Why are running contracts with companies like Nike at such a premium?

Is this a serious post?

It frightens me that this way of thinking is becoming quite common among US citizens.

OP, why don't you go outside and buy the first person you see a free meal? Are you trying to tell me you don't have the money to do that? Why wouldn't you do it?

In fact, why the hell are you spending money feeding yourself when there are starving people in the world? Are you trying to tell me you don't have the money to do that?

People are dying for Pete's sake. Is your financial situation so tight that you can't save someone's life? You can either save someone's life or be a selfish prick and feed your face today, what will it be?

Thanks America wrote:

It frightens me that this way of thinking is becoming quite common among US citizens.

OP, why don't you go outside and buy the first person you see a free meal? Are you trying to tell me you don't have the money to do that? Why wouldn't you do it?

In fact, why the hell are you spending money feeding yourself when there are starving people in the world? Are you trying to tell me you don't have the money to do that?

People are dying for Pete's sake. Is your financial situation so tight that you can't save someone's life? You can either save someone's life or be a selfish prick and feed your face today, what will it be?

Please explain how your line of reasoning applies. Or maybe I am too much of an idiot.

From my viewpoint it would be the latter

Money isn't tight, but the return on investment is.

Runners like Webb aren't employees of Nike; they are sponsored but are essentally independant contractors (just like Jimmie Johnson doesn't work for Lowe's). Think of the money used to pay Webb's sponsorship as not salary, but as coming out of the advertising budget.

If Webb was getting $100,000+ per year, you had better believe that the swoosh on his chest was helping bring in some multiple of that amount. Now this number is hard to calculate (it's not like I told Nike "I bought this shoe because of Webb" when I picked up my latest pair of Pegasus), but mostly it's about exposure. Seeing the swoosh on runners at the front of the pack at big meets is a big deal.

Nike is smart. In big sports with tremendous exposure, they will continually sponsor the huge names with huge contracts. But in niche sports like track, they will throw some money at the top, but for the most part they sponsor "up and comers." Minimal investment from Nike for a potential huge payout later. When those runners start demanding star money after they've "made it" Nike will keep the cream of the crop (typically Olympic or WC gold medalists) and cut the rest free. Meb, Webb, Leo, and Nick I'm sure tried to negotiate raises (or in Webb's case, maybe just the status quo), and Nike realized their ROI for these athletes just isn't worth it. Meb proved he still has it, Nick we'll have to see about, but in Webb and Leo's cases Nike made the right choice.

Of course Nike could afford it, but ask yourself this: Could Nike put that $400K to better use? How many other niche sports are there? How many other ways could they spend those marketing dollars and probably get a better return?

They may have a huge overall marketing budget but that budget is divided up between a lot of product and marketing managers that control much smaller amounts. Those marketing managers need to show measurable results from their expenditures as their jobs may literally depend on that.

Hingle McCringleberry wrote:

I guess my question is why Nike chooses not to keep guys like Webb and Symmonds on board. I mean, Nike is a multinational corporation with insane amounts of dough. Would it rally make a huge difference on their bottom line if they kept Webb and Symmonds on board? While they are at it, why couldn't they offer 40,000 dollar contracts to 10 or so All American guys that show serious promise but haven't quite blossomed? Are you trying to tell me they don't have the money to do that?

I don't really understand why they don't throw more money into American track. Is money that tight over there at Nike?

Get real here. First of all, Nike did not drop Nick. He chose to drop Nike. He has been very clear about this and the reason being certain items in the contract that caused him to want to do business with somebody else.

And they are not interested in giving contracts to a bunch of also-rans and wannabes. They are interested in giving contracts to emerging top people like Chris Derrick or Isiah Young. But before most of those people can command full value, Nike tends to cut them loose and "buy" more "emerging" stars cheap...just like Adidas did with Allyson Felix (she went to Nike for a better offer).

They care about STARS (cheap) so they can sell overpriced shoes to hobby joggers.

Nike is a corporation owned by its investors and run by executives who have to answer to a bottom line.

