hello everybody welcome back to case
studies with the biz doc I’m Tom
Ellsworth this week another request from
the audience well sorta
you would ask for a number of companies
and one of them with Nike I know a lot
about Nike I used to wear Nike running
shoes growing up and also I knew a lot
about Nike and you know there Tiger
Woods line and golf clubs that they
eventually got out of the golf equipment
business but there was a lot of case
studies in there but one stood out for
me and it was the dawn of the Air Jordan
and the negotiation went into it so this
week we’re going to dive in we’re going
to look at how the negotiation unfolded
and how what Jordan wanted and what Mike
ended up with were very very different
things and this week there will be two
core points and the first will be have
the guts to go big but not so big that
you’d kill yourself but don’t be afraid
of the big deal even if you’re a small
company there could be big deals in your
size that make a difference for you
don’t be afraid to go big but you never
get yourself killed the second will be
learn the art of negotiating with
win-win steps and clauses that actually
work for everybody not every contract
has to have nothing but catches and
we’re going to see some of that this
week so now let’s dive into the
negotiation and the story of how the Air
Jordan shoe came to market and
everything that unfolded to get it there
first of all we go back to many of you
may be familiar with the Air Jordans
shoe there’s a tail that goes at once
upon a time the Air Jordans were banned
by the NBA well they kind of were that’s
not really the story there’s a little
bit of folklore behind that fans may
remember that at the very beginning
there was like a $5,000 fine that
happened a couple times any other of
some of that but there’s truth and
fiction in the whole story but it did
boil down to that the NBA at the very
beginning they wanted all the teams to
wear shoes that had a lot of white in
the color of the shoe and they wanted
the shoes to match with the rest of the
team and at that time commissioner David
Stern was not amused and didn’t like it
when Jordan came out on court wearing
some very dark black and red shoes that
match the colors of the Chicago Bulls
right back they
looked pretty hot they look nice but it
wasn’t what the league wanted and so yes
the league came out and said no no we
don’t want there so you can read lots of
versions of that story and a lot of
things but that was the first day on
court but let’s go back in time to find
out how did Michael Jordan end up in
those air jordans on court getting fined
by the NBA at the start of what would be
marketing and shoo history going back in
time he graduates from the University of
North Carolina University of North
Carolina was coached by Dean Smith a
Hall of Fame person and a Hall of Fame
coach Dean Smith at that time had a
contract with Converse and he was paid
about $10,000 a year to get his team the
University of North Carolina Tar Hills
one of the three or four legendary
programs in college basketball history
with like UCLA in Kansas and Duke these
were the legends of college basketball
and for 10 grand you could get a coach
in those days to make sure his players
warrior sneakers seems like a small
amount of money today but back then that
was that’s pretty impressive nonetheless
Dean Smith was paid for that for
converse but when Michael Jordan
graduated he really want to be an adidas
he loved adidas he loved the brand he
loved things about it he wanted to be
sponsored by adidas when he came into
the NBA but adidas they had their own
issues you see in 1978 just a few years
prior Adi Dassler which is where adidas
gets its name but he had passed away and
his wife Kathy was running the business
in addition she had brought in her son
Horst and their four daughters and they
were all running various divisions of
Adidas and to make matters worse all the
son in law’s married to those women were
also involved too so adidas didn’t have
all the direction that Adi Dassler had
given it because he had passed away to
make it worse now the mom the wife Kathy
was coming under bad health and actually
she was in very poor health and would
pass away within within a year so adidas
the legendary company adidas was in no
position in terms of leadership
consistency to really sit down and make
a real run at Michael Jordan
this disappointed him and Jordans agent
said let’s go talk to converse converse
is sponsoring everybody there the
basketball shoe let’s go talk to him
Jordan didn’t really want to do that he
really didn’t want to do that he went to
the meeting only because Dean Smith had
a relationship with converse and he said
okay my coach the man I love the man
that coached me we won national
championship together okay I’ll go see
converse so they going to see converse
and converse was very very confident
they said look we have magic we have
