been with Nike since 2002.

Nike co-founder Bill Bowerman once said, “if you have a body, you are an athlete” and that statement remains the premise on which the American corporation has built its multi-billion dollar empire.

Forbes magazine ranks Nike as the number one sports brand in the world, valuing its name alone at $26 billion – compared to $7.5 billion in 2007. No matter the economic climate, the controversies that impact sport, and the constantly changing patterns in the market, Nike continues to be a giant that keeps on growing.

In their latest annual report for the fiscal year ending in May 2015, Nike Brand reported revenues of $28.7bn, which reflected a 14 per cent increase, with double-digit growth in North America, both European geographies and China. Revenues for Nike, Inc. rose 10 per cent to $30.6bn.

Nike, Inc. expects revenue to increase 63 per cent to $50bn by 2020, boosted by growth in its e-commerce, women’s and Jordan brand businesses.

“We don’t take anything for granted,” Trevor Edwards, President, Nike Brand, told Sport360° at the Nike Innovation Summit in New York earlier this month.

“One of the clear mantras for our company has always been that we make sure we exist to serve consumers. And to have a reason for consumers to continue to choose us again and again and again actually comes out of great innovation. And our innovation is inspired by the great athletes because they challenge us to not rest on our laurels, to make sure that we are always challenging how we create products; make it new, make it better.

“And I think that that strive actually helps us from a business perspective to continue to connect with consumers.”

The main themes that dominated Nike’s Innovation Summit were personalisation and adaptability – two concepts Edwards believes will “define the future of sport”.

The new Nike+ app that will be launched in June will combine the Nike Training Club, Nike Running Club and retail apps into one.

As for adaptability, Nike has finally created the self-tying shoes with power-operated laces that the world got to see in ‘Back to the Future II’ in 1989. They’re calling it the HyperAdapt 1.0 and plan on releasing it by the holiday season at the end of this year.

It is a big year for Nike and not just because of their new ground-breaking releases. With the Olympics, the European Championships and the Copa America all taking place this summer, Edwards says such events provide a perfect platform for the brand to showcase its innovations to the world.

In football, Nike faces stiff competition from adidas with both brands fighting over global supremacy in the sport.

The 2014 FIFA World Cup provided a valuable launching pad for Nike’s Flyknit with more than a third of the players in the competition choosing to wear the Magista, the brand’s first Flyknit boot, including Mario Gotze, who scored the winning goal in the final.

Nike will be hoping to make further impact in France this summer.

“This summer you have some incredible stages where the great football players will actually be on those stages to play football to the highest. So between the kits that we’re launching as well as the anti-clog product, which has this great traction – because we’ve combined sports and science to actually create material that now prevents mud from clogging the football boots. It’s a big deal,” explains Edwards of Nike’s new anti-clogging technology. “It makes the boots 50 per cent lighter. So we’re super excited about the benefit of that.

“On the other side we’ve created some great uniforms. We’ve got this AeroSwift technology, which is super light, 10 per cent lighter.

“It’s got 50 per cent more stretch in it, so it gives great range of motion and it dries 25 per cent faster, so when you’re playing on the pitch and you’re sweating, it’s actually moving sweat while you’re actually playing. So we’ve got some really great innovations around that time.”

While football is a sport in which Nike faces the toughest competition, Edwards insists there is room for growth in every area and that’s where the Olympics can pay dividends.

“For us, the Olympics is the proving ground for our products, for our performance innovations. So we take this moment very seriously and like the athletes, we’re helping them get prepared for that moment,” he adds.

“At the same time it’s a great energy moment for everybody, because everybody is passionate about sport.

“What we see happen when you come out of an Olympics or even during the Olympics, you’ll see people get out, they want to run more, they want to do things. So we know that we can tap into that collective passion for sport that we see and we provide some of these innovations for everyday athletes.”

In basketball, Nike is unrivalled and owns almost 95 per cent of the footwear market.

But such dominance did not breed complacency as the company inked an eight-year apparel deal with the NBA that will start in the 2017-2018 season – an agreement that is rumoured to be worth $1 billion, which is approximately a 245 per cent annual increase from the previous agreement with adidas.

