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Nike agreed to pay the $410,000 fine for Air Jordan 1’s NBA uniform violation and cleverly took it as a bold marketing opportunity. The tagline “NBA cannot stop you” led to the rise of the shoe’s popularity among its fans
Nike offered Michael Jordan a five-year contract worth $500,000 per year, which included stock options and other benefits. If all the benefits were added, the total amount reached $7 million. (PTI/File)
In the 1970s, Adidas sneakers were dominating streets and playgrounds alike. The brand reigned supreme, facing no significant competition. However, a misstep would cost Adidas its throne, allowing a then-small company, Nike, to seize the crown. Today, Nike’s market cap dwarfs Adidas’s, standing at three times the size. The story of this remarkable turnaround and the events that unfolded is a captivating tale worth exploring.
During the same decade, Nike Inc., formerly known as Blue Ribbon Sports, was manufacturing track sports shoes. The company’s launch of a shoe with a “waffle pattern” sole design became popular among track athletes, bolstering Nike’s reputation in the sport. However, the basketball market remained dominated by Adidas and Converse.
Nike’s sales experienced rapid growth throughout the 1970s. From a starting point of $28.7 million in 1973, sales surged to $867 million (approximately Rs 70 billion) by the close of 1983. However, this period of expansion was interrupted in 1984 when Nike announced its first-ever quarterly loss.
Although Adidas was once the dominant brand, its position began to shift during the 1984 National Basketball Association (NBA) draft. NBA legend Michael Jordan was largely responsible for this change. Jordan played his first season at North Carolina, where he won the Atlantic Coast Conference (ACC) Rookie of the Year title in 1982. He then left North Carolina, and the Chicago Bulls selected him as the third overall pick in the 1984 NBA draft.
While playing for North Carolina, Jordan wore Converse shoes. This was primarily due to his coach, Dean Smith, having an annual $10,000 deal with Converse. However, Jordan’s preference leaned towards Adidas, and he desired to wear their shoes in the NBA. Despite recognising Jordan’s potential, Adidas, seemingly complacent with their market position, did not extend an offer to Jordan. Disappointed, Jordan began discussions with Converse.
During the meeting, the Converse representative proclaimed, “We are basketball.” This statement emphasised the deep-rooted connection between the Converse brand and the sport, particularly due to the enduring popularity of their iconic Chuck Taylor All-Star shoes. By making this assertion, Converse aimed to convey their self-perceived status as a leader within the basketball industry.
In response, Jordan enquired, “Where is my place in this discussion (what you are saying)?” John O’Neil, Converse’s president, replied, “We will treat you like our other superstars.” Jordan’s father, James, then posed a crucial question, “Do you have any new, innovative ideas?” A palpable silence ensued. Converse, it seemed, had no answer.
The brand ultimately offered Jordan a deal worth $100,000 annually, a figure commensurate with agreements offered to other prominent athletes.
When things did not work out with Converse, Nike saw an opportunity. The company needed a superstar to brighten its business, and it saw that superstar in Michael Jordan. However, Jordan was a fan of Adidas and did not even want to talk to Nike. He told his agent, David Falk, “Just get a deal with Adidas.”
However, David Falk enjoyed a strong relationship with Nike, as seen by the footwear choices of most of his clients. Keen for Jordan to consider their brand, Nike executives persuaded Falk and Jordan’s father to arrange a meeting.
Nike showed him new red and black designed shoes. Jordan told them that he liked Adidas because they were very close to the ground, which Nike did not have. The company representative responded, saying that they could make shoes according to his wishes. This was a unique offer, as no other company was customising shoes at the time. Jordan seemed more receptive to this idea.
Nike offered Jordan a five-year contract worth $500,000 per year, which included stock options and other benefits. If all the benefits were added, the total amount reached $7 million. This was an unprecedented deal in the industry. The biggest deal at that time was with New Balance, in which James Worthy was given $150,000 per year. While the deal offered to Jordan was extraordinary, it came with a significant condition: he would have to achieve one of three specific achievements in the first three years:
- Become the Rookie of the Year
- Become an All-Star
- Maintain an average of 20 points per game
The challenge was to live up to any one of these three in the first three years. However, even after getting such a big offer, Jordan was still inclined towards Adidas. Before signing with Nike, he once again approached Adidas and said that Nike was offering him this significant deal. If Adidas offered him anything close, he would sign with them immediately.
Adidas, however, did not present him with a comparable offer, considering him “too small” for such a deal. Subsequently, Michael Jordan finalised the deal with Nike.
Nike designed the shoes as per Jordan’s suggestions. A few weeks later, his agent, Falk, named these shoes “Air Jordan”. “Air Jordan 1″ was launched in the 1984-85 season. Its colour was red and black. But this was a violation of the uniform code in the NBA. Now Nike had only two options. They should either change the colour of its Air Jordan shoes or pay a fine of $5,000 for every game.
Nike, accepting a fine of $410,000, cleverly incorporated the penalty into their marketing strategy for the Air Jordan 1. The advertisement boldly proclaimed, “NBA cannot stop you from wearing these shoes.” This audacious approach resonated with its consumers and made Air Jordan 1 immensely popular among fans.
Jordan had to fulfil one of the three conditions in his contract, but he fulfilled all three in his first year. He achieved an average of 28.2 points per game, was selected as an All-Star, and earned the title of ‘Rookie of the Year’.
By the end of 1985, the Air Jordan brand generated revenue of $100 million. Nike co-founder Phil Knight described it as “the perfect combination of quality product, marketing and athlete endorsement.”
In 2019, Nike commanded an 86% share of the basketball market and a staggering 96% share of the lifestyle-basketball market. During the 2019-20 NBA season, Nike and Air Jordan shoes were worn by a considerable 77% of players. Nike’s revenue reached an impressive $40 billion (approximately Rs 3.2 lakh crore) in 2019, surpassing Adidas’s revenue by 60%. Currently, Nike boasts a market value of $112 billion, three times that of Adidas, which stands at $40 billion.
