Nike Golf never profitable, Even with Tiger

[raynorfan1]

Excluding the profits from the apparel/soft goods business while apparently including the cost of the Tiger Woods endorsement contract makes the accounting pretty suspect.

 

How does that make the accounting suspect? Phil Knight said they never made money on equipment and balls, it was going on for 20 years, and the next year looked to be the same, so Nike got out of equipment and balls. Sounds like the accounting and related decision is spot on. To make better decisions, you work in smaller increments, not larger.

 

It's suspect if you're counting all of the costs of the TW endorsement deal (something north of $20M per year) as an expense of the Equipment business, ignoring the benefit to the Golf Apparel segment specifically and Nike brand generally that Tiger brings. Allocation accounting is never fun for anybody...

[mallrat]

In general the athletes contracts are not attributed to individual segments. They have a division called Sports Marketing which oversees the handling of all athletes. Now each athlete has a handler with their specific category but Sports Matkeying would never turn a profit on their own because they don't offer any products.

[Bomber_11]

I think Nike may have just taken too long to get to the point where they were making equipment that was competitive across the board. That as well as gimmicky names and color schemes.

 

Sasquatch, Sumo, etc. aren't going to draw much of a crowd. Neither is a red or 'photo blue' crown. It looks cheap honestly.

 

Nike really did make competitive and sometimes superior products w/ the Vapor and Vapor Fly lines, method putters, Engage wedges, VR series, and RZN balls.

 

However, so many things were a big miss leading up to those, that A LOT of golfers had completely taken their eye off of Nike. I was a brand loyalist for a long time (bought my first set of Slingshot irons in high school), and I'll admit I don't think a lot of the early product cycles were up to par w/ their competitors. Even going into Covert 1.0 Nike was still behind the Taylormade's or Callaway's.

 

Not even the Tiger endorsement could make up for the fact that they had a reputation for making inferior, gimmicky products.

 

If I could build a Nike bag that I'd put up against any other OEM's product out there, I'd have:

 

Nike Vapor Fly Pro Blackout driver

Nike Vapor Pro 3w

Nike VR Pro Blades

Nike Engage Wedges

Nike Method Milled 006

 

Damn this is making me wanna build a nostalgia bag...

[Yepyukon]

I was a Demo Tech Rep (or ES) for Nike Golf for 6 years. The quality of the product was not the issue.

 

The biggest issue was the bias. I would be set up between 2 other vendors (say TM and Callaway) and people would make their hike down the fitting line. When they would get to Nike, it was a 50/50 shot if they would even want to hit a Nike club because of whatever bias they had towards Nike/Tiger. Some would come out specifically to hit our product at times, but that was rare.

 

I remember one event where I was there with a co-worker. We had a guy basically tell us that our product was junk and couldn't hold a candle to his driver. We had a FlightScope and asked if he could prove that so we could inform Nike R&D (basically goading him into hitting it). Not only did ours outperform his driver, but it did by a large margin. He said our machine was wrong and stormed off.

 

The other issue Nike Golf had, IMO, was their advertising. Whenever you would see a commercial with Tiger or Rory, they were all swooshed out but it never really talked about the equipment. Hitting balls into a washing machine is cute, but tell the consumer about the product. The compression channel (or speed pocket or speed channel depending on other manufacturers) was released by Nike in 2011, years before some other manufacturers incorporated it...but Nike never let anyone know.

 

Nike Golf never made the best equipment for everyone, but no one does. The sad part was the lack of effort on Nike's part to get new people to play their product and the bias from those that maybe hit one years ago or never gave it a fair chance to try their newer models.

[mallrat]

I was a Demo Tech Rep (or ES) for Nike Golf for 6 years. The quality of the product was not the issue.

 

The biggest issue was the bias. I would be set up between 2 other vendors (say TM and Callaway) and people would make their hike down the fitting line. When they would get to Nike, it was a 50/50 shot if they would even want to hit a Nike club because of whatever bias they had towards Nike/Tiger. Some would come out specifically to hit our product at times, but that was rare.