If Nike kept athletes who are no longer going to perform or be on TV, or controversial athletes, etc on contract, it would be losing money that it instead could be using on other athletes with brighter prospects.

The vast majority of Nike's budget goes to producing its products as cheaply as possible and taxes on selling those products as well as payroll for essential employees. Otherwise some other company would sell a product more cheaply or lure away Nike's essential staff just like every other company has to deal with. This primary budget is the number one concern of the company.

Nike like any other corporation has to then budget whats left between advertising and sponsorships of athletes that use its products. This budget is secondary in nature and can change dramatically from year to year because of business conditions and primary budget concerns.

Nike has figured that Mary Cain for instance is a better investment than Alan Webb. While it doesn't seem like a lot of money to keep on contract non-performing athletes thats money that instead could go to a television commercial or landing another more lucrative athlete. Its also money that could instead go to sponsor another venue for the sport. Is cutting 4 or 5 non-performing athletes for another venue, commercial, or 4 or 5 performing athletes worth it? Yes it is.

Even the appearance doing this is good for the image of the company and investors who make decisions with their money. Investors don't want to hold a company that gives away money to non-performing athletes over hot, new athletes, venues and advertising. The share price could be hurt for instance, and that could effect the people who answer to investors. Its enough that Nike backs track as much as it does to begin with. The sport is small and Nike budgets a huge amount for it, and not just for the athletes.

As a share holder , I want the "spare" money in a dividend.

I'd rather they took that money and sent it to the people making Nike products at slave-like wages.

Hingle McCringleberry wrote:

I guess my question is why Nike chooses not to keep guys like Webb and Symmonds on board. I mean, Nike is a multinational corporation with insane amounts of dough. Would it rally make a huge difference on their bottom line if they kept Webb and Symmonds on board? While they are at it, why couldn't they offer 40,000 dollar contracts to 10 or so All American guys that show serious promise but haven't quite blossomed? Are you trying to tell me they don't have the money to do that?

I don't really understand why they don't throw more money into American track. Is money that tight over there at Nike?

Wow. Lost respect for you. You're not nearly as smart as the average intelligence bear that I thought you were.

In real word: the only reason to have employees is if you can make money off them. Otherwise you wouldn't hire them. Same for signing athletes to contracts. Maybe every sports team should give every free agent 10% more than what other teams would normally give them because it isn't that much more.

Its their business model. I'm surprised they cut back on Symmonds but they might have calculated he won't ever get better and by 2016 he will be over his potential.

Its all based on the Olympics. Doesn't matter if you are a star (unless you are Alberto who signed a 10 year deal when he was on top.)

Webb is 30 and the odds are heavy he is beyond an even bet of ever medaling in the Olympics, let alone win.

Its not just Nike that cuts back on star runners when they look like they are on a downside. The smartest thing Webb ever did was go pro when he was able to sign for that much money.

Pat Porter and Jim Spivey are some examples of big names that when they failed to make an Olympic team and were pushing 30 got dropped (or cut way back). Spivey in the late 1980's was a Nike runner and 3:48 miler who was 5th in the 1984 Olympic 1500 and won the Bronze at the World Champs and was only making 40k a year from Nike and it was cut back. He went to Asics. And kept going and made an Olympic team again in 1992 and competed well until 1996.

Nike's model is to provide support and recruit the very best prospects with the biggest money in the sport but there comes a time when they have they have to decide that an investment didn't pay off and funnel that back to the next younger generation of prospects.

tl; dr, but wow, I am surprised you thought I possessed even average intelligence. You were sorely mistaken.

xenonscream wrote:

I'd rather they took that money and sent it to the people making Nike products at slave-like wages.

So Nike forces people to work for free?

Where exactly do you think that cute NOP shirt you have came from? And how do you think Nike can afford to keep Wheating around? And who may I ask paid Kara and Lauren a bunch of money to run? You are a contributor to the existence of those "slave wages" you complain about when you support Nike and its athletes.P.S. I really like Nike products.

xenonscream wrote:

I'd rather they took that money and sent it to the people making Nike products at slave-like wages.