Larry Bird we have dr. Jay we got people
like Mark McGwire we got all these
players we are the basketball shoe and
we are the kings of basketball shoes and
Michael Jordan was there at this dad and
they asked well where does Michael fit
in and they looked around and they
didn’t offer a very different answer
they just said what we know we know
Mike’s great we’ll treat him just like
we do the other pro players $100,000 a
year and they were asking well is there
anything more to it is there anything
innovative and now on converse side
they’re thinking wow what’s wrong with
this guy we’re going to teach him you
know we’re going to treat him scuse me
just like Magic Johnson treat him just
like Larry Bird and give him a hundred
thousand just like them and he hasn’t
even walked on the court in the NBA yet
come on now this is what we’re going to
do and still Jordan and his dad were
like nothing innovated no other ideas no
there wasn’t and so they left so
converse really had no chance and also
by the way at that time converse was
already kind of losing its footing
because Nike was signing signing coaches
and doing better than converse was and
other shoe companies were making inroads
and converse was also last to do like
innovative fabrics and to do things like
making a basketball shoe out of pure
leather was something that Nike had
already been investigating so really
converse already was cut in the
background
sliding even though they saw themselves
as became the next thing that happened
is they get a call from a very unusual
source OJ Simpson OJ Simpson was working
for the spot built brand as a marketing
consultant
part of his sponsorship agreement with
them because when he was in the NFL the
last part of him being in the NFL he
wore cleats that were called juice
mobiles and that’s was his connection to
spot built so they made these basketball
we made they made these football cleats
for oj I know G is saying we can’t make
basketball shoes for Michael Jordan and
let me tell you I know something about
marketing because I’m everywhere and in
those days Oh Jay was everywhere he’s
with Hertz rental car he was a really
beloved guy that had a very very level
reputation and so he would had all kinds
of sponsorships and he was saying watch
this guy out of North Carolina Michael
Jordan is the next me that’s what oj
said and in his consulting role the
sport belt he said listen you got to go
get this guy so the vp of marketing
which was the son of the CEO and owner
of sport built says hey dad what do we
do and he said if that’s the story and
I’m believing it and I’m trusting it you
go get Michael Jordan and here’s the
quote don’t leave a dime at the door in
other words let’s go get him so sport
built wants to go out and get him and so
Michael Jordan and his agent went to see
them and they said we will make you the
star of our company you will be the
marketing icon of our company you will
be the whole thing and so that was
pretty impressive but you know sports
built versus adidas Michael’s heart was
still with adidas and sport belt big and
cleats but not exactly in other areas so
they left Michael Jordan’s agent next
would make some of the phone calls and
arrangements that would change the
course of history in basketball shoes he
spoke tonight
in basketball shoes and here’s what he
did he called Nike and he talked to Rob
Strasser and he said Rob I want to come
in and see you and I’m bringing Michael
Jordan and we want to talk about
basketball shoes and Rob Strasser did
many big deals at Nike and Falk Michael
Jordan’s agent emphasized to him how big
and important this was going to be well
he calls Michael a Michael
I don’t want to go see Nike I don’t want
to go to more meetings I want you to
call Adidas and get me adidas he says
look they’re in turmoil they got these
things going on that you know the kids
are running the company come on Mike and
he said nope
you know I want to go see a do this well
Bob called
Michael Jordan’s parents James and
Delores and here’s what he said I need
Michael to be at the meeting with Nike I
need him to go to Oregon and so he gets
a call back and says okay I’m going to
Oregon but my parents James and Delores
are coming along and they all went when
they got there they met with strasser
they also met with Peter Moore a
designer and Howard white and Sonny
Vaccaro and Sonny Vaccaro is now
legendary and very well known for he was
the guy that said this is the guy
Michael Jordan is the guy and he is
going to be a huge hit for this company
and we’re going to get him and he was in
the meeting these guys were in the
meeting and they laid it out to him and
they said this is what we’re going to do
for you and they played a video of a
song called jump by the Pointer Sisters
and they put a lot into their
presentation and Michael sat back and
listened and then he said you know one
of the reasons I like adidas is because
