When Doping Delivers – US Postal Service & Lance Armstrong 12th August, 2015

Following the fallout from the recent athletics doping scandal brought to the fore by The Times & German broadcaster ARD last week, this is an opportune time to look at one of the biggest and divisive scandals in sport. The continuing battle between Lance Armstrong and one of his prime sponsors, the US Postal Service.

The US Postal Service was a long term sponsor of Lance Armstrong’s cycling team, partnering from 1998 to the 2004 season. The US Postal Service paid $40 million in rights fees across the 6 year term with around $18 million received by Armstrong himself.

In the wake of Lance Armstrong’s sensational doping confession in 2013 the US Government are seeking damages of over $100 million under the False Claims Act as it was sold on the notion Armstrong competed as a ‘clean’ rider. In the blog Enter at Your Own Peril, Slingshot Sponsorship previously explored the facets that affect a sponsor when the rights holder is involved in controversy, however the current case has highlighted another valuable point of discussion.

The interesting development within the Armstrong vs. U.S.P.S. case is the comment from Armstrong’s legal team that the US Postal Service “got exactly what it bargained for, including tens of millions of dollars’ worth of publicity, exposure to more than 30 million spectators at international cycling events, and hundreds of hours of television coverage”.

Herein lies an interesting argument. The US Postal Service did indeed ‘get what it paid for’ with studies stating it received at least $139 million in worldwide brand exposure in four years. Bolstering this, in a document for a 2003 Postal Service news conference the Postal Service described the sponsorship as “may be one of the most effective public relations ventures the Postal Service, and for that matter, any other global service agency, has ever undertaken”.

The argument posed by the defending council is during the sponsorship of the team the US Postal Service reached its objective of overhauling the stereotypes of the postal workers, increasing brand exposure and driving sales and that the current revelations had no hand in the effectiveness of that partnership.

If the US Postal Service reached its outlined goals it would seem contrived to seek fiscal compensation over a decade after the sponsorship ended. With the battle still rumbling on in the courts only time will tell what the Federal Judge will decide.

Michael Jordan: The Original Brand Ambassador! 25th February, 2013

On February 17th 2013 Michael Jordan, one of sport’s great personalities, turned 50. Not only is ‘Mike’ a sports legend but also the face of arguably the most successful brand endorsement deal of all time. Due to the recent headlines involving sports stars such as Oscar Pistorius and Lance Armstrong the value of brand ambassadors is being questioned more than ever (see Mark Mylam’s blog). Michael Jordan’s sponsorship deal with Nike however, proves what kind of positive impact such an agreement can have for both the brand and the celebrity. Let’s recap this incomparable success story:

“The 1984 Olympics was Michael Jordan’s coming out party” describes his agent David Falk. Up until this point Michael Jordan had not even played a single game in the NBA and yet at the time top three major basketball shoe brands Adidas, Converse and Nike were after him. Before his NBA career even started Jordan already knew who he wanted to partner with – Adidas. The German sports brand and Converse were the leading shoe suppliers for the NBA stars in the mid and late 80’s. Michael Jordan himself had never worn any Nike basketball shoes before and was convinced by the quality of Adidas’ products but the first brand that Michael Jordan met with was Converse. During this pitch Jordan mentioned his worries about the endorsement deals that Converse already had in place with superstars like Magic Johnson or Larry Bird and asked: “With all these stars, where do I fit into the conversation?” John O’Neil, the president of Converse, took that question and replied: “We’ll treat you like all our other superstars.” This is obviously not the answer that the upcoming star wanted to hear and the $100,000 per year that Converse offered him could not change his mind either.

The next invitation that Michael Jordan received was from Nike, however he was not interested in what they had to tell him and declined this invitation at first. In the end it was Jordan’s mother who convinced him to at least listen to what Nike had to offer so he took the plane and the rest, as they say, is history. Nike  decided to spend all of its marketing budget on Jordan and offered him a five-year deal worth $500,000 annually plus royalties; five times as much as any other NBA superstar was receiving at the time. It wasn’t only the sound of the money that made Nike suddenly attractive to Jordan: Nike offered Jordan his own signature shoe line. This is the kind of special treatment that Converse didn’t offer Michael and as a result they were out of the running.

However Adidas was still in the race – Jordan’s “favourite shoe”. If Adidas could have matched what Nike put on the table then Michael would have teamed up with the German brand. However Adidas missed out on this opportunity and this mistake became known as one of the worst business decisions in the last 50 years. “They didn’t feel it was worth it,” said Jordan. “Which in hindsight is perfect for me, because it made my decision much easier. And I ended up with Nike, and it became a great relationship.”

The Jordan brand was born (with the jumpman logo appearing in 1987). Since 1984 Nike’s subsidiary coproduced 27 basketball shoes with Michael Jordan. Last year, the U.S. Jordan Brand sneaker business alone had $1.25 billion in wholesale revenue. Although Michael Jordan himself isn’t playing anymore there are still active NBA players (Carmelo Anthony, Blake Griffin, Chris Paul etc.) acting as Air Jordan ambassadors and supporting the brand’s huge success within the basketball industry. Whereas in the mid and late 80’s Converse and adidas were dominating the U.S. basketball shoe market, 30 years later it is the Jordan brand that is controlling 58% of it, followed by its parent company Nike (34%), adidas (5.5%), Reebok (1.6%) and Under Armour (0.6%).

Michael Jordan himself is still earning more than $80 million per year through corporate sponsorship deals and the majority of this income is related to his partnership with Nike. The current details of this deal are a well kept secret but royalties now generate more than $60 million annually for MJ, according to a Forbes article.

You can buy yourself a lot of nice Birthday presents with that amount of money – Congratulations Michael! But also, congratulations Nike!