David Falk - Sports Marketing, Promotions, and Contracts - Nike Shoe Deal: "Air Jordan"

Nike Shoe Deal: "Air Jordan"

After signing Jordan, Falk quickly made the first major deal with Nike, Inc. The Nike shoe deal, considered the most successful sports endorsement relationship in history by many,coined the "Air Jordan" brand name. At the start of the 80s, only Kareem Abdul-Jabbar had a six-figure shoe deal for $100,000 (with Adidas), and Nike was a small player next to companies like Converse, which had virtually owned the market on basketball shoes through the 1970s. After James Worthy signed an 8-year, $1.2 million endorsement deal with New Balance in 1982, also negotiated by Falk, Falk decided to make large demands to shoe companies for Jordan's services, including his own shoe line and a royalty.

"We decided to stretch the envelope", Falk said. "Instead of calling up the companies and asking them how much they would pay Michael Jordan, we called them up and asked them to make a presentation and explain what they could do to promote him. Needless to say, this got a lot of quizzical replies."

Unbeknownst to Falk and Jordan, Nike had decided to target Jordan as their player of the future. Jordan himself was initially reticent; throughout college he had worn Converse because of the company's endorsement deal with Tar Heels coach Dean Smith, and off the court, he wore Adidas. Jordan had never worn or even seen a Nike shoe before the company contacted him.

Nike's initial offer was $250,000, his own shoe line, and a percentage of the revenues. Jordan already had a standing offer from Adidas for $500,000, and Falk demanded that Nike match the figure in addition to the revenue percentage. Nike came back with an offer of $500,000 and a smaller cut. Falk agreed.

"David Falk elected to take more guaranteed money and less revenue percentage", said (Nike Scout) Sonny Vaccaro. "So out of the chute he lost himself a lot of money. But in retrospect, it really amounted to nothing. It wasn't a big-time bidding war. Probably the most determining thing was Adidas wasn't going to offer him a lot of money. It was the first time that the athlete was going to share in the royalties of the shoe. That was the gamble."

The deal was all the more significant because it was considered difficult to market African-American players in 1984, especially in a team sport like basketball. In fact, Nike insisted on several "outs" in its initial contract with Jordan: the shoe line could be dropped if certain sales figures were not met, or if Jordan failed to make the NBA All-Star Game in his first three years. The shoe line was expected to earn $3 million for Nike in about three to four years. As it turned out, the Air Jordan sneaker earned Nike $130 million in 1985 alone, making their $500,000 contract with Jordan one of the great bargains of all time, a precursor to Jordan's more lucrative deals with Nike, including a 1997 deal for $30 million.