 

I remember one event where I was there with a co-worker. We had a guy basically tell us that our product was junk and couldn't hold a candle to his driver. We had a FlightScope and asked if he could prove that so we could inform Nike R&D (basically goading him into hitting it). Not only did ours outperform his driver, but it did by a large margin. He said our machine was wrong and stormed off.

 

The other issue Nike Golf had, IMO, was their advertising. Whenever you would see a commercial with Tiger or Rory, they were all swooshed out but it never really talked about the equipment. Hitting balls into a washing machine is cute, but tell the consumer about the product. The compression channel (or speed pocket or speed channel depending on other manufacturers) was released by Nike in 2011, years before some other manufacturers incorporated it...but Nike never let anyone know.

 

Nike Golf never made the best equipment for everyone, but no one does. The sad part was the lack of effort on Nike's part to get new people to play their product and the bias from those that maybe hit one years ago or never gave it a fair chance to try their newer models.

 

This is a very good post. Would like to add that the VR driver with the compression channel is still a monster.

 

Another thing they did wrong was alienate people. In the more recent years they focused on premium and the Modern Golf Athlete which turned a LOT of golfers off.

[Z1ggy16]

Perception is reality, and Nike didn't give the public the perception their gear was as good, or better than TM/Cally, etc. When you think of Nike... What comes to your mind the very first second? For me, it's shoes, and gym clothing, not golf. Nike needed to have an A+ marketing campaign to help distinguish their brand away from what it was also already good at. It's a shame really because when they left market, it lowered supply of golf clubs a bit and now lets TM and Cally charge even more $$ for their stuff and keep prices higher for longer.

[ElJefe26]

Excluding the profits from the apparel/soft goods business while apparently including the cost of the Tiger Woods endorsement contract makes the accounting pretty suspect.

 

How does that make the accounting suspect? Phil Knight said they never made money on equipment and balls, it was going on for 20 years, and the next year looked to be the same, so Nike got out of equipment and balls. Sounds like the accounting and related decision is spot on. To make better decisions, you work in smaller increments, not larger.

 

It's suspect if you're counting all of the costs of the TW endorsement deal (something north of $20M per year) as an expense of the Equipment business, ignoring the benefit to the Golf Apparel segment specifically and Nike brand generally that Tiger brings. Allocation accounting is never fun for anybody...

 

Couldn't agree more with your last sentence!

 

Anyway, the article (did not watch the video) was silent on the contribution of Tiger's contract to the golf equipment margins, but I expect that they were solely evaluating the contribution margin of the golf equipment and balls, ignoring Tiger's endorsement deal.

[mallrat]

An example of my previous post. A very good friend of mine was one of the lest 3 people employed in the equipment division, the last 2 months he was in charge of cleaning things up and doing an inventory.

 

During his clean out of the Oven West he found 2 Trackman's that hadn't even been opened. 2 untouched Trackman's still in the packaging on top of the 2 they had hooked up. Why? Just wasteful spending.

[raynorfan1]

Anyway, the article (did not watch the video) was silent on the contribution of Tiger's contract to the golf equipment margins, but I expect that they were solely evaluating the contribution margin of the golf equipment and balls, ignoring Tiger's endorsement deal.

 

The article is really built around what seems like a pretty off-the-cuff remark from Phil Knight that "we never made money in equipment, even with Tiger Woods behind it." It's not like we got Big 4 audited statements for the unit - who knows what Knight was talking about with respect to costs - but he does tie Tiger to the business pretty closely.

[mallrat]

I think that might be because they thought the TW line had Jordan brand potential with the hope of eventually putting out a TW club.

[BlackM00Nlight]

I think that might be because they thought the TW line had Jordan brand potential with the hope of eventually putting out a TW club.

 

Not going to lie, I was waiting and hoping for true line of TW branded clubs.

[mallrat]

Would have been interesting. A true blade, a fixed hosel maybe 440cc driver and his putter. Would have been curious to see it.