they make a slightly lower cut shoe
rather than the tall ones you made and
rather than Nike telling them well
you’ll wear what we give you and that
was pretty typical what would happen
with shoe contracts they said well tell
me about that
maybe we’ll adjust that maybe we’ll
design it differently and that impress
Jordan because now they’re talking about
adapting the shoe to him they don’t just
want to put his name on it and hand him
a check they involved him in the shoe
that impressed him and that would be
important ad they took a little bit of
break and they went into a separate
conference room and made even more
presentations about how they would
market it and what they would do and the
president of Nike Phil Knight came in to
talk and he said his piece and he
explained that they were going to do and
the great meeting was had but Jordan
didn’t say yes at least not yet
he left with an offer and the offer he
left was $500,000 for five years a two
point five million dollar contract
remember Magic Johnson Larry Bird were
getting $100,000 each from Converse and
recently James Worthy had gotten a deal
from New Balance for 180,000 this was an
over-the-top contract but it wasn’t just
that they said we think we’re going to
go places with you and we want you to
participate in the upside of Nike we’re
also including stock we’re giving you
stock in Nike that could make this deal
worth 7 million dollars to you so there
you had Nike putting up to 7 million
dollars on the table unheard of at those
times it was over the top
nothing could say we want you more than
that but they also want to protect
themselves and here’s an important
lesson in negotiation here when Nike
came back and said we think you’re going
to be monstrous we think this is going
to be monstrous but here’s the criteria
if one of these things doesn’t happen we
can get out of the contract early if you
don’t win Rookie of the Year if you’re
not named to the all-star team if you
don’t average 20 points a year 20 points
a game rather in one of your first two
years we could then opt out a little
early in the contract meaning that they
put all these chips on the table and if
he doesn’t turn out to be this
incredible basketball hero this
incredible all-star they could get out
well they looked at it and Michael
Jordan’s side said okay so if he doesn’t
do those things he can get out but what
if he does those things and we still
sell shoes and people like Mike and
maybes you know we think he’s going to
be huge but what if he’s an average
player but people love him and he sells
a lot of shoes and they said ok and if
he sells a minimum level certain million
dollars worth of shoes we’ll stay in the
contract so that was a good negotiating
point to say I want you to do this but I
have to do that and if I do that then
you have to do that back and forth that
is a good two sided contract that’s not
simply I’m the boss I’m writing the
check here it is so don’t ever be afraid
to figure out how can you put like
win-win
situations into your contracts like that
and whether you’re a small company or a
big company you can put clauses in that
really benefit you as well as benefit
your business partner so there it was
they left Nike with that deal and when
they left Jordan didn’t say yes he went
back home and instructed his agent to
call Adidas and say here’s the deal if
you’ll offer me anything close to this
I’m still signing with you
adidas because that’s where his heart
was well guess what happened
adidas couldn’t do it and they weren’t
going to do it and they said that’s it
so now they kind of knew that you know
they were going to go with Nike and the
poor guys over at the spot built believe
it or not they offered more cash than
Nike did they were ready to just just
kill the company to get Michael Jordan
but they said no we’re not going to do
that
Nikes making the shoe they’re going to
adapt the shoe the putting marketing
behind the shoe they got a lot of
marketing muscle we’re going with Nike
so they went with Nike and by the way
speaking of marketing one of the things
that Falk Michael Jordan’s agent asked
to have in the contract was that they
would spend a million dollars on
marketing a year Jordan shoe well the
season rolls around now we’ve got all
this negotiated we have a star we’ve got
sneakers we’ve got everything set up and
the season rolls around everything went
right even the things that went wrong
went right the shoes of Michael Jordan
wore on court that eventually David
Stern then the Commissioner of the NBA
said hey wait a minute you know you’re
all the shoes that the team should match
and those aren’t the team colors even
though they were the team colors red and
black David Stern just didn’t like the
fact that they were really a lot of
black and red and sort of dark sneakers
they didn’t look like white sneakers
where they used to and he wasn’t ready
for that and so he fined him and that
