The Sporting Goods and

1

• The Sporting Goods and
• Licensed Products Industries
• Chapter 18

2
Introduction

• Triple commodity nature
• The activity or game form
• The service
• The goods
• Encompasses equipment, apparel, and footwear.
• Licensed products are specialized subset of
  industry.
• Sales revenues in the billions of dollars
  worldwide.

3
History Sporting Goods

• Early entrepreneurs in the sport industry created
  ideas for better uses of existing technology.
• 1811 George Tryon, gunsmith, carved out niche
  with people interested in sports expanded into
  fishing tackle business.
• Tyron became major sporting good wholesaler east
  of the Mississippi River.
• 18401850s Michael Phelan and John Brunswick
  established production of billiards equipment.
• 1888 Rawlings began operations in St. Louis.

4
History Sporting Goods (cont.)

• A. J. Spalding
• Created sporting goods manufacturing giant based
  on selling to expanding American middle class
• Adopted technological advances for manufacturing
• Created and fostered markets for products
• Produced guides on how to play/exercise and
  promoted grassroots sport competitions

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History Sporting Goods (cont.)

• Gained credibility with consumers by claiming
  official supplier status with baseballs National
  League
• Created profitable distribution system
• Company sold directly to retailers at a set price
  with the guarantee that retailers would sell at a
  price that Spalding set.
• Created stable markets for Spalding goods and
  eliminated price cutting at the retail level

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History Sporting Goods (cont.)

• 1906 The Sports and Fitness Industry Association
  (SFIA, formerly the Sporting Goods Manufacturers
  Association) was founded as intercollegiate
  football leaders and athletic equipment
  manufacturers sought to make the sport safer.
• 1920s Knute Rockne, Honus Wagner, and Nap Lajoie
  began to endorse sporting goods products.
• 1950s After Korean War, spending on sporting
  goods increased.
• 1960s Imported products arrived in greater
  numbers in American market.
• 1970s Increased recognition of product liability
  and injuries associated with sports equipment.
• 1980s1990s Growth as products and consumer
  demographics became more diverse.

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History Sporting Goods (cont.)

• Adidas and Puma
• Founded in the 1920s by Adolph Adi Dassler
  (from whose name the companys would derive) from
  a family shoe business.
• Success through production of soccer cleats and
  track spikes.
• Dassler established brand equity by convincing
  U.S. track star Jesse Owens to wear his spikes in
  the 1936 Berlin Summer Games.
• Rudolf Dassler (Adis brother) founded Puma after
  a falling out between the two brothers.
• The two companies compete for international
  market share, with Adidas holding an advantage
  because of its relationship with FIFA.

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History Sporting Goods (cont.)

• Nike and Reebok
• Nike began as an offshoot of Blue Ribbon Sports.
• 1980 Nike revenue reaches 269 million a year,
  and replaced Adidas as the United States top
  sneaker.
• 1986 Nike temporarily lost its top ranking to
  Reebok.
• Late 1980s The advent of the Air Jordan and
  Bo Knows marketing campaigns propelled Nike
  back to the top of the industry.
• 2005 Competition trying to catch up
• Adidas bought Reebok for 3.8 billion in 2005.
• 2012 Fiscal Revenues 24.1 billion

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History Sporting Goods (cont.)

• Licensed products
• Licensed apparel
• Based on notion that fans will purchase goods to
  draw them closer to their beloved organizations
  and athletes
• 1947 University of Oregon allowed to use
  Disneys Donald Duck image for the universitys
  mascot.
• 1973 UCLA credited with being first school to
  enter into a licensing agreement.
• 1975 NCAA formed its properties division to
  license championship merchandise.
• 1983 Notre Dame creates licensing program.

10
History Sporting Goods (cont.)

• Pro sports licensing
• For-profit branch of the league is referred to as
  a properties division.
• 1963 NFL was the first professional league to
  develop a properties component under Commissioner
  Pete Rozelle.
• 1966 MLB creates properties division.
• 1969 NHL creates properties division.
• 1982 NBA creates properties division.
• Properties divisions approve licensees, police
  trademark infringement, and distribute licensing
  revenues equally among league franchises.
• Players associations also administer licensing
  programs.

11
Industry Structure

• Sporting goods
• Industry Manufacturers of sporting goods
  equipment, athletic footwear, sports apparel, and
  accessory items to the sport and recreation
  market
• Trade associations
• SFIA Trade association for manufacturers,
  producers, and distributors of sport apparel,
  athletic footwear, and sporting goods equipment
• The industry employs more than 375,000 people and
  generates 77 billion in domestic revenue
  wholesale sales (SFIA, 2013)

12
Industry Structure Licensing

• Manufacturers of licensed products (licensees)
  pay teams and leagues (licensors) for the right
  to manufacture products bearing team and school
  names, nicknames, colors, and logos.
• Enables schools and teams to generate brand
  recognition and interest and to increase revenues
  with very little financial risk.
• Licensees assume the risk by manufacturing the
  product and paying fee to the licensor (royalty)
  for the use of trademarks on products.