[farmer]

Bomber and Ziggy make excellent points. Nike got gimmicky, and gimmicky nearly killed Wilson. A friend of mine had some Slingshot irons, gimmicky name, and the little piece of steel across the back made them whistle. An idea that was a gimmick to make them seem different, and poorly executed. The latest Nike driver I tried to hit had the big cutout in the sole (copied from Faultless) and the trailing edge of the sole caught in tee box grass. Awkward. As Ziggy posted, golf is not the first thing that comes to mind when Nike is mentioned.

[Z1ggy16]

Bomber and Ziggy make excellent points. Nike got gimmicky, and gimmicky nearly killed Wilson. A friend of mine had some Slingshot irons, gimmicky name, and the little piece of steel across the back made them whistle. An idea that was a gimmick to make them seem different, and poorly executed. The latest Nike driver I tried to hit had the big cutout in the sole (copied from Faultless) and the trailing edge of the sole caught in tee box grass. Awkward. As Ziggy posted, golf is not the first thing that comes to mind when Nike is mentioned.

I wonder, too.... How well could Nike have done if they made a new company just purely for golf, sort of how Adidas did it with Taylormade. Outfit all your players in your larger parent company's gear, but give full range and control of clubs to the smaller company. This way, you don't wash out your golf business with your clothing business, and the golf company can make the brand have it's own image rather than people making an image of it based on the parent company's other goods.

 

I know that's not an awesome example, but I wonder if by being such a large company being in so many different things at once, lead them to the ultimate closing up shop in this specific industry. I think the same thing may have happened with baseball, too? Back in my young kid days I remember seeing some nike bats, gloves, etc... but then in college, it was pretty much just Easton dominating and only Nike stuff you saw were spikes. Easton had this happen to them with hockey... They are no longer in the hockey business due to the almost exact same scenario. And I own Easton hockey gear and it's top notch stuff.

[Bomber_11]

I think that might be because they thought the TW line had Jordan brand potential with the hope of eventually putting out a TW club.

 

Not going to lie, I was waiting and hoping for true line of TW branded clubs.

 

I would've bought those instantly.

 

I'd buy a ball of yarn if it had a TW logo on it

[BlackM00Nlight]

I think that might be because they thought the TW line had Jordan brand potential with the hope of eventually putting out a TW club.

 

Not going to lie, I was waiting and hoping for true line of TW branded clubs.

 

I would've bought those instantly.

 

I'd buy a ball of yarn if it had a TW logo on it

 

Would be handy in those tournaments where you can buy yarn by the foot to use on the green instead of putting!! ????

[KGrinols]

What comes to your mind the very first second? For me, it's shoes, and gym clothing, not golf.

 

While true, it applies to multiple companies who are doing fine.

Bridgestone and Dunlop are the first 2 to come to mind. Wilson and Mizuno cover multiple sports, all of which Golf is likely the least popular or well known.

 

As for people blaming colors, I think that's silly. Cobra has had crazy colors for years, although to their credit they always had a black option available. TM shocked the world with a White driver and are still doing it better than anyone.

Mizuno had the EZ in orange, everything since in blues, Callaway is on a green kick right now.

 

 

In my opinions Nike's issue was very simple.

They're a young mans company and golf is an old mans game.

They were never going to step in from day 1 and steal a significant share of customers.

Nike, in order to succeed, had to concede loses for at least 1 generation of golfers, if not 2-3.

You have to wait for the young men, who grew up with your clubs/clothes, to grow into old men who continue to do so.

I'm 32 and wear Nike to the course every time I play, but my grandfather is never going to be wearing Nike clothing on the course or off.

In 30 years, I'd like to think I'll still be wearing Nike on and off the course, but I can't say for sure.

But the point is it will be another 22 years before my generation becomes the 'average golfer'.

 

I do think you made a great point about what 'could have been' if Nike opened a sister company under a different name. But when you're a company as big as Nike, sometimes it makes sense to try and ride your establish brand out rather than start from scratch. In Nike's defense, all of their pre-golf products, sold themselves simply by the athletes that wear them. It was probably a shocking revelation to them that just putting their equipment in the hands of famous people didn't work from an advertising standpoint, because it's literally been a successful business model for them, for as long as I can remember.