led to a TV commercial
which was very funny and by the way
again those were airships that had been
designed and colored the color of the
ultimate Air Jordans black and red those
weren’t even the Air Jordan sneakers
that were
eventually be on the market which is a
little trivial in the background for you
but nonetheless Nike puts out an ad and
it said this on October 15th
Nike created a revolutionary new
basketball shoe on October 18th the NBA
threw them out of the game fortunately
the NBA can’t keep you from wearing them
and every kid wanted a pair of these Air
Jordans can you imagine that marketing
muscle the NBA said no that that doesn’t
keep you from wearing them well guess
what Michael Jordan averaged 28 point 2
points a game in his rookie season with
the Chicago Bulls and was Rookie of the
Year so the contract was locked in
thanks to that performance and every kid
suddenly wanted to be like Mike and
there are other things that part of this
that were really interesting not related
to negotiation like Nike put those shoes
out there at $65 a pair which was
unheard of you know you know there’s so
many things in the story that are
unheard of you know $65 basketball
sneakers in nineteen you know 85 I mean
that really got some parents revved up
well apparently not all the parents were
revved up because some of the parents
paid up because Nike sold 70 million
dollars worth of Air Jordans by the end
of the basketball season and over a
hundred million dollars in total Air
Jordan shoes and merchandise that year
and then that annual report Phil Knight
said something which I loved this quote
because he’s a marketer and I came from
marketing when I graduated school it was
you know what this was the perfect
combination of a new high quality
product our marketing and an athlete
endorsement and it was an athlete that
matched because Michael Jordan was all
about performance he was all about
scoring but he was also this compelling
wonderful personality who had won a
national championship at North Carolina
and it was a nice guy he was a good guy
and he was a heavy competitor and you
would see him doing dunks with his
tongue sticking out he was such an icon
of the game so quickly and Sonny Vaccaro
of Nike was right he’s the guy
he’s the guy he’s the guy that’s what
Sonny Vaccaro would say over and over
this is our guy this is the guy
well how they done since then that’s a
great story about seventy million
dollars twenty eight point two points
Rookie of the Year eighty-four
eighty-five you know the the iconic
Jumpman logo and twenty-three but where
do they go from there
let’s take a look at some stats now to
see just how massive this brand became
today Air Jordans are 58 percent of the
basketball shoe market that’s pretty
amazing
they are 85% of the basketball shoes
over $100 and they are 77% of the
basketball shoes for kids under 18 these
look at these dominant figures and by
the way kids under 18 they’ve only seen
film of Michael Jordan he retired long
ago they haven’t seen him play alive
with all these teenagers they’re like
wearing Air Jordans
and it’s a brand and it’s transcended
his athletic career to become this
enduring brand of athletic shoes
basketball shoes and by the way speaking
of shoes if you took the Air Jordan
brand and compared it to the total shoe
market in the United States total shoes
it’s ten point eight percent of the shoe
market in the United States and by the
way it sells eight times what LeBron
James does eight times when you think
about LeBron James and being an icon of
basketball today and the success that he
is and coming back to Cleveland and
winning for the city and all the things
that he does and Air Jordan still sells
eight times LeBron James there’s only
one word for that that is damn that’s
amazing equally amazing is Air Jordan
within a year is going to potentially
pass the three billion dollars a year in
sales revenue it’s amazing in it’s
amazing story well that’s this week’s
case study and that is how the
negotiation between Michael Jordan and
converse and Adidas and Nike and sport
belt came together the
brought us the Air Jordan brand it was a
brand that got created by Nike who did
everything they could to win and those
two points stand tall have the guts to
go big but don’t go so big that you kill
your company but you don’t have to be as
big as Nike to do a big deal that
perhaps put your company on the map and
take you further but don’t kill yourself
and point to in the art of negotiating
find ways to put win-win steps in for
everybody because that’s how some of the
greatest deals in history like the
original contract for Air Jordan get me
so that’s the story this week now I need
the pillow the pillow there we go please
subscribe to value tainment to get more
of case studies by the biz doc and the
best content on the internet for
entrepreneurs until next time I’m Tom
Mills Ruth I hope I let you better than