Through that deal, NBA uniforms will feature a logo for the first time in the league’s 70-year history.

Some questioned whether Nike really needed to invest all that money in a sport it already is a dominant market leader of but Edwards explains the reasoning behind that move, with an eye firmly on horizons beyond the league’s American heartland.

“We’ve obviously worked with the NBA for many many years. And I think one of the reasons the NBA and us thought it would be a great opportunity is that we see the global growth of basketball and the idea that two brands, the NBA and ourselves, could come together to innovate, to actually bring basketball to more people around the world was super exciting for us because more and more people are watching it,” he said.

“If you go to China, that is the number one sport, that is what a lot of young kids play. You’ve also seen the growth in Europe. So the idea that brands together could create something really powerful is amazing.”

In terms of venturing into new markets, Edwards says the main opportunity available in the Middle East is inviting people to participate in sport. Through events like We Run DXB, and through digital platforms like the Nike+ app, the brand can communicate with consumers in the Middle East and gain ground in the region.

Some of Nike’s biggest athletes are heading towards the end of their careers with Kobe Bryant retiring at the end of this season and Roger Federer, while still maintaining his place at the top of tennis, is 34-years-old. Edwards is not concerned about the imminent exit of such superstars from their sports.

“The great thing about sport is that it kind of recycles. There’s always a new person going to come in who wants to beat the goals of somebody else,” said Edwards. “So the idea that there’s a continuous cycle of amazing athletes is something that we live for. We still have young players like Neymar, Eden Hazard, there’s a lot of young players still coming up.

“Some of the more seasoned athletes would join as ambassadors for the brand, they’ll still work with us. Roger is still playing amazing and until somebody stops him, we’re happy for him to keep going.

“Kobe has chosen to retire but his products will still be around and he’s a great athlete in terms of giving us insight about creating products, so we’ll still work with those athletes to help us sharpen and make better products.”

One thing Nike – and sport – cannot escape from is the controversy that comes with athletes committing doping offences.

Nike recently suspended its contract with Maria Sharapova after the Russian tennis ace tested positive for a performance-enhancing drug but the company last year re-signed American sprinter Justin Gatlin, who has received two doping bans in the past.

Nike has, somewhat understandably, received a huge degree of criticism as a result.

“We take everyone by a case-by- case basis. Athletes represent us as people altogether and often there are frailties and we pay attention to that,” explained Edwards. “The thing about sports is that there are rules and there are consequences, and that’s something that’s just in life and we approach it that way.

“We don’t condone the use of performance-enhancing drugs, we have strong beliefs about being ethical in sports and we truly believe in fair play, so the task that we always have is to make sure that sport continues to be energised, that’s what we believe in.”

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Business of Sport: How Omar is helping PES take on FIFA

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Neymar (l) and Omar promote the new game.

Football video gaming is a bipartisan pastime. Two games rule the market and their virtues are extolled and debated by friends, families and colleagues the world over. Bonds have been made, strengthened and even broken over allegiances to FIFA or Pro Evolution Soccer (PES), such is fans’ commitment to their respective franchises.

FIFA fans flock for goal-fests, fast-paced gameplay and the world football naming rights that mean confusion is avoided over teams or players’ real-life equivalents. For those that fell in love with PES though, the realistic build-up play, need to master off the ball movement and players such as Roberto Larlos and Von Mistelroum made it the only game worth playing.

PES swept its counterpart aside for years as gamers fell in love with Konami’s dedication to replicating the beautiful game and its smallest nuances until FIFA upped its game and PES lost sight of what made it such an iconic product with a cult following.

In 2008, Konami did away with some of the best loved features of PES and slow, unresponsive gameplay and a lack of innovations saw users turn their back on the product and move to FIFA.

In 2013 Marc Melton joined the PES family, taking up the role of head of emerging markets at Konami Digital Entertainment. What he found was a once much-loved product desperately in need of a fresh impetus, lagging behind its peers.

“We had a lot of success and I think it’s fair to say that three years ago we dropped the ball on the game,” Melton told Sport360. “We had a difficult challenge but now, as we celebrate 20 years, we again have a critically-acclaimed game that is roundly regarded as better than other games on the market.”

