For example, Nike was the largest sportswear company by revenues in 2022. Nike Inc. generated $49.107 billion in revenues in 2022, Statista estimates. In contrast, the second largest sportswear brand, Addidas AG generated $22.008 billion in revenues in 2022. I estimate Nike’s revenues exceeded Addidas’s by $27.099 billion.

Nike (NKE) is making more money. Yet the company is transforming its marketing strategy.

For example, Nike ended is ending its 27-year partnership with golf legend Tiger Woods. Woods has been a Nike (NKE) spokesperson since 1996. The latest Wood-Nike deal signed in 2013 was worth $200 million. Yet the company let Tiger go in 2023.  

Skeptics will note Woods is aging and no longer dominating professional golf. However, Tiger is still a prominent celebrity with powerful name recognition. In particular, Woods is a hero to millions of older men who golf and spend money on athletic gear. Yet Nike’s executives think they can live without Tiger. Why?

Is Nike’s (NKE) business model dying?

Perhaps, Nike’s incredibly successful business model is dying. Nike (NKE) became the most successful sportswear brand by leveraging celebrities such as Woods and Michael Jordan.

For example, Nike was the largest sportswear company by revenues in 2022. Nike Inc. generated $49.107 billion in revenues in 2022, Statista estimates. In contrast, the second largest sportswear brand, Addidas AG generated $22.008 billion in revenues in 2022. I estimate Nike’s revenues exceeded Addidas’s by $27.099 billion.

Yet, Nike could abandon the business model that created that success. Why?

Does the Modern Media landscape Threaten Nike (NKE)?

I think the fragmenting media landscape could threaten Nike’s business model. To explain, 37 years ago there were celebrities most people recognized.

For example, people who had never watched a basketball game knew who Michael Jordan and Dennis Rodman were. Similarly, people who didn’t play golf knew who Tiger Woods was.

People knew who those celebrities were because they got their news from TV channels that reported on those athletes’ activities. In contrast, today people get their news from social media that only cover topics they are interested in. For example, a golfer does not know who the famous NBA players are.

Don’t believe me. Just ask 10 people on the street, “who is the top player in the NBA?” I predict only one or two of them will mention Denver Nuggets center Nikola Jokić. Michael Jordan calls Jokić one of the greatest basketball players of all time. Yet, most people are unaware of his existence.

Yet, 30 years ago seven or eight out of 10 people would have named Michael Jordan without straining their memory.

How Social Media has Changed Celebrity Culture

Celebrity is losing its value as old media loses its viewers. Old media made celebrity valuable by creating celebrities everybody could recognize. For example, Michael Jordan.

Centralized media created the old celebrity culture that made Jordan and Tiger Woods famous. Constant “news reporting” put their faces before the public making Woods and Jordan famous to non-sports fans. Those centralized media no longer exist.

During the week of 22 to 28 September 1997, America’s most watched TV networks were NBC with 16.52 million average viewers, CBS with 15.29 million average viewers, ABC with 13.05 million average viewers, and Fox with 9.29 million average viewers, Nielsen estimates. I calculate all four networks averaged 54.15 million viewers nationwide in September 1997.*

Interestingly, the same four channels were the most-watched US TV networks in 2023, Variety estimates. Yet, the viewership figures are far lower. For example, NBC averaged 4.537 million viewers, CBS averaged 4.508 million viewers, ABC averaged 3.888 million viewers, and Fox averaged 3.353 million viewers in 2023.

I calculate all four broadcast networks averaged 16.278 million viewers in 2023. Therefore, more people were watching one network, NBC, in 1997, than all four broadcast networks in 2023.

Moreover, I calculate the broadcast networks’ viewership was under 5% of the US population. To explain, the US population was 340.964 million in 2024, Worldometer estimates. For the record, 5% of 340.964 million is 17.0482 million.

Why Nike is abandoning Celebrities

In 1997, the US population was 272.395 people. I calculate the broadcast networks reached 54.15 million people or a little under 20% of the population.

Thus, there are no centralized and curated media that reach a large percentage of the population. Instead, once popular media reach a few million people.

Around 91.56% of Americans (308.27 million people) used social media in 2022, Statista estimates. However, social media users are not all watching the same thing the way TV viewers do.

For example, a Wrestling fan goes to Wrestling Twitter, while a right-wing political junkie peruses pro-Trump Facebook pages. This makes it hard for brands like Nike to reach a mass audience.

In this environment I think it makes more sense for Nike to make sponsorship deals with many social media influencers than a few prominent celebrities. For example, popular YouTubers or TikTokers. For example, 81% of Americans were watching YouTube in April 2021, the Pew Research Center estimates.

Hence, Nike shoes on a golf pro who offers putting tips on YouTube or TikTok, could be more effective than a big check to Tiger Woods. Likewise Nike shoes on a YouTuber who records his play at famous golf courses could reach more golfers than a commercial with Tiger.

Thus, I predict brands like Nike will pay celebrity athletes far less. Endorsement deals will be smaller but there will be far more of them.

How Much Money is Nike (NKE) making?

Nike (NKE) is making more money. For example, Nike’s quarterly revenues grew from $13.32 billion in November 2022 to $13.39 billion in November 2023. However, the revenue growth rate is small, just 0.55% between 2022 and 2023.

Conversely, the quarterly net income grew by 18.56% from $1.33 billion in November 2022 to $1.58 billion to November 2023. Nike reported an 11.79 net profit margin on 31 November 2023. The net profit margin grew by 17.9% between 2022 and 2023.

Impressively, Nike’s cash from operations grew by 181.42% to $2.82 billion in November 2023. Google Finance estimates Nike’s cash grew by $1.74 billion between November 2022 and November 2023. Finally, the free cash flow grew by 273.93% to $2.55 billion between November 2022 and November 2023.

Conversely, Nike’s cash and short-term investments fell by -6.53% to $9.93 billion between November 2022 and November 2023.

What Value Does Nike (NKE) Offer?

Nike (NKE) lost value last year. Its total assets fell by 6.16% from $39.65 billion in November 2022 to $37.2 billion in November 2023.

Similarly, Nike’s share price fell from $127.94 on 11 January 2023 to $105.06 on 12 January 2024. I think Mr. Market prices fairly given the fall in assets. However, Nike has less debt. Its total liabilities fell from $24.38 billion in November 2022 to $23.06 billion in November 2023.

I consider Nike a bargain because it will pay nine 37¢ quarterly dividends between 3 April 2024 and 2 January 2026. Overall, Nike shares offered a $1.48 forward dividend and a 1.42% forward dividend yield on 11 January 2024.

Nike’s brand still offers enormous value. However, the company will need a new marketing strategy to preserve that brand in today’s media environment.

*https://www.cbssports.com/golf/news/tiger-woods-splits-with-nike-golf-after-27-year-relationship-there-will-certainly-be-another-chapter/

*https://www.cbssports.com/golf/news/whats-next-for-tiger-woods-four-golf-apparel-options-to-consider-following-nike-split-after-27-years/

*https://www.statista.com/statistics/900271/leading-sportswear-and-performance-wear-companies-by-sales-worldwide/

*https://www.ratingsryan.com/2021/05/weekly-nielsen-ratings-1997-98-tv-season.html

*https://www.statista.com/topics/3196/social-media-usage-in-the-united-states/#topicOverview

*https://www.pewresearch.org/internet/fact-sheet/social-media/?tabId=tab-3814afe3-3f3c-4623-910b-8a6a37885ab8

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I calculate all four broadcast networks averaged 16.278 million viewers in 2023. Therefore, more people were watching one network, NBC, in 1997, than all four broadcast networks in 2023.
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