[Music] you
studies with the biz doc I’m Tom
Ellsworth this week another request from
the audience well sorta
you would ask for a number of companies
and one of them with Nike I know a lot
about Nike I used to wear Nike running
shoes growing up and also I knew a lot
about Nike and you know there Tiger
Woods line and golf clubs that they
eventually got out of the golf equipment
business but there was a lot of case
studies in there but one stood out for
me and it was the dawn of the Air Jordan
and the negotiation went into it so this
week we’re going to dive in we’re going
to look at how the negotiation unfolded
and how what Jordan wanted and what Mike
ended up with were very very different
things and this week there will be two
core points and the first will be have
the guts to go big but not so big that
you’d kill yourself but don’t be afraid
of the big deal even if you’re a small
company there could be big deals in your
size that make a difference for you
don’t be afraid to go big but you never
get yourself killed the second will be
learn the art of negotiating with
win-win steps and clauses that actually
work for everybody not every contract
has to have nothing but catches and
we’re going to see some of that this
week so now let’s dive into the
negotiation and the story of how the Air
Jordan shoe came to market and
everything that unfolded to get it there
first of all we go back to many of you
may be familiar with the Air Jordans
shoe there’s a tail that goes at once
upon a time the Air Jordans were banned
by the NBA well they kind of were that’s
not really the story there’s a little
bit of folklore behind that fans may
remember that at the very beginning
there was like a $5,000 fine that
happened a couple times any other of
some of that but there’s truth and
fiction in the whole story but it did
boil down to that the NBA at the very
beginning they wanted all the teams to
wear shoes that had a lot of white in
the color of the shoe and they wanted
the shoes to match with the rest of the
team and at that time commissioner David
Stern was not amused and didn’t like it
when Jordan came out on court wearing
some very dark black and red shoes that
match the colors of the Chicago Bulls
right back they
looked pretty hot they look nice but it
wasn’t what the league wanted and so yes
the league came out and said no no we
don’t want there so you can read lots of
versions of that story and a lot of
things but that was the first day on
court but let’s go back in time to find
out how did Michael Jordan end up in
those air jordans on court getting fined
by the NBA at the start of what would be
marketing and shoo history going back in
time he graduates from the University of
North Carolina University of North
Carolina was coached by Dean Smith a
Hall of Fame person and a Hall of Fame
coach Dean Smith at that time had a
contract with Converse and he was paid
about $10,000 a year to get his team the
University of North Carolina Tar Hills
one of the three or four legendary
programs in college basketball history
with like UCLA in Kansas and Duke these
were the legends of college basketball
and for 10 grand you could get a coach
in those days to make sure his players
warrior sneakers seems like a small
amount of money today but back then that
was that’s pretty impressive nonetheless
Dean Smith was paid for that for
converse but when Michael Jordan
graduated he really want to be an adidas
he loved adidas he loved the brand he
loved things about it he wanted to be
sponsored by adidas when he came into
the NBA but adidas they had their own
issues you see in 1978 just a few years
prior Adi Dassler which is where adidas
gets its name but he had passed away and
his wife Kathy was running the business
in addition she had brought in her son
Horst and their four daughters and they
were all running various divisions of
Adidas and to make matters worse all the
son in law’s married to those women were
also involved too so adidas didn’t have
all the direction that Adi Dassler had
given it because he had passed away to
make it worse now the mom the wife Kathy
was coming under bad health and actually
she was in very poor health and would
pass away within within a year so adidas
the legendary company adidas was in no
position in terms of leadership
consistency to really sit down and make
a real run at Michael Jordan
this disappointed him and Jordans agent
said let’s go talk to converse converse
is sponsoring everybody there the
basketball shoe let’s go talk to him
Jordan didn’t really want to do that he
really didn’t want to do that he went to
the meeting only because Dean Smith had
a relationship with converse and he said
okay my coach the man I love the man
that coached me we won national
championship together okay I’ll go see
converse so they going to see converse
and converse was very very confident
they said look we have magic we have