[QuickFeet]

An example of my previous post. A very good friend of mine was one of the lest 3 people employed in the equipment division, the last 2 months he was in charge of cleaning things up and doing an inventory.

 

During his clean out of the Oven West he found 2 Trackman's that hadn't even been opened. 2 untouched Trackman's still in the packaging on top of the 2 they had hooked up. Why? Just wasteful spending.

 

LOL.............Why just have 2 when you can have 4 for twice the money.

 

Sounds like our federal government, one of the best working models on inefficiency and wasteful spending on the planet.

[QuickFeet]

I was a Demo Tech Rep (or ES) for Nike Golf for 6 years. The quality of the product was not the issue.

 

The biggest issue was the bias. I would be set up between 2 other vendors (say TM and Callaway) and people would make their hike down the fitting line. When they would get to Nike, it was a 50/50 shot if they would even want to hit a Nike club because of whatever bias they had towards Nike/Tiger. Some would come out specifically to hit our product at times, but that was rare.

 

I remember one event where I was there with a co-worker. We had a guy basically tell us that our product was junk and couldn't hold a candle to his driver. We had a FlightScope and asked if he could prove that so we could inform Nike R&D (basically goading him into hitting it). Not only did ours outperform his driver, but it did by a large margin. He said our machine was wrong and stormed off.

 

The other issue Nike Golf had, IMO, was their advertising. Whenever you would see a commercial with Tiger or Rory, they were all swooshed out but it never really talked about the equipment. Hitting balls into a washing machine is cute, but tell the consumer about the product. The compression channel (or speed pocket or speed channel depending on other manufacturers) was released by Nike in 2011, years before some other manufacturers incorporated it...but Nike never let anyone know.

 

Nike Golf never made the best equipment for everyone, but no one does. The sad part was the lack of effort on Nike's part to get new people to play their product and the bias from those that maybe hit one years ago or never gave it a fair chance to try their newer models.

 

This is a very good post. Would like to add that the VR driver with the compression channel is still a monster.

 

Another thing they did wrong was alienate people. In the more recent years they focused on premium and the Modern Golf Athlete which turned a LOT of golfers off.

 

Not sure that NIKE Executive Management ever figured out what/who the Modern Golf Athlete is/was. There are about 100 members in the two golf associations I play with; there are probably 5 players that I would put into that label, according to my definition. Most of the members can't fit into their apparel and want a shoe like the Footjoy classics let alone have some Nike equipment in the bag.

[regiwstruk]

Not to pile on but what kills me is how much input the non-golfing parts of Nike had in the golf products. Know a few Oven exes and they said most of the clothing/shoes are designed by people who don't play. Hence, the shoes with "innovative grip technology" or whatever that absolutely wreck a green just by walking on it.

[BlackM00Nlight]

An example of my previous post. A very good friend of mine was one of the lest 3 people employed in the equipment division, the last 2 months he was in charge of cleaning things up and doing an inventory.

 

During his clean out of the Oven West he found 2 Trackman's that hadn't even been opened. 2 untouched Trackman's still in the packaging on top of the 2 they had hooked up. Why? Just wasteful spending.

 

LOL.............Why just have 2 when you can have 4 for twice the money.

 

Sounds like our federal government, one of the best working models on inefficiency and wasteful spending on the planet.

 

Remember that dying old man in the movie "Contact"?? "First rule in government spending: why build one when you can have two at twice the price? Only, this one can be kept secret."

[mahonie]

Heard a couple of guys talking about this at the driving range. They said they were pretty sure Tiger would have already broken Jack's record had he stayed with Titleist.

 

Titleist bleeds more money on its hardware than most other OEMs...only the Pro V1 that keeps it afloat which is why they fight so hard against the likes of Costco when their market share is threatened. Tiger's Titleist clubs were knock offs of his Mizunos in any case...so it's been said.

[mahonie]

Not to pile on but what kills me is how much input the non-golfing parts of Nike had in the golf products. Know a few Oven exes and they said most of the clothing/shoes are designed by people