The reviews of PES 2016 and the reaction of fans certainly appear to support Melton’s claims, with the game’s stunning new visuals and fluid gameplay earning widespread acclaim.

One major addition to the game for fans in the Middle East was the first appearance of an Arab superstar on its cover as Al Ain and UAE supremo Omar Abdulrahman shared the spotlight with Barcelona and Brazil superstar Neymar.

The presence of ‘Amoori’ is in keeping with PES’ ambition to showcase and spot the best talent around the world and allow the game to connect with people in each region.

“What we’ve been trying to do is educate the company overall about the opportunity and the cultures across the world so that we can make the best game that appeals properly to each region,” added Melton. “We look at how we can appeal and connect with a passionate football audience, when there are other games available, shall we say, without naming them. We know that, we’re not living in a bubble here.

“PES is a little more aggressive. We feel we are closer to grassroots fans and football fans locally in all markets and part of what we’re trying to do there is connect with people locally and highlighting talent.

“Omar not only represents to the Middle East but the broader audience what we are trying to achieve as a brand. He’s a very skilled, well-loved player who has fans beyond Al Ain and I think with his family heritage from Yemeni descent, through Saudi Arabia and the Emirates helps him connect with the region. We feel Omar is absolutely the right fit while PES is resurgent.

“We’re aware of the parallels between Neymar nominated for the Ballon d’Or and Omar on the shortlist for Asian Player of the Year but there is a reason why brands like PES and Nike value a partnership with Omar because he is the right person for us to represent, not just the Middle East, but to reflect the global interest of football within and outside the Middle East.”

It makes perfect sense that PES would use Omar to front its campaigns and is another feather in the 24-year-old’s cap as one of the most marketable Asia players in history. His face adorns a huge Etisalat billboard on Dubai’s Sheikh Zayed Road and now also fills the stores of malls on the cover of one of the world’s most popular games.

Not only is he on the back of an AGL title-winning season with Al Ain, but he also put himself in the shop window with a superb display in the 2015 Asian Cup which saw the UAE claim third place. It also earned him a new four-year deal with The Boss, worth a reported Dh14 million per year to add to those lucrative sponsorship deals. Abdulrahman’s involvement this year is the beginning of Konami’s wider plan to tap into local markets and give the game an identity that resonates with users in each market.

“I think our relationship with Omar has been very successful,” said Melton. “It’s the first time I’ve been able to secure support for a local endorsement player and I believe for local football it’s been very beneficial for both parties. It’s our ambition, long term, to continue to work with the best partners in the region.”

And with a gaming market worth over $2bn in the MENA region (accounting for 2.19 per cent of the world market according to Newzoo’s ‘2015 Global Games Market Report’), it makes perfect sense for PES to attempt to position itself in one of the world’s most rapidly growing regions.

The Middle East has also long been at the forefront of PES and Konami’s global growth, something that the Omar front cover reinforces. Old Konami arcade games were imported and shipped through the UAE even before the country’s official formation thanks to its position along the trade route that saw the game makers take their products beyond local East Asian shores.

“The Middle East is hugely important because of the passion for football, the love for the competition and the history that we have with the game, from Konami’s Winning Eleven right up to PES,” said Melton.

“A long-time ago, our founder met a collector in the UAE and was buying arcade machines when he was starting out. As a result, that trade partnership between the regions was always very strong and those early versions of the game found a good home of key, big gaming fans who enjoy football and gaming.

“The Middle East is widely regarded as a hugely passionate gaming and football region.”

And while Melton could not share sales figures in the region due to company policy, he did say that Konami “are very happy with numbers on sales and investment”. At the first week of its release in the UK last year, FIFA 16’s sales were down seven per cent on their 2015 game and although it still comfortably outsold PES, the resurgence of Konami’s flagship football title may well have played a role.

It seems that PES is finally back on track and its renaissance is something Abdulrahman will have been at the heart of if sales continue to grow year on year and FIFA’s slow.