Larry Bird we have dr. Jay we got people
like Mark McGwire we got all these
players we are the basketball shoe and
we are the kings of basketball shoes and
Michael Jordan was there at this dad and
they asked well where does Michael fit
in and they looked around and they
didn’t offer a very different answer
they just said what we know we know
Mike’s great we’ll treat him just like
we do the other pro players $100,000 a
year and they were asking well is there
anything more to it is there anything
innovative and now on converse side
they’re thinking wow what’s wrong with
this guy we’re going to teach him you
know we’re going to treat him scuse me
just like Magic Johnson treat him just
like Larry Bird and give him a hundred
thousand just like them and he hasn’t
even walked on the court in the NBA yet
come on now this is what we’re going to
do and still Jordan and his dad were
like nothing innovated no other ideas no
there wasn’t and so they left so
converse really had no chance and also
by the way at that time converse was
already kind of losing its footing
because Nike was signing signing coaches
and doing better than converse was and
other shoe companies were making inroads
and converse was also last to do like
innovative fabrics and to do things like
making a basketball shoe out of pure
leather was something that Nike had
already been investigating so really
converse already was cut in the
background
sliding even though they saw themselves
as became the next thing that happened
is they get a call from a very unusual
source OJ Simpson OJ Simpson was working
for the spot built brand as a marketing
consultant
part of his sponsorship agreement with
them because when he was in the NFL the
last part of him being in the NFL he
wore cleats that were called juice
mobiles and that’s was his connection to
spot built so they made these basketball
we made they made these football cleats
for oj I know G is saying we can’t make
basketball shoes for Michael Jordan and
let me tell you I know something about
marketing because I’m everywhere and in
those days Oh Jay was everywhere he’s
with Hertz rental car he was a really
beloved guy that had a very very level
reputation and so he would had all kinds
of sponsorships and he was saying watch
this guy out of North Carolina Michael
Jordan is the next me that’s what oj
said and in his consulting role the
sport belt he said listen you got to go
get this guy so the vp of marketing
which was the son of the CEO and owner
of sport built says hey dad what do we
do and he said if that’s the story and
I’m believing it and I’m trusting it you
go get Michael Jordan and here’s the
quote don’t leave a dime at the door in
other words let’s go get him so sport
built wants to go out and get him and so
Michael Jordan and his agent went to see
them and they said we will make you the
star of our company you will be the
marketing icon of our company you will
be the whole thing and so that was
pretty impressive but you know sports
built versus adidas Michael’s heart was
still with adidas and sport belt big and
cleats but not exactly in other areas so
they left Michael Jordan’s agent next
would make some of the phone calls and
arrangements that would change the
course of history in basketball shoes he
spoke tonight
in basketball shoes and here’s what he
did he called Nike and he talked to Rob
Strasser and he said Rob I want to come
in and see you and I’m bringing Michael
Jordan and we want to talk about
basketball shoes and Rob Strasser did
many big deals at Nike and Falk Michael
Jordan’s agent emphasized to him how big
and important this was going to be well
he calls Michael a Michael
I don’t want to go see Nike I don’t want
to go to more meetings I want you to
call Adidas and get me adidas he says
look they’re in turmoil they got these
things going on that you know the kids
are running the company come on Mike and
he said nope
you know I want to go see a do this well
Bob called
Michael Jordan’s parents James and
Delores and here’s what he said I need
Michael to be at the meeting with Nike I
need him to go to Oregon and so he gets
a call back and says okay I’m going to
Oregon but my parents James and Delores
are coming along and they all went when
they got there they met with strasser
they also met with Peter Moore a
designer and Howard white and Sonny
Vaccaro and Sonny Vaccaro is now
legendary and very well known for he was
the guy that said this is the guy
Michael Jordan is the guy and he is
going to be a huge hit for this company
and we’re going to get him and he was in
the meeting these guys were in the
meeting and they laid it out to him and
they said this is what we’re going to do
for you and they played a video of a
song called jump by the Pointer Sisters
and they put a lot into their
presentation and Michael sat back and
listened and then he said you know one
of the reasons I like adidas is because
they make a slightly lower cut shoe
