As Nike stock rises, fate of NFL partnership unclear

It has been two weeks since Labor Day weekend when Nike announced its 30th Anniversary ad campaign starring Colin Kaepernick. It was a risky partnership as it appeared Nike, one of the NFL’s largest and most lucrative licensing partners, took sides in the Kap v NFL protest controversy. The immediate backlash consisted of Nike customers burning their shoes or cutting the swoosh out of their socks and gym shorts, and trending hashtags like #JustBurnIt.

Nike, generating more than $36 billion in global revenue this year alone, certainly would have done its homework before signing on Kaepernick to its ad campaign and risking its position as the world’s largest athletic apparel provider. Nike undoubtedly knew there would be backlash over the campaign and would not have signed Kaepernick if it did not project long-term success and increased sales.

That long-term success is already beginning to manifest. Two weeks ago, when the news about the campaign broke, Nike stock dropped 3.9% when markets opened. But yesterday, when the stock market closed, Nike finished at $83.49, an all-time high for the company.

Although sales and stocks may rise, Nike is jeopardizing its lucrative partnership with the NFL. In March the NFL and Nike signed an 8-year extension on their current partnership agreement. When asked if Nike cleared it with the NFL prior to signing Kaepernick, Nike stated, “Nike has a longstanding relationship with the NFL and works extensively with the league on all campaigns that use current NFL players and its marks. Colin is not currently employed by an NFL team and has no contractual obligation to the NFL”. i.e., no Nike did not give the NFL a heads up.

Nike likely believes one of two things: (1) the NFL is unable to get out of their Nike deal and seek out a new on-field provider or (2) believes even if they lose the NFL deal, the increased sales caused by the ad campaign will make up for losing the NFL deal.

If Nike believes the NFL is contractually obligated to stick with them, that confidence may be misplaced. Sponsorship deals and license agreements commonly have what are known as “good-faith” clauses. These clauses essentially say, even if the other party fulfills their contractual obligations, we can still get out of this deal if they do not act in good faith in fulfilling those obligations. Not acting in good faith could mean a number of things, including signing a sponsored athlete as polarizing as Colin Kaepernick that has both sides of the protest debate angry at the NFL for not resolving the matter and doing so without even giving their NFL partners a courtesy heads-up.

It remains to be seen if the NFL will try to get out of its Nike deal, but look for Nike’s competitors like Under Armour to try and woo the NFL away when the Nike deal expires. Their job shouldn’t be too hard. For now, Nike’s other sponsor athletes are loving the stock market.

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