Tuesday, 9 October 2007

Corporate America Walks Away

In the NHL's battle to attract corporate sponsorship, they've hooked up with some pretty reputable companies to put money in their coffers - Reebok, Mastercard, Mission, and a variety of other sponsors. However, one of the NHL's biggest sponsors is pulling the plug on its hockey venture. Nike has decided that "it was putting on the block its flagging hockey division, known as NikeBauer".

In an era when hockey is supposed to be thriving, according to Gary Bettman, losing one of the biggest corporate entities on the planet cannot be good.

Rick Westhead of the Toronto Star has come across several key points as to Nike's change of heart regarding hockey. His full article is linked, but I'll run down the reasons for Nike deciding that it no longer wants to be involved in hockey:

1) "By 1993-94, some 303,000 amateur players were registered with USA Hockey, the sport's governing body in the U.S., up 55 per cent from 1990-91. The sport had generated such a buzz that media company Walt Disney was even investing in hockey overseas, buying a stake in Russia's famed Central Army team.

"USA Hockey figures show that in 2005-06, the most recent year for which statistics are available, there were 442,077 registered players in the U.S., down from 445,245 in 2004-05 – the second-straight year of decline."

Yes, falling numbers in grassroots hockey is a problem. I'm no marketing wizard here, but why wouldn't the billion-dollar company known as Nike get onboard with USA Hockey and help promote the game, and grow it at the grassroots level? Seems elementary to me, Phil Knight. Grow the game, grow your business.

2) "After buying Canstar, Nike decided to allow the Canadian company to operate independently. While Canstar factories churned out Bauer and Cooper branded skates, facilities in the U.S. and overseas produced a separate Nike line.

"There were immediate setbacks.

"Retailers were returning an inordinate number of skates to Nike because they didn't fit comfortably. The company's top NHL endorsement agent, Detroit Red Wings high-octane star forward Sergei Fedorov, reportedly cut ties with Nike over similar concerns.

"Nike subsequently merged the two hockey divisions. Last year, it combined all of its hockey offerings under the NikeBauer brand."

I'm almost certain that having your most-marketable stars cutting ties with your business will result in lost sales. Hockey skates aren't basketball shoes. It can take weeks to have the skate fit properly when breaking it in. Hockey skates are an extension of the foot, meaning that if they are uncomfortable, one's game will suffer. Nike should know this from all its worldly knowledge on shoes, especially when it comes to sprinters and runners. It appears that Nike was more concerned with dollars and cents than common sense.

3) "Rollerblade president John Hetterick said of Nike's purchase of Canstar: 'Nike will... help us get in-line speed skating and roller hockey into the Olympics. This sport will surpass ice hockey in a few years.'

"That's not what happened.

"Within five years, sales of in-line skates were beginning to slip, and companies were either folding or looking to see off their rollerblade assets. (In 2004, the Sporting Goods Manufacturers Association said there were 17 million in-line skaters, compared with 32 million in 1998.)

"'It really went south,' said Jim Rennie, who published Jim Rennie's Sports Letter, a widely read sporting goods newsletter, from 1977 to 2002.

"Skateboarding came on in popularity and they just marketed in-line skating wrong," Rennie said. "They were too focused on the extreme rollerblader who was doing jumps and everything, not the average skater.'"

Not only does Nike not make good skates, they can't even market to the correct demographic they need. The X-Games crowd is hip and cool and all that, but the average in-line skater doesn't care about which bearings will allow for better railslides. In-line skating is still popular, but the marketing has to be done correctly. Marketing in-line skates to 10% of the general population is a great way to lose sales.

4) Firenzo Arcadi, who owns Toronto sporting goods store Toronto Hockey Repair Ltd., has another theory about why the hockey business has swooned.

"'It's the $900 skate,' Arcadi said, referring to NikeBauer's latest offering, a sleek silver, black and blue skate called the Supreme one90 that retails at some stores for $899.

"'These companies like Nike are pricing themselves right out of the market,' said Arcadi, whose store sells about $2.5 million worth of equipment each year, down from $3 million just four years ago.

"'It's at a point where families are having to decide whether they want to pay a $1,100 mortgage or buy skates,' he said."

Take heed, Reebok. You've already raised NHL jersey prices, and you now have the majority of the market in terms of merchandise sales. Over-pricing your merchandise is the best way for your sales to dry up. Nike charged ridiculous prices on hockey equipment and merchandise, and now they're out. You've been warned, Reebok. Nike lasted 14 years in hockey. You could be looking at less.

Looking at Mr. Westhead's article, he has identified the major problem with the growth of hockey in North America: skyrocketing prices. The average fan can barely afford a T-shirt today instead of an NHL jersey. Corporate America, specifically Reebok, should look at making the NHL affordable for everyone before just lobbying to their corporate friends and CEOs with six-figure salaries. At this rate, those are the only people who can afford to be fans.

With Nike out of the picture in terms of competition, Reebok has a definite advantage in making a difference in the game of hockey. Will they do it? It's all up to Reebok. Mr. Westhead, you've written a wonderful article, and I commend you for your work.

Until next time, keep your sticks on the ice!

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