"Will Adidas+Reebok Be Able To Rebound?"

The story which I found to be one of the biggest sports business stories of the decade is about the world’s second and third biggest sporting goods companies, Reebok and Adidas, respectively, lacing up to run with the #1 big dog, Nike, in an attempt to become “king of the hill in the world of sports shoes and apparel!”  (Howard, T. 2005)

In August 2005, the CEO of Adidas, Herbert Hainer, announced the deal to merge the two companies in a cash transaction buyout of Reebok’s stock, which included the 17% stake held by founder, Paul Fireman.  Hainer believed this would help Adidas to take on Nike, the number one sporting-goods brand, while giving Adidas a stronger presence in North America, and Reebok, who had a strong presence in the United Kingdom, a stronger presence on the global stage.

As reported in the CNBC video, 10 Years in the Making, under the “hit or miss” category, the decision of Adidas to acquire Reebok for an estimated $3.8 billion is considered one of the big misses. The goal was to become a big challenger to Nike; however, it actually made both brands weaker.  When Adidas bought Reebok, Adidas had a 10% share of the market and Reebok had an 8% share, now it is reported that Adidas has a 6% share and Reebok has a 2% share.

Although it was previously believed that Reebok was “on the rebound” with the “toning shoes”, which Reebok claimed “wear a pair of shoes to burn more calories and tone muscles better”, unfortunately, it was the focus of an investigation and class action lawsuit. The Federal Trade Commission (FTC) is cracking down on the company for alleged false claims.  As of September 29, 2011, the FTC has announced it was settling a class action lawsuit for $25 million with Reebok and creating a fund to refund customers.  

What Adidas has discovered is that although Reebok had NBA and NFL marketing deals, they had no proprietary assets.  Consequently, this decline is in large part due to the NFL announcement in October 2010 that Nike would be the official uniform provider of the NFL beginning in April 2012.  According to CNBC’s Sports Business Reporter, Darren Rovell, “As CNBC reported Monday, Nike will produce all on-field apparel including game uniforms and base layer, as well as sideline personnel apparel and fan gear.” The Reebok $300 million deal with the NFL will expire before the 2012 season.

Is Adidas+Reebok able to rebound?  Stay tuned!  The game is not over yet!!

Reebok still has a 10-year agreement that went into full effect with the 2004-05 season with the National Basketball Association (NBA), which also applies to all Women's National Basketball Association (WNBA) teams, teams in NBA's development league, and includes, with limited exceptions, exclusive rights for Reebok to design, manufacture, sell and market licensed merchandise headwear, T-shirts, fleece and other apparel.   Additionally, beginning with the 2006-07 season, Adidas was able to get its name on NBA apparel, including team warm-ups, by signing an 11-year global merchandising marketing deal.  Now that’s a slam dunk!!

Nike (Greek Goddess Victory) remains #1 and “king of the hill in the world of sports shoes and apparel!”  I would suggest that maybe Adidas+Reebok should change it’s name to Adonis (Deity of Greek Mythology) ~ handsome god of desire and manly good looks who died, but was reborn.  That indeed would be interesting to see the two Greek deities battle it out ~ or merge to be known as the world’s greatest love affair.  Hmmm…..now that’s a thought!!

RESOURCES

http://www.usatoday.com/money/industries/manufacturing/2005-08-02-adidas-usat_x.htm

http://video.cnbc.com/gallery/?video=1368367744

http://www.cnbc.com/id/35687695/Reebok_Finally_On_The_Rebound

http://www.cnbc.com/id/39632866/Nike_Will_Have_Exclusive_NFL_Apparel_Rights

http://www.benmautner.com/widerangle/2005/08/adidas-bought-reebok.html

http://www.businessweek.com/the_thread/brandnewday/archives/2006/04/adidas_spends_big_with_nba.html

SHAWN RESPERT, MULTI-TALENTED FORMER PROFESSIONAL ATHLETE!!! LIFE AFTER BASKETBALL~

I had the distinct honor and pleasure to meet and speak with former NBA player, Shawn Respert, at the Houston National Golf Club in Houston, Texas.  Although he is an avid golfer, he was a former Michigan State University basketball star, and also obtained his Bachelor of Science degree in Communications.  In addition to his life experiences and specialties, his impressive list of accomplishments include Assistant Basketball Coach at Prairie View A&M University, Director of Basketball Operations at Rice University, Manager of Player Development with the NBA and currently Director of Basketball Operations at the NBA/Houston Rockets. 

Whether he is negotiating a new contract for himself or for one of his long list of athletes that he has helped to develop, there is a sincere appreciation for his impressive list of accomplishments.  Shawn has expertise in evaluating an athlete’s basketball skill sets, which includes identifying areas of strengths & weaknesses, and creating a workable plan to promote growth and development in the areas of concern for both professional athletes and basketball franchises.  While his experience in the sports industry includes helping to educate and manage the careers of professional basketball players, Shawn believes that the most important aspect is the “overall development” of the athlete.  Therefore, he is acutely aware of the importance of building and maintaining relationships created between the players and the business operations. 

Among the core focuses of our discussion was leverage and power.  Shawn is currently in the final month of his 3-year contract with the Houston Rockets, but he continues to leverage his status and roles in the industry to negotiate a new contract with three other prospective NBA franchises.  Although he has to contend with the NBA lockout for the 2011-12 season currently underway, he remains confident that there will always be a market for the assets he provides to the sports industry.

Shawn explained to me that when under a contract and before a negotiation can take place, other teams seeking to hire new top staff members must communicate and get permission from the front office executives of the team where the prospective candidate or athlete is currently employed before they are able to recruit and negotiate terms of a contract.  To communicate without the expressed permission of the league is considered “tampering”, which is a direct violation of the rules.  Because the NBA tries to maintain “the appearance” of an even leveled playing field, especially when it comes to recruiting top employees and players, no team should have a clear advantage over another team.

An example of tampering that he cited was in 2003, the Cleveland Cavaliers (CC) were heavily fined because it was alleged that former head coach, John Lucas, encouraged his scouts to recruit LeBron James, a high school athlete from Akron, OH, and allowed him to workout in open gym at the CC facilities.   Although this action was at a time when recruiting and drafting high school athletes was allowed, it created the appearance of an uneven playing field.  Shawn stated, “as long as he was just out looking, it was ok, but to have actually invited him to workout in the CC facilities was considered “crossing the lines”!!”

According to most, LeBron was arguably the #1 pick that year and CC happened to have the worse stats in the NBA, which placed them in a position to have the most balls in the lottery. It worked!! They were awarded the 1^st draft pick option, and hence, LeBron James became a Cleveland Cavalier.  After an extensive investigation, it was concluded that there was sufficient evidence to support their claims of tampering and they were heavily fined $750,000.

Shawn also explained that because there are some very restrictive rules associated with basketball negotiations that carry very stiff penalties for violations, it does not matter whether it is prospective players or front office staff candidates, it is better to do your research, know the rules, and get the required permission before beginning any negotiations, especially when you are under an active contract.

I truly enjoyed my very first golfing experience and informative conversation with such a multi-talented, well-spoken and well-rounded sport’s professional that is actively making a difference in the industry.

For more information on Shawn's life experiences and impressive career, check out:

SHAWN RESPERT GOES OFF......
RICE OWLS 

CANCER SURVIVOR