“We would be wrong in the past if we hadn’t benchmarked against competitive products, as I’m sure FIFA benchmarked against PES,” Melton added. “We do look over our shoulder, it would be unhealthy not to. But do we look forward? Absolutely, and that’s where the majority of our focus is. The reality is, if you get too obsessed with the competition then you miss out on setting the bar yourselves. “We are competitive but we don’t have a dart board with a FIFA cover on it in the office.”

Either way, it certainly looks like PES have hit the bullseye with their latest product, its place in the hearts of Middle East gamers jolted back into life – thanks in no small part to the association with Abdulrahman.

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Business of Sport: Al Fahim Auto creating sporting synergy

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Use #360business to have your say on this week's feature.

The Abu Dhabi HSBC Golf Championship tees off on Thursday with Mercedes dealership Emirates Motor Company, the flagship of the Al Fahim Group, as official car supplier.

Frank Bernthaler, CEO Automotive of the Al Fahim Group spoke to Sport360 editor Steve McKenlay about the sponsorship and why the group is aligning itself with more sporting events in the capital.

Why have you got involved in the Abu Dhabi HSBC Golf Championship?

Well, first of all because of our strategic partnership with the Abu Dhabi Sports Council which is now going into its second year. The first year was about discovering what we could do together, and learning from each other. We looked at a couple of events that we could possibly get involved in and decided to go for cycling with the Abu Dhabi Tour. This is not a sport we might usually look at but again, the ADSC is growing, as are we, and it was a good opportunity for us to do something as a sponsor and also as a corporate social responsibility action. They want to grow in Abu Dhabi and we are an Abu Dhabi-based company so it was a good fit and it was successful, from what we have seen.

Obviously, the HSBC Abu Dhabi Golf Championship is a different beast. I consider it the best of the European Tour tournaments in the region. The field is by far the best and when you look at the golf village and the way the tournament is organised it is first class.

The main reason, I guess, is because 60,000 plus people come over for four days and we know from the statistics of the past years that there are many people coming that are not on our radar yet. Western expats, who we have not really catered for in the past, Asian expats and some Arab expats so this is very interesting for us.

All the activations we are going to do is going to be focused on promoting the brand, our products and making sure that everybody understands that Emirates Motor Company is part of the Al Fahim Group. But also to support the tournament per se so that more people come than last year.

At Mercedes our claim is ‘the best or nothing’ and I am 100 per cent convinced that partnering up with this golf tournament which is the best you can get in golf in the Middle East is a perfect fit.

I was one of the key players when Mercedes-Benz associated itself with the Desert Classic so I know what a golf tournament can do for your brand. At that time it put Mercedes on the sports map in Dubai because before that it was BMW with golf, Audi with tennis and Mercedes nowhere. At the end of the day BMW dropped out and it took us four to six weeks to put our deal together with all the logistics and approvals you have to get.

al-fahim-business-of-sport-360-automobiles-cars

When you decide to get involved in big international sporting events like this do you need the approval of Mercedes HQ?
No, we inform them and make sure we follow the guidelines. Obviously, we would hope for a contribution, maybe financially, because of the huge TV coverage these events get, particularly in Asia, so the value for Mercedes-Benz as a brand is huge. They supported the Desert Classic in the beginning, but right now they are not supporting us but what we wanted was to convince them that this is the right thing to do. I am hoping we can enhance our activations with some of the other big golf tournaments Mercedes sponsor like the Masters, the Open and PGA Championship.

Is the main reason for using sport to increase the awareness of your brand the fact that it gives you access to a young audience and therefore customers of the future?
You have to understand that our customer base here is younger anyway. We have 18 and 20-year-olds driving AMG cars. Normally the average age of an AMG driver is 50 plus or something like that. The average age of a Mercedes driver here in the region is 10 years less than it is in Europe.

That’s because it is a younger society here. Here you don’t see old people, and by that I mean 70 and 80-year-olds, walking on the streets like you do in Germany and the rest of Europe. We probably in the past did not have offers in place, like leasing or other good finance deals, or maybe we did not have the right product. Right now, Mercedes has the best product line ever and the entry point for the brand is lower so you can cater for the younger people. That is the message we want to get across.

