A couple of weeks ago, NBA rookie Zion Williamson signed with Nike's (NKE 0.58%) Jordan shoe brand. At $75 million, the Williamson partnership is one of Nike's biggest, surpassing the $55 million sponsorship agreement with Serena Williams back in 2003 -- even if it pales in comparison to Tiger Woods' 2013 deal with the company, estimated to be worth $200 million. Meanwhile, Nike's LeBron James deal is expected to earn the basketball player more than $1 billion by the time he hits retirement age.
The contract between Nike and Williamson might at first look like your typical sponsorship of a star athlete by an apparel company, but in fact, things are more complicated than that. This is because Williamson's history with Nike is interesting, to say the least.
Back in February, in one of the most farcical sporting moments of the year so far, Williamson's Nike shoes "exploded" just 33 seconds into a showdown between Duke and North Carolina, causing a minor injury to the rising basketball star but a lot more injury to Nike. In fact, the awkward moment, which was witnessed live by millions, was so damaging to Nike's brand that the company lost as much as $1.1 billion in value the following morning.
The new shoe deal is a double victory for Nike, which hasn't just secured the endorsement of one of basketball's biggest names but has also managed to partially reverse the negative implications from February's unfortunate incident.
As we saw with last year's divisive Colin Kaepernick affair, Nike has one of the most impressive marketing departments in the world, which manages to stage expertly timed interventions into the overlapping worlds of sport, politics, and pop culture. The Williamson deal is yet another example of its master strategy at work.
But it doesn't stop there. The company has carefully built an aura around its products that few, if any, rivals can hope to compete with. Central to this aura is Nike's use of 'emotional branding', whereby it infuses its footwear and sportswear with inspirational, even heroic connotations. According to its slick, cinematic commercials, to wear Nike sneakers means to relentlessly self-improve, to overcome adversity, to flourish. Add to this the fact that the company also boasts what might be the world's best-known slogan -- "Just Do It" -- and the result is a brand of unique potency and power.
Contrast Nike's approach with that of a rival such as Under Armour (UAA 0.52%). Like Nike, the younger company has embarked on major sponsorship deals with sporting icons like boxer Anthony Joshua and tennis star Andy Murray. However, Under Armour has yet to build up what is sometimes called "sponsorship equity." In other words, it has not leveraged these associations quite as well as Nike, which regularly turns superstars into passionate brand ambassadors.
Furthermore, Under Armour -- whose share price has really been through the wringer in recent years, having recently seen its worst day in two years -- does not appeal to the emotional nature of partaking in sports and competitions. There is no coherent story around its brand, none of Nike's motivational magic.
A perfect example of Nike's use of "motivational magic" can be seen in last year's "Dream Crazy" ad. Narrated by Colin Kaepernick and featuring a series of unlikely success stories from the world of sport, the commercial urges the consumer to embrace the toughest possible challenge he or she can imagine. At no point, amid the emotive music, self-help rhetoric, and images of struggle and achievement, does the company even try to sell anything. Instead, it indelibly fastens its brand to the idea of triumph itself. Nike, after all, was the Greek goddess of victory.
The company's marketing genius is not limited to old-fashioned advertisements and celebrity endorsements, such as the Kaepernick and Williamson deals. Nike has also, to a large extent, conquered social media. By breaking up its Twitter presence into individual subsidiary brands, such as Nike Run Club and Nike Football, it maintains a series of smaller, like-minded followings with which it can more easily and humanely interact, rather than issuing bland corporate updates from a centralized account.
Undoubtedly, Nike owes a great deal of its market share to the sheer quality of its apparel, which has always been on the cutting edge of sportswear technology and design. Yet the products themselves will probably always be locked in a razor-thin battle with competitors, future and present. When it comes to building an intoxicating ambiance around its brand, however, Nike really does operate in a league of its own.
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MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Nike and Under Armour. Read our full disclosure policy here.