Sept. 15, 2000 -- Tiger Woods formally signed a new five-year endorsement contract with Nike today as industry analysts tried to answer the $100 million question.
Is a golfer worth that much money?
“Part of that answer rests with what Nike’s ultimate goals really are,” said Bob Williams of Chicago-based Burns Sports Celebrity Service, which matches athletes with corporate sponsors.
“The good news is they found Michael Jordan’s replacement as the most marketable athlete in the world, and the best athlete in the world.”
The downside, Williams said, is that golf is a niche sport that doesn’t reach the masses and doesn’t have the television ratings the NBA pulled in during the Jordan era.
“How much growth is there in golf?” Williams said. “And how much can Nike capitalize?”
The deal is worth an estimated $100 million over five years, according to a source close to the negotiations who spoke on condition of anonymity. It is believed to be the richest endorsement contract in sports, depending on how that is defined.
Williams said Jordan made as much as $25 million a year, depending on sales. Former heavyweight champion George Foreman recently sold his likeness to Salton Inc., which makes barbecue grills, for $137.5 million in cash and stocks.
But that was a lifetime deal. Woods’ new contract expires in 2006, when he will be 30 and just hitting the prime of his career.
“The value Nike received on the first contract caused me to come to my conclusion that it would be chump change,” his father, Earl Woods, said of the five-year, $40 million deal that raised eyebrows in 1996.
“And this contract will be chump change compared to the next one, because Tiger is only going to get bigger and better.”
Measuring Woods’ Worth
While not discussing specifics of the contract, Nike Golf President Bob Wood said money was not the best way to measure Woods’ worth.
“We don’t even look at it like that that,” he said. “When the first one came out, everyone said, ‘What the hell did you do that for?’ His representation is enough to reinforce everything we say about ourselves — competitiveness, excellence and a desire to be better.”
Trying to measure Woods’ value goes beyond Nike.
One of the sticking points in the negotiations was IMG trying to get back some of the interactive and Internet rights that used to belong to Nike. IMG has a special team exploring how to market those rights, which could be worth millions more.
And while agent Mark Steinberg finally has the Nike contract out of the way, he said today he is working on contract extensions with other companies Woods endorses, such as American Express and EA Sports.
“This deal raises the ante for everyone else who wants Tiger,” Williams said.
Steinberg said that won’t necessarily be the case, and while he said negotiations on other contracts have been successful to date, “They will compensate Tiger fairly for what he does for each of them.”
Nike is in a different league. Woods is a walking swoosh from the top of his hat to the heel of his shoe.
“He’s the most photographed athlete — and maybe the most photographed entertainer,” Steinberg said. “Nike is the only brand you can see on this person. That’s why it makes it a more all-encompassing endorsement.”
Nike first introduced Woods with its “Hello, World” advertisement when he turned pro in 1996, followed by a series of ads that touched on everything from Woods’ ethnicity to his unmatched charisma.
One of the most famous ads was Woods bouncing a ball off his wedge — behind his back, between his legs, even catching it on the clubface — and then whacking in into the horizon while the ball was still in the air.
“Nike obviously thinks he’s worth this money,” said Alistair Johnston, head of worldwide golf operations for IMG. “They not fools. They’re a company with great experience and fiscal responsibility that understands the value of branding more than any company in the world, with the exception of maybe Ford and Coca-Cola.
“That gives them vast areas of business that can’t even be contemplated now,” said Johnston, who has been involved in sports marketing for 30 years. “What appears to be on the surface an extraordinary amount of money in five years might not be.”
One area that appears to be on the horizon is golf clubs. Woods is under contract to use the Nike golf ball, and the company is exploring a move into putters, wedges and perhaps a full line of clubs.
“It they decided to go into the club business, having Tiger will not do them any harm,” Johnston said.