rather than the tall ones you made and
rather than Nike telling them well
you’ll wear what we give you and that
was pretty typical what would happen
with shoe contracts they said well tell
me about that
maybe we’ll adjust that maybe we’ll
design it differently and that impress
Jordan because now they’re talking about
adapting the shoe to him they don’t just
want to put his name on it and hand him
a check they involved him in the shoe
that impressed him and that would be
important ad they took a little bit of
break and they went into a separate
conference room and made even more
presentations about how they would
market it and what they would do and the
president of Nike Phil Knight came in to
talk and he said his piece and he
explained that they were going to do and
the great meeting was had but Jordan
didn’t say yes at least not yet
he left with an offer and the offer he
left was $500,000 for five years a two
point five million dollar contract
remember Magic Johnson Larry Bird were
getting $100,000 each from Converse and
recently James Worthy had gotten a deal
from New Balance for 180,000 this was an
over-the-top contract but it wasn’t just
that they said we think we’re going to
go places with you and we want you to
participate in the upside of Nike we’re
also including stock we’re giving you
stock in Nike that could make this deal
worth 7 million dollars to you so there
you had Nike putting up to 7 million
dollars on the table unheard of at those
times it was over the top
nothing could say we want you more than
that but they also want to protect
themselves and here’s an important
lesson in negotiation here when Nike
came back and said we think you’re going
to be monstrous we think this is going
to be monstrous but here’s the criteria
if one of these things doesn’t happen we
can get out of the contract early if you
don’t win Rookie of the Year if you’re
not named to the all-star team if you
don’t average 20 points a year 20 points
a game rather in one of your first two
years we could then opt out a little
early in the contract meaning that they
put all these chips on the table and if
he doesn’t turn out to be this
incredible basketball hero this
incredible all-star they could get out
well they looked at it and Michael
Jordan’s side said okay so if he doesn’t
do those things he can get out but what
if he does those things and we still
sell shoes and people like Mike and
maybes you know we think he’s going to
be huge but what if he’s an average
player but people love him and he sells
a lot of shoes and they said ok and if
he sells a minimum level certain million
dollars worth of shoes we’ll stay in the
contract so that was a good negotiating
point to say I want you to do this but I
have to do that and if I do that then
you have to do that back and forth that
is a good two sided contract that’s not
simply I’m the boss I’m writing the
check here it is so don’t ever be afraid
to figure out how can you put like
win-win
situations into your contracts like that
and whether you’re a small company or a
big company you can put clauses in that
really benefit you as well as benefit
your business partner so there it was
they left Nike with that deal and when
they left Jordan didn’t say yes he went
back home and instructed his agent to
call Adidas and say here’s the deal if
you’ll offer me anything close to this
I’m still signing with you
adidas because that’s where his heart
was well guess what happened
adidas couldn’t do it and they weren’t
going to do it and they said that’s it
so now they kind of knew that you know
they were going to go with Nike and the
poor guys over at the spot built believe
it or not they offered more cash than
Nike did they were ready to just just
kill the company to get Michael Jordan
but they said no we’re not going to do
that
Nikes making the shoe they’re going to
adapt the shoe the putting marketing
behind the shoe they got a lot of
marketing muscle we’re going with Nike
so they went with Nike and by the way
speaking of marketing one of the things
that Falk Michael Jordan’s agent asked
to have in the contract was that they
would spend a million dollars on
marketing a year Jordan shoe well the
season rolls around now we’ve got all
this negotiated we have a star we’ve got
sneakers we’ve got everything set up and
the season rolls around everything went
right even the things that went wrong
went right the shoes of Michael Jordan
wore on court that eventually David
Stern then the Commissioner of the NBA
said hey wait a minute you know you’re
all the shoes that the team should match
and those aren’t the team colors even
though they were the team colors red and
black David Stern just didn’t like the
fact that they were really a lot of
black and red and sort of dark sneakers
they didn’t look like white sneakers
where they used to and he wasn’t ready
for that and so he fined him and that
