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Shock waves as Nike to slash marketing

NIKE Inc, one of the largest corporate spenders in the United States sports sector, could send shock waves through the industry this year by cutting its marketing budget as part of its push to reduce expenses.

The world's largest athletic shoe and clothing maker, known globally for endorsement deals with such athletes as golfer Tiger Woods and basketball star Kobe Bryant, as well as the Brazilian national soccer team, signaled its cost-cutting mode late Tuesday by announcing it would cut up to 1,400 jobs, or 4 percent of its work force.

Nike's reining in ad spending, sports sponsorships and endorsement deals was not only likely, but could be done without hurting its dominant position, analysts said.

"They have such penetration in their marketing budget that they can use attrition to cut off contracts," said Robert Boland, professor of sports management at New York University, referring to Nike's various sports contracts.

"You'll definitely see a different allocation and you'll definitely see some reduction," he added. "When you're the biggest, you have the power to do that."

Companies such as General Motors Corp and FedEx Corp have cut marketing budgets, including sports-related spending, in response to the recession.

Nike officials would not address specific plans, but indicated nothing is sacred.

Biggest impact

"As part of restructuring our business, we're analyzing all aspects of our costs, including sports marketing contracts, advertising and brand marketing, to ensure we're spending resources wisely and focusing on the business opportunities that will have the biggest impact," Nike spokesman Derek Kent told Reuters.

"There are opportunities for reductions in endorsement contracts and we are evaluating them on a case-by-case basis," he added.

Eliminating deals with lesser athletes, pro and college teams, and sporting events could reap Nike significant savings, analysts said.

"They still want to uphold the spending on their marquee athletes, but there are opportunities to cut back on the secondary and tertiary type athletes or even teams that perhaps didn't really captivate or drive eyeballs to the brand," said Stifel Nicolaus analyst Tom Shaw, who rates the stock "hold."

In the process of dumping contracts, however, Nike could create opportunities for smaller rivals like Under Armour Inc, Boland said.

Nike spent an estimated US$255 million to US$260 million on sponsorships last year, up from US$240 million to US$245 million in 2007, said research firm IEG, which is owned by advertising giant WPP Plc.


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