The NFL and Reebok International Ltd. yesterday reached a massive 10-year merchandising deal that will put every team in Reebok-made uniforms by 2002.
The deal, worth in excess of $250 million, quickly gives the shoe manufacturer a dominant position in a business worth $3 billion annually in the U.S. while allowing the NFL much greater control over its far-flung apparel sales.
Over the past year, the NFL has worked hard to take a more hands-on role in its business functions, ranging from stadium development to its Internet activities. This latest deal, which will supplant contracts with Reebok rivals Nike, Puma and Adidas, fits squarely within the newly aggressive approach.
“We felt our historic business model in the apparel area was outdated, that it left us with too passive a role relative to quality, relative to fashion, relative to fitness and lifestyle serving the fans across the board” said NFL commissioner Paul Tagliabue.
Reebok will supply uniforms, practice and sideline gear for 20 teams next year and all 32 teams for the seasons of 2002 through 2010. The company also will make all of the popular Pro Line authentic merchandise sold to fans and greatly expand apparel offerings to women, children and fitness enthusiasts.
Sales of NFL-logoed merchandise easily top those of any other U.S. pro league or the NCAA. But the business has been stagnant for several years, and many large retailers have decreased floor space devoted to replica jerseys, T-shirts and similar gear.
“We were lacking a real vision. We were not creating exciting products. We were far too tied to replicas and what was on the field,” Tagliabue said.
The Reebok-NFL deal also gives the league an option to turn the deal into a new joint venture company in which both would own stock. To help make room within the marketplace for Reebok, Tagliabue also said the league’s total number of licensees will decrease from about 300 to less than 150. By dealing with fewer companies, the NFL also will have far greater leverage to negotiate better margins and higher quality control.
“[This deal] sets a trend and a declaration for what can and will be the fashion of the future for sportswear,” said Reebok chairman Paul Fireman.
Reebok’s U.S. shares closed yesterday at $23.09 on the New York Stock Exchange, up 25 cents. Reebok stock, while still less than half its levels in 1997, has risen by more than a third since rumors of the NFL deal began swirling in late October.
The NFL’s wholesale revenues from the deal will be split evenly among the teams, following decades of league practice. The league, however, is also working on a new provision to its merchandising policy to allow teams to control where Pro Line gear is retailed within their own markets.
By allowing teams to act as local wholesalers for the high-end merchandise, sales in part would be driven to their own in-house retail operations, where teams are allowed to keep all revenues from the retail markups.
Dallas owner Jerry Jones is a key proponent of the idea, with Washington owner Dan Snyder also believed to be interested. Ratification of the plan could come within weeks.
Thirty NFL teams, including Washington and Baltimore, approved the Reebok deal. Miami abstained from the vote, and Oakland owner Al Davis dissented.