led to a TV commercial
which was very funny and by the way
again those were airships that had been
designed and colored the color of the
ultimate Air Jordans black and red those
weren’t even the Air Jordan sneakers
that were
eventually be on the market which is a
little trivial in the background for you
but nonetheless Nike puts out an ad and
it said this on October 15th
Nike created a revolutionary new
basketball shoe on October 18th the NBA
threw them out of the game fortunately
the NBA can’t keep you from wearing them
and every kid wanted a pair of these Air
Jordans can you imagine that marketing
muscle the NBA said no that that doesn’t
keep you from wearing them well guess
what Michael Jordan averaged 28 point 2
points a game in his rookie season with
the Chicago Bulls and was Rookie of the
Year so the contract was locked in
thanks to that performance and every kid
suddenly wanted to be like Mike and
there are other things that part of this
that were really interesting not related
to negotiation like Nike put those shoes
out there at $65 a pair which was
unheard of you know you know there’s so
many things in the story that are
unheard of you know $65 basketball
sneakers in nineteen you know 85 I mean
that really got some parents revved up
well apparently not all the parents were
revved up because some of the parents
paid up because Nike sold 70 million
dollars worth of Air Jordans by the end
of the basketball season and over a
hundred million dollars in total Air
Jordan shoes and merchandise that year
and then that annual report Phil Knight
said something which I loved this quote
because he’s a marketer and I came from
marketing when I graduated school it was
you know what this was the perfect
combination of a new high quality
product our marketing and an athlete
endorsement and it was an athlete that
matched because Michael Jordan was all
about performance he was all about
scoring but he was also this compelling
wonderful personality who had won a
national championship at North Carolina
and it was a nice guy he was a good guy
and he was a heavy competitor and you
would see him doing dunks with his
tongue sticking out he was such an icon
of the game so quickly and Sonny Vaccaro
of Nike was right he’s the guy
he’s the guy he’s the guy that’s what
Sonny Vaccaro would say over and over
this is our guy this is the guy
well how they done since then that’s a
great story about seventy million
dollars twenty eight point two points
Rookie of the Year eighty-four
eighty-five you know the the iconic
Jumpman logo and twenty-three but where
do they go from there
let’s take a look at some stats now to
see just how massive this brand became
today Air Jordans are 58 percent of the
basketball shoe market that’s pretty
amazing
they are 85% of the basketball shoes
over $100 and they are 77% of the
basketball shoes for kids under 18 these
look at these dominant figures and by
the way kids under 18 they’ve only seen
film of Michael Jordan he retired long
ago they haven’t seen him play alive
with all these teenagers they’re like
wearing Air Jordans
and it’s a brand and it’s transcended
his athletic career to become this
enduring brand of athletic shoes
basketball shoes and by the way speaking
of shoes if you took the Air Jordan
brand and compared it to the total shoe
market in the United States total shoes
it’s ten point eight percent of the shoe
market in the United States and by the
way it sells eight times what LeBron
James does eight times when you think
about LeBron James and being an icon of
basketball today and the success that he
is and coming back to Cleveland and
winning for the city and all the things
that he does and Air Jordan still sells
eight times LeBron James there’s only
one word for that that is damn that’s
amazing equally amazing is Air Jordan
within a year is going to potentially
pass the three billion dollars a year in
sales revenue it’s amazing in it’s
amazing story well that’s this week’s
case study and that is how the
negotiation between Michael Jordan and
converse and Adidas and Nike and sport
belt came together the
brought us the Air Jordan brand it was a
brand that got created by Nike who did
everything they could to win and those
two points stand tall have the guts to
go big but don’t go so big that you kill
your company but you don’t have to be as
big as Nike to do a big deal that
perhaps put your company on the map and
take you further but don’t kill yourself
and point to in the art of negotiating
find ways to put win-win steps in for
everybody because that’s how some of the
greatest deals in history like the
original contract for Air Jordan get me
so that’s the story this week now I need
the pillow the pillow there we go please
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entrepreneurs until next time I’m Tom
Mills Ruth I hope I let you better than
[Music] you
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