Sunday, April 3, 2011
Two of the biggest stories of the past decade in sports were baseballs performance enhancing drug scandal and Adidas’ buying of Reebok for $3.8 billion. The drug scandal has dominated headlines while the big Reebok deal may have slipped past some consumers. However, both have had a profound impact on sports and the businesses behind them.
According to a 2005 ESPN Article, 52% of fans still believe that Barry Bonds should still deserved to be in the Hall of Fame. The Scandal continues to grab headlines as Barry Bonds’ perjury trial is currently taking place. As mentioned in the above CNBC video, while the game’s biggest names were involved in the scandal and the MLB received a black eye but business continued to thrive.
Unlike the MLB’s scandal, the Reebok/Adidas deal has turned out to be very bad for business. The deal was originally intended to increase the market share of Adidas and better challenge the industry’s biggest competitor. Initially, US shares of the company stock rose 30 percent upon the announcement of the deal. However, since then the deal has been a disaster. According to the CNBC article, both of the brands were made weaker. Before the deal Adidas and Reebok had 10 and 8 percent market share respectively. Since the deal their Adidas market share has dwindled to 6 percent and Reebok’s share is down to about 2 percent.
The situation for Reebok continues to worsen as reports surface that Reebok may lose its contract with the NFL (National Football League). The NFL is rumored to be negotiating a deal with Nike for the 2012 season that may leave Reebok out in the cold. A 2010 Bloomberg article quoted Citigroup analyst Kate McShane who stated in investor notes that, “Reebok’s NFL contract represents about $350 million of its $565 million in U.S. apparel revenues.” Needless to say, this would further devastate the business and slash revenues.
Sports are big business and they are only getting bigger. The behind the scenes business deals of sports will surely continue to affect the sports industry for better or worse.