Do you think your association with golf and other sports will persuade drivers of other brands to switch to Mercedes?
Yes, I think that will happen but only if we create the awareness. People think that everybody knows Mercedes but the car doesn’t sell by itself because the competition doesn’t sleep and secondly, I am not sure we have the awareness that we have an A-Class, a CLA or GLE or the largest SUV range of all luxury manufacturers. So an event like the Abu Dhabi HSBC Golf Championship gives us that exposure. It enables us to interact with the customers, talk to them and help them understand our products and what we are doing.

One of our activities at the event is to raffle a car which is something that has not been done before because we want to drive people into our showroom, not necessarily to buy but to create the awareness of our products. And I am sure we will succeed in that.

What would you say is the biggest plus of being the official car supplier to this tournament?
There are so many benefits to us but it is being associated with such a first class event. You talk about the Abu Dhabi Sports Council, you talk about all the other sponsors and you feel they are all leaders – first class brands and I have to say not too many tournaments can make that claim.

Did you sponsor the Abu Dhabi Tour cycling event because it is a growing sport in the region?
Yes, that was one of the reasons but it’s not only cycling. Sport in general is growing, particularly sport for the masses. In the case of the Abu Dhabi Tour the country is creating a sporting opportunity for the masses on a bike.

Where else in the world can you ride a bike on a Formula One track, like you can in Abu Dhabi every week, except when it is too hot? Even the leaders in Abu Dhabi are cycling which, for us, is very interesting. The people who cycle usually buy expensive bikes which makes them potential customers because that means they are also likely to buy our cars. I know the Abu Dhabi Sports Council has big plans for the cycling so for us to be associated with something that is successful is great.

Why is social responsibility important to you?
This is to do with the Al Fahim family and being embedded in the society of Abu Dhabi, not only in sport but in many other areas. What we are trying to do is find a good combination so we are not doing things just because of corporate social responsibility. We are always looking for a good synergy. If we support the sports council in an event it is because we believe in what Abu Dhabi and the ADSC is doing in trying to get more Emiratis active in sports but on the other hand I am also looking on the commercial side – to whom are we talking? Is there a synergy? If these two are good and the deal is good then we go for it.

Al Fahim Group sponsorship

  • 7 year partnership with Al Ain Equestrian, Shooting and Golf Club
  • Handicap Shooting World Tournament
  • Group63 drag race at Yas Marina Circuit
  • Jeep SRT drag racing

Are there any other sports in Abu Dhabi you might sponsor?
We are looking at the Abu Dhabi Community Run which is great for us and we will be encouraging our employees to participate. Maybe one day there will be an Abu Dhabi Marathon like the Dubai Marathon. I wouldn’t be surprised if that happened. We are also talking about possibly sponsoring the Abu Dhabi International Triathlon but we have nothing concrete at the moment. It is something we would like to sponsor.

How does your company benefit from the Abu Dhabi Grand Prix and the fact that Mercedes are currently dominant?
As long as Mercedes keep winning it brings tangible benefits when the grand prix comes to Abu Dhabi. It gets people talking and we have the two drivers in the showroom at least for a couple of hours. The fact that we can talk about the winning team within a very successful business helps. But this is only occasional because during the four years of Red Bull dominance we could not talk about Mercedes success. However, we can always talk about motorsport in general because it is part of the Mercedes DNA and you can see that in our AMG cars. More than 40 per cent of our product offerings is AMG and that means motorsport and racing. That is why it is natural for us be associated with Abu Dhabi motorsport and we are very active at Yas Marina Circuit. We are trying to increase that activity and I hope that soon every AMG customer from EMC will have the possibility to go to Yas and test their cars there in a race environment and in that way you can bring F1 to reality for everybody.

How did you fare in challenging 2015 trading conditions?
We have sold more cars than last year. We grew our sales business by 8.3 per cent. That is a combination of Mercedes-Benz cars, commercial vehicles, Fiat and Jeep. The lowest growth rate we had on Mercedes cars was slightly shy of three per cent. But the overall market declined by between five and 10 per cent. So we have grown our business in a tough environment.

Importantly, we don’t sit on massive stocks so we are not forced to do deals just to get rid of cars and create cash. We are in a healthy business position and not too many competitors can say that.

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