The Sporting
Goods and
Licensed
Products
Industries
Chapter 18
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.
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.
• 1840–1850s: Michael Phelan and John Brunswick
established production of billiards equipment.
• 1888: Rawlings began operations in St. Louis.
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
History: Sporting Goods (cont.)
– Gained credibility with consumers by claiming
official supplier status with baseball’s 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
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.
• 1980s–1990s: Growth as products and consumer
demographics became more diverse.
History: Sporting Goods (cont.)
• Adidas and Puma
– Founded in the 1920s by Adolph “Adi” Dassler (from whose
name the company’s 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 (Adi’s 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.
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
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 Disney’s
Donald Duck image for the university’s 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.
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.
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)
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.
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. § 1051–1127, 1946, p. 1).
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).
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.
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 Dick’s.
• Within large companies, such as footwear and apparel
manufacturer New Balance, there are divisions for each
product line, such as basketball, tennis, crosstraining/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.
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
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 oncourse apparel for competitions.
Challenges of Creating Brand
• A brand’s 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
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.
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 Nike’s 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”.
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 NFL’s licensing
practices harmed competition.
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.