The myth of inimitability: How Under Armour made the most of Nike’s tactical error

Klue

Basketball is changing and Stephen Curry is the ambassador of the new, long-game. As he leads the Golden State Warriors toward another championship, there is a debate about whether a four-point shot should be added to the game. That is the impact that Curry has made on the game in just a few years. It’s the same kind of tide shift that happens when an industry is disrupted by a new idea. The status quo is challenged and new players have the opportunity to grow and influence while incumbents rush to catch up.

“The game has changed, no question about it…The game evolves.” Larry Bird

Much has been made of Curry’s influence on the game and what ESPN calls the marketing heist of the century. In 2013, Nike did not re-sign Curry to an endorsement deal, and he went to Under Armour. Frankly, it’s not much of a heist if you leave the vault wide open. Nike didn’t lose Stephen Curry to Under Armour but they made a big mistake letting him go. They underestimated his potential as a player and as an influencer on both the game and the culture that surrounds it. As a result, they’ve given a scrappy competitor the opportunity to gain momentum and market share.

When Curry’s contract came up for renewal in 2013, Nike mishandled negotiations and declined their first-right to match an offer from Under Armour. Nike opted out of a deal that would have cost them about 0.04% of their $102 billion market cap. And they behaved rather poorly while doing it: the contract meetings were not attended by top management, Curry’s name was mispronounced on one occasion and the pitch deck featured the name of another player, Kevin Durant. In perhaps the biggest slight, they offered the opportunity to sponsor a camp for young players with potential to two other players, even though Curry had been very vocal about how much that meant to him.

Presumptive attitude cost them. No one’s forecasting the end of an empire here, but the threat is the potential for a competitor to gain valuable ground. They almost did it again last summer with Kevin Durant when they lowballed the first offer to renew his contract. It wasn’t until the last minute that Nike stepped up to match an almost $300 million offer from Under Armour. 

So, the question is, why? This is a successful company run by smart people making good decisions. Why did Nike take a pass on the ‘world’s greatest basketball player’ and hand him to a hungry competitor? They based the future on the present and failed to account for some external influences.

They missed some key indications that the game of basketball itself was evolving from a flash and dunk spectacle to Curry’s long-game style of play. His three-point play dominates the game, as thousands turn up before every game to watch him warm up. He will likely lead the Warriors to their second championship in as many years. Curry’s hustle and grit mentality reflects larger societal trends. Under Armour is more aspirational than inspirational. Their I Will What I Want attitude speaks to millennial emphasis on the individual—circumstance be damned. Nike, on the other hand, offers up larger-than-life figures like Michael Jordan and LeBron James. They’re figures to look up to, but it’s understood that few will ever breathe the air up there.

It’s difficult, if not impossible, to go head-to-head with a market leader like Nike. They have more resources, more money and more brand recognition. They build player images and empires. Under Amour, like any up-and-comer, had to find other ways to build relationships with players. They threw support and merchandise behind a lesser-known player, Kent Bazemore, in hopes that it would gain them presence with other players. It did. Bazemore was a key influencer when his friend, Curry, was wondering whether he should stay put with Nike or move to Under Armour. The company supports long-term relationships by staying loyal and honouring what matters to the players. Under Armour outbid Nike by nearly 7x for representation on campus at Bazemore’s alma mater. This is a stark juxtaposition of the way Nike denied Curry a basketball camp during his renewal talks.

Under Armour recognized the potential value that a player like Curry could bring to their ‘locker room’ brand. They’ve made great strides in the basketball footwear category, but to expand into urban culture, they need to tap into something deeper than trophies and swag. Sneakerhead culture remains unimpressed with the Curry brand so far, but that may change with the upcoming Curry 3 model. Nike opened up a huge runway for them when they basically gave them Stephen Curry, two-time MVP and fan-favourite. Under Armour’s sales in the basketball footwear category increased 41% in the first year of Curry’s contract and Morgan Stanley recently suggested that his value to the company may be in the neighbourhood of $14 billion.

It’s a common first misstep in a company’s decline. Calm down, no one is suggesting the imminent demise of a company with a 95% market share. And yet. Leaving the door open, even a little, welcomes speculation and doubt. Competitors—big 0r small—will begin to chip away at that gap. Arrogance and apathy are perhaps the most common causes of disruption.

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