13
Industry Structure Trademarks

• What is a trademark?
• A trademark is defined under the Federal
  Trademark Act of 1946, commonly referred to as
  the Lanham Act, as any word, name, symbol, or
  device or combination thereof adopted and used by
  a manufacturer or merchant to identify his goods
  and distinguish them from those manufactured or
  sold by others (Lanham Act, 15 U.S.C.
  10511127, 1946, p. 1).

14
Industry Structure Royalty Fees

• Royalty fees generally range from 4 (for toys
  and games) to 20 (for trading cards and video
  games) and are based on gross sales at wholesale
  costs.
• The royalty rates for teams and leagues vary,
  ranging from 8 to 20, with the majority at
  around 12 (Licensed Sports, 2012).

15
Industry Structure Collegiate Sport

• Some NCAA Division I-A schools administer their
  own licensing programs.
• Schools can retain a greater portion of sales
  revenues.
• The Collegiate Licensing Company (CLC), was
  formed in 1981, and was recently purchased by
  sport marketing company IMG.
• Now known as IMG College, it articulates
  licensing agreements on behalf of approximately
  200 colleges and universities, bowls,
  conferences, the Heisman Trophy, and the NCAA.
• Client colleges pay a portion of the royalties
  (usually 50) to CLC for its efforts.

16
Career Opportunities

• Opportunities range from entrepreneurs with an
  idea for a specific product or store to
  employment with firms such as Callaway, Russell,
  UnderArmour, or New Balance, as well as sporting
  goods stores, such as Champs Sports or Dicks.
• Within large companies, such as footwear and
  apparel manufacturer New Balance, there are
  divisions for each product line, such as
  basketball, tennis, cross-training/fitness, and
  children.
• Licensing industry Employment with league
  licensing departments, collegiate licensing
  offices, and licensees, as well as with retail
  sales outlets and product manufacturers.

17
Management

• Rapid change is the rule in the sporting goods
  and licensed products industries.
• Intense competition and new performance
  standards.
• Quality, speed and flexibility, innovation, and
  sustainable growth
• Innovation is a key performance standard
  affecting sporting goods and licensed products.
• Topps digital initiatives
• Under Armour Dri Fit products

18
Marketing

• Expert usage helps overcome the risk factors
  customers assess when deciding on a purchase.
• Huge investments into star athletes.
• Endorsement relationships work for lower-profile
  players.
• Professional golfers and their selection of
  on-course apparel for competitions.

19
Challenges of Creating Brand

• A brands image is the cumulative impact of all
  the associations with a particular brand.
• Creating a distinct identity
• Includes logos, players, traditions, facilities,
  rivalries and ownerships
• Difficult when in an industry with established
  brands, like Nike or Adidas
• Li-Ning in China Battling Nike and Adidas for
  market share, and using American athletes such as
  Dwayne Wade to endorse products

20
Ethics

• One of the most basic forms of global involvement
  occurs when a business turns to a foreign company
  to manufacture one or more of its products,
  called global sourcing.
• Takes advantage of manufacturing expertise or
  lower wage rates in foreign countries.
• Sport apparel and shoe manufacturers have come
  under fire for paying unfair low wages and
  supplying unsafe working conditions in their
  overseas operations.
• Industry giants Adidas, Nike, and Puma have been
  universally and repeatedly criticized for paying
  low wages and treating workers poorly.

21
Finance NFL and Nike

• In 2012, the NFL chose to work with Nike to
  produce its uniforms and on-field apparel for the
  next 5 years.
• The NFL is looking to capitalize on Nikes
  position as a market leader to help promote its
  brand.
• Nike is looking to capitalize on the most popular
  professional sport league in the United States.
• 2012 New uniforms did not create significant
  buzz.

22
Legal

• 2000 American Needle sued NFL on antitrust
  grounds after NFL signed exclusive deal with
  Reebok and immediately raised prices.
• 2008 Court found in favor of NFL as single
  entity but both sides appealed to Supreme Court.
• 2010 Supreme Court ruled NFL was not single
  entity and case must be remanded in lower courts.
• Still to be determined Whether the NFLs
  licensing practices harmed competition.

23
Summary

• Sporting goods and licensed products represent
  two growing and expanding segments of the sport
  industry.
• Individuals are needed to work in many capacities
  in both the sporting goods and licensed products
  industries.