BULL MARKET: The greening of Jordan

Originally published May 1, 1988.

From Time Jordan watches to Air Jordan shoes, Michael Jordan is using a carefully crafted game plan for commercial endorsements to slam dunk a fortune into his bank account.

His moves in the business world are rivaling his moves on the court, and they’re making him a lot more money.

Endorsements for everything ranging from ethnic hair products to bank consulting services provide him with an estimated $4 million annually, far more than the $830,000 salary he earns this year under his current Chicago Bulls contract. And, if his business strategy works as planned, his endorsements will continue to pay long after his basketball career is over.

”You want to get to the point where . . . he’s such an institution, his popularity will never decline,” said David Falk, senior vice president at ProServ, which represents Jordan. “I think Michael Jordan has the opportunity to become a classic.”

Though he concedes other players may envy Jordan’s endorsement income, Falk says history will view the Bulls guard as a pioneer. “His success opens doors. There’s a tremendous rub-off from Michael onto other players. People like Michael Jordan have had a major role in the comeback of basketball.”

Jordan’s ascent has coincided with the sport’s remarkable rejuvenation. Less than a decade ago, many National Basketball Association teams were plagued by drug scandals, financial chaos and fan discontent with players they viewed as lazy and overpaid.

”We faced a lot of negatives,” said the NBA’s Rob Millman. “We were really a minor-league sport in many people’s eyes.” It’s no surprise that endorsement dollars went elsewhere.

But just a few years later, with a more effective drug program, sounder finances and heroes like Jordan around, the NBA is hot. Television ratings and attendance are soaring. Bulls season ticket sales, for instance, have jumped from 4,800 last year to 11,200 this year, and may top 13,000 next year, according to Steve Schanwald, Bulls vice president of marketing.

Other Bulls celebrities also are getting into the endorsement act, said Schanwald, though he wouldn’t disclose their outside incomes.

Head coach Doug Collins “has gotten real hot,” endorsing Frito-Lay snack foods, Ameritech cellular phones and the Gallagher clothing store, in addition to radio and television contracts, Schanwald said. Players Scottie Pippen and Charles Oakley pitch for City Chevrolet, he said.

Most Bulls team members get free equipment from athletic shoe companies and earn money for personal appearances. But for the average player, income from commercial endorsements is “zero,” he said. “It’s not fair to compare people to Michael Jordan.”

One reason for the disparity is that companies are spending more money on fewer players.

A decade ago, Nike had 68 percent of NBA players under contract to wear its shoes on the court, according to company spokesman Kevin Brown. Now it hires “a very small percentage,” he said. “Before you can work acceptably with any athletes in a sport, you have to have a manageable group. When the group of people is just outrageously large, that’s called overhead. We’ve cut way back.”

As Falk puts it, “One Michael Jordan can do more than 50 lesser players.”

That’s certainly been Nike’s experience. In the nine months after it introduced the first Air Jordan basketball shoes in March, 1985, the Beaverton, Ore.-based manufacturer chalked up $110 million in wholesale revenues from the new line. It sold another $15 million worth of Air Jordan-branded apparel in the first nine months.

That enormous success helped Nike rise from the ashes of the running boom and hold its own against the explosive challenge of Reebok aerobic shoes, industry experts say.

”It’s probably the best thing that ever happened to that company,” said Sportmart buyer Larry Holleb.

Nike’s newest model of the Air Jordan shoe, which contains a capsule of compressed gasses for foot support, is aimed at a smaller market of adult customers willing to pay for technical innovation. Targeting that rarefied niche rather than aiming the shoes at a broad consumer market is one way to avoid overexposing Jordan, Brown said. “A fan doesn’t want to see a high-quality athlete exploited.”

While the Nike deal was Jordan’s first big commercial venture after he joined the Bulls in 1984, others quickly followed, including McDonalds, Coca-Cola, Chevrolet and Wilson Sporting Goods. Now Jordan, marketed as a clean-cut, charismatic role model for youngsters, spurns many more deals than he accepts.

”You have to be very selective and turn down things that don’t fit or you’ll lose the momentum you’re striving to build,” said Falk. “We want products that fit his image and are complementary.” Pepsi wouldn’t be an appropriate replacement for Coke, he noted, since McDonald’s serves the latter soft drink.

”The plan is aimed at creating long-term, possibly lifetime, corporate partners for him,” said Falk. “Nike, Coke, McDonalds - we hope these people will be with him for 20 or 30 years.”

Now, as Jordan’s 3- to 5-year endorsement contracts are renewed, he is de-emphasizing time-consuming personal appearances and stressing television advertising, which provides more bang for his efforts, Falk said.

Jordan also will try acting in music videos, an upcoming motion picture and possibly his own television program, according to Falk. He may expand his influence in golf, another sport he excels in.

”It takes a significant amount of time, but he’ll continue doing these things only if it’s manageable,” Falk said. “He feels, and we agree, he’s more than a basketball player.”