Can These Shoes Bring Nike Jordan-esque Success?

Source: Diegoestefano97  

Retired basketball star Michael Jordan earned an estimated $90 million last year, his highest 12-month total ever. Pretty good for a man who hasn't played basketball in over a decade. Jordan continues to score big paydays thanks to the ongoing and growing success of his Nike (NYSE: NKE  ) Jordan brand, which grew sales 11% last year.

Jordan has been a juggernaut for Nike, and as the company looks to replicate that success, it now turns to faithful NCAA football fans.

Jordan is stronger than ever
Nike is the unquestioned king of shoes worldwide, but especially in the U.S. According to SportsOneSource data reported by MarketWatch, the Nike and Jordan brands accounted for $62.63 of every $100 that was spent on shoes from January through mid-April this year. This compares to $58.84 during the same period in the year prior.

SourceMarketWatch. Data YTD through April 12, 2014/SportsOneSource.

The $3.79 differential that Nike/Jordan saw from 2013 to 2014 came almost entirely from the Jordan brand, which has solidified itself as the No. 2 sneaker brand behind only Nike itself in the U.S. Therefore, given this extraordinary success, it is no surprise that Nike is seeking that next Jordan, or some other means to grow its dominant position even larger in the shoe space.

Time to invest elsewhere
Unfortunately for Nike, there are no athletes -- or people in general -- quite as attention-grabbing as Michael Jordan, labeled the best ever by some. Basketball shoes are the company's best-sellers, yet even so the company's other biggest basketball shoe sellers, LeBron James, Derrick Rose, and Kevin Durant, are nowhere near the Jordan brand in annual shoe sales.

In fact, Nike might even be losing reigning MVP Kevin Durant;  Under Armour (NYSE: UA  ) reportedly offered $265 million to $285 million over 10 years to Durant. Nike reportedly made $175 million off Durant-related products last season. .

Nonetheless, Nike already has deals with the biggest names in basketball -- so it might be time to branch out and make big investments in other areas.

Grow behind college athletics
Nike is now looking to college football as a way to replicate the performance it has seen with NBA stars, and with Jordan specifically. Last week the company unveiled the Lunar TR1 shoe line, which is specifically designed with school colors and team logos for eight college football teams and will launch on Aug. 27. 

Source: Nike

Of course, Nike CEO Phil Knight included the Oregon Ducks in his eight team line-up, adding to the $68 million football performance center he funded for the university last year. While Oregon is a big school with a successful program and a loyal fan base, Florida State, Alabama, Oklahoma, Ohio State, and Texas pretty much include all the most dominant programs of the last 15 years. The addition of Georgia and Michigan State adds another SEC powerhouse and a popular school that appeals to the Northern demographic.

Alabama Crimson Tide. Source: Nike

The chart below shows each team's valuation and its 2013 revenue according to Forbes. The valuation is each team's estimated worth based on Forbes' analysis, but the revenue each team created was from ticket sales, apparel sales, and all other revenue sources. The revenue is important, as it shows the size of each team's fan base, and how much those fans are willing to spend on their favorite team.

Team

Valuation

Revenue

Texas Longhorns

$133 million

$104 million

Georgia Bulldogs

$99 million

$75 million

Alabama Crimson Tide

$95 million

$82 million

Oklahoma Sooners

$80 million

$60 million

Oregon Ducks

$74 million

$52 million

Michigan State Spartans

$64 million

$50 million

Ohio State Buckeyes

$63 million

$58 million

Data source: Forbes

Surprisingly, Florida State did not make the top 20 Forbes list for most valuable teams  -- but after coming off a national championship, chances are its valuation is on the rise. With that said, Forbes' list is only counting the revenue and value of the team itself, not the hundreds of millions of dollars that retailers and designers create from team apparel, like Nike, Under Armour, and Adidas. Importantly, teams get a royalty, an unknown percentage, but total apparel sales are likely much higher than the figures imply. 

Now, not one of the eight teams that Nike is using for its new TR1 shoes has a large enough following to replicate the success of the Jordan brand. However, combined, the TR1 shoe line could eventually become a Jordan-like presence, as each sneaker is purposely designed as athletic wear that can be used across a variety of sports and worn casually to support a team. Not to mention they look pretty cool, too.

According to Nike, the TR1 shoes will cost $120, while Jordan's range from $120 to $200. Last year, Jordan apparel created $2.25 billion in U.S. retail sales,  but not just from footwear, as the brand also includes tank tops, shorts, socks, etc. While it is unlikely that eight teams alone can replicate the Jordan success for Nike, the key is whether designs from 16, 24, or more schools can create a billion-dollar brand, or if multiple designs per school could achieve success. Given the revenue that these noted schools earned last year, and the loyalty of these fan bases, the TR1 line could be largely successful for Nike, even if it doesn't become the next Jordan. 

Foolish final thoughts
All things considered, Nike has large endorsement deals with most big-name basketball players, and -- as evident from the Kevin Durant offer from Under Armour -- it is getting rather pricey to gain and keep the sponsorship of top athletes. Therefore, marketing to team-specific fans is likely a much wiser business decision; it keeps expenses down, and the company doesn't have to worry about an injury affecting an entire team, thus implying that sales should be consistent long-term.

If the concept is successful, Nike has the opportunity to expand into other NCAA football teams, along with NCAA men's basketball -- which adds an important element, as Michigan State in particular is a top-tier basketball program whose football and basketball logos are identical. Nike might have a winner on its hands: an approach that could produce significant revenues, and make its market-leading shoe presence even more dominant.

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