Adidas

Knight bet Japanese running shoes would do to Adidas what Japanese cameras did to Germans. In a Stanford entrepreneurship seminar paper, Knight argued that running shoes could follow cameras, which had cut deeply into a market once dominated by Germans. His classmates met the presentation with boredom and not one question.

He kept going anyway, spending weeks in the library on importing and exporting. Blue Ribbon began with 12 pairs of Onitsuka shoes sent to a man in his 20s living with his parents, and it became Nike.

Founders▶ 6:54

Knight pitched Onitsuka on pricing its shoes below Adidas. Knight went to Japan and said that if Onitsuka shoes reached American stores at prices that undercut Adidas, the venture could be hugely profitable. Most American athletes wore Adidas, so he aimed at the leader's customers on price.

The first shoes arrived in Oregon about a year later. He sold them to athletes by word of mouth and from his car.

Founders▶ 9:26

Knight deliberately cast Adidas as a monster to keep himself driven. Adidas had dominated the shoe market for a couple of decades with the arrogance of unchallenged dominance, and Knight hated looking up each day to see it far ahead. He admitted he might need to see them as a monster to motivate himself.

The contempt kept him driven for the whole long climb. Per the host, Nike eventually became the most successful athletic company in history. Knight said: "I needed to see them as a monster."

Founders▶ 34:39

Adidas could not match the royalty deal that won Michael Jordan for Nike. In 1984 Nike offered Jordan a $2.5 million guarantee over five years, a 5% royalty on gross sales of the whole Air Jordan line, and later stock options. Converse and Adidas had too many stars and too much to lose to match an upside deal, while Nike had nothing to lose.

Air Jordan sold $126 million in year one against an internal goal of $3 million over three years. Jordan's first-year royalty roughly equalled his whole seven-year Bulls contract. The Nike episode notes Adidas offered Jordan about $100,000 a year.

Acquired▶ 2:17:59

Nike's scale let it outbid Adidas for the biggest athletes. Nike is twice Adidas's size, and Adidas is much larger than the next player. The hosts argue the main game is customer acquisition through the biggest athletes, who go where the largest machine pays most. Kobe left Adidas and, reportedly, paid $8 million to join Nike.

Nike holds 86% of performance basketball shoes and 96% of lifestyle basketball. Adidas's gross margin of about 46% edges Nike's 44%, and the source notes Adidas stumbled in 2018.

Acquired▶ 3:09:54

WeWard pitched brands like Adidas on commission-only affiliate deals. WeWard approached affiliate platforms and brands directly, offering to promote them for a commission. Brands carry little risk because they pay only on sales, and tracking technology is already in place. WeWard works with Nike, Adidas, Expedia, Booking.com and Amazon.

The wellness setting makes brands happy to be associated. Yves Benchimol: "They just pay a commission of a sales and there is all the tracking technology that are already in place."

Sub Club▶ 22:11