Analysis of the Sport Licensing Deal: NFL, Nike, and Fanatics

This report provides an overview of the licensing agreement between the NFL, Nike, and Fanatics. The deal grants Fanatics the rights to manufacture, market, and sell Nike-branded NFL fan gear for a 10-year period, starting in 2020. The report examines the structure of the licensing agreement, including the roles of the licensors and licensees, the royalty rates, and the scope of the deal. It highlights the importance of licensing in expanding consumer bases and catering to changing consumer behaviors, such as the preference for online shopping. The analysis references the original article from Vox, discussing the implications of the deal for the sports merchandise market, the terms of the agreement, and the strategic rationale behind it, emphasizing the importance of Fanatics' reputation and reliability in securing the deal. The report also mentions that the deal does not include the production and supply of kids’ clothes and jerseys worn by couches and individual football players.

Running head: SPORT LICENSE 1
Sport License -Mod 1-1
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Institution

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Sport License –Mod 1-1
Article Link: https://www.vox.com/2018/5/23/17380964/nfl-nike-fanatics-sports-gear
Overview
Licensed sports merchandise are readily available in a variety of physical and online
stores. The various forms of sports merchandise include athletic equipment, jersey, and home
decorations. In his study, Ozturk (2006) argues that licensed merchandise is a product of
licensing agreements between parties, licensors and licensees. In essence, a licensing agreement
serves as a contractual agreement, which plays a central role in allowing a given organization to
pay a fee or royalty for using entities of another firm, including trademark, name, and patent. For
example, the licensor can choose to lease the rights of its trademark to the licensee. The royalty
rates paid often range between 8 and 20 percent, meaning they can be calculated from a properly
defined payment plan and agreed on revenue sales. As a result, this paper examines elements of a
recent sport licensing deal between Nike and the National Football League (NFL) and Fanatics.
Article Basics
In the article in Vox, “The NFL and Nike have signed a giant 10-year deal with online
retailer Fanatics,” Rey (2018) briefly summarizes a recent deal that saw Nike, in collaboration
with the NFL sign a contract with Fanatics, giving the sport fan gear and apparel store the right
to produce, market, and sell all adult NFL Nike-branded gear. One of the licensors, the NFL, is
the current American football league tasked with the responsibility of leading up to 32 teams.
Licensing sports merchandise helps a great deal in presenting businesses with the opportunity to
broaden their consumer bases, as they can market and sell to an increased number of sports fans
at local, global, and national levels (Grimes, 2016). Concisely, the sports body, the NFL, is the
licensor, while the firm leasing its rights operates as the licensee.

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Hecox (2013), in his recent analysis of Reebok bike business, argues that licensors enter into
licensing deals only after establishing that the other party, licensee, is reliable and reputable. In
this case, the NFL and Nike have entered the agreement with Fanatics since the licensee
possesses the much-needed attributes to utilize their brand appropriately. The NFL has so far
argued that they engaged Fanatics with the sole purpose of achieving and maintaining the instant
gratification trend (Rey, 2018). Although the sale of Nike-branded gear manufactured by
Fanatics will primarily be online through NFLShop.com and Fanatics.com, the merchandise will
also be distributed to other retailers, including Dick’s Sporting Goods.
Deal Terms
Although the agreed fees or royalty is yet to be communicated, the length of the deal will
be a 10-year licensing agreement. In particular, the licensing deal is scheduled to start in 2020
and will remain in force until 2030. The agreement makes Fanatics the sole manufacturer, as
well as distributor and seller, of all Nike-branded fan gear (Rey, 2018). Equally important, the
deal does not include the production and supply of kids’ clothes and jerseys worn by couches and
individual football players. As stated earlier, the deal will allow Fanatics and other stakeholders
in the sports industry to acquire and sell Fanatics’ made NFL fan gear, including retailers,
especially those with brick and mortar stores. Sensibly speaking, the deal remains suitable and
realistic, as it will add value to the NFL Shop, while at the same time, catering for the ever-
changing consumer behavior. The current generation of fans prioritizes convenience since they
want to purchase goods at the comfort of their couches from their digital devices.

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References
Grimes, B., (2016). Licensing update 2016 edition. Alphen aan den Rijn, Netherlands: Wolters
Kluwer & Business.
Hecox, M., (2013). Sport licensing and internationalization: A case analysis of the Reebok bike
business. DOI: 10.4135/9781526436849
Ozturk, H., (2006). Licensed merchandise buying behavior of sports fans. Turkish Journal of
Sport and Exercise, 18(1), 50.
Rey, J., (2018). The NFL and Nike have signed a giant 10-year deal with online retailer Fanatics.
Vox. Retrieved May 28, 2019, from https://www.vox.com/2018/5/23/17380964/nfl-nike-
fanatics-sports-gear