Reflections on the 'Air' Movie
Nike's partnership with Michael Jordan revolutionized sports business and marketing
Over the weekend, I went to see the ‘Air’ movie, starring Matt Damon and Ben Affleck, about how Nike recruited Michael Jordan when he was coming out of college in 1984. I won’t give away the movie other than to say it is fantastic. I want you to go see it. The movie isn’t woke, which I appreciated. It is a powerful and inspiring story of overcoming the odds, fighting the man, of David and Goliath. Nike revolutionized how athletes are marketed and are compensated. It is a business case for the ages.
In 1984, Sonny Vaccaro, played by Damon, heads Nike’s struggling basketball division. Nike’s share of the basketball shoes market is only 17%, way behind its competitors Converse and Adidas whose share of the market is 54% and 25%, respectively. Nike needs a high profile signing from the 1984 NBA draft to propel the brand. Sadly for Nike, most high draft picks have already or will sign with either Converse or Adidas, because they can offer them higher compensation, including Michael Jordan who wants to sign with Adidas. Nike’s budget is only $250K and they plan to spread it on multiple signees.
One night Sonny is home watching video of Michael Jordan—-an 18 year old University of North Carolina freshman at the time—-make the 1982 NCAA Championship winning shot against Georgetown. Sonny realizes that Michael is special. After persuading Nike CEO Phil Knight, played by Affleck, and Director of Marketing Rob Strasser, played by Jason Bateman, to spend the entire budget on Jordan, Sonny goes to North Carolina and talks to Michael’s parents and asks them to give Nike a chance to sign Michael. When he returns to Nike’s headquarters in Oregon, he asks designed Peter Moore to design a new signature shoe specifically for Michael Jordan, which they name “Air Jordan,” after Michael’s spectacular jumping and dunking ability. Creating a new shoe for a player was unheard of at the time, especially for someone who at that point hasn’t even played a single minute in the NBA. Magic Johnson, Julius Erving, and Larry Bird—-who all were with Converse—-didn’t have they own shoe. They were simply payed to endorse shoes already on the market.
Nike with Michael Jordan ushered in a new era of sports business and marketing. They revolutionized how athletes are marketed and how they are compensated by apparel and other companies. After Nike upped its budget, in addition to $500K per year in salary, Jordan also received a percentage of the gross sales of every Air Jordan shoe pair sold in perpetuity (although in the movie it’s not mentioned what exactly that percentage is, it’s believed to be 5% of gross sales). This set a new standard for athletes to get equity/share of profits from companies they endorse. Nike’s goal was a combined total of $3 million in gross sales in the first three years from Air Jordan shoes , and put in an exit clause in Jordan’s contract if that didn’t materialize. Air Jordans generated $126 million in gross sales in the first year alone (at 5%, this implies that Jordan got paid $6.3 million from gross sales of his shoes; by comparison, Jordan’s first year salary in the NBA was only $555,000).
It is believed that today Jordan makes $400 million per year (compare to LeBron who reportedly makes $30 million per year), and has made a total of $1.6 billion, from Nike. Jordan’s net worth is $2 billion. In 1997, Nike bought Converse. Michael Jordan made Nike into a global behemoth and the rest is history. The lesson: Seek win-win deals. You are only one deal away from transforming your company and changing your life.
Go see the movie, you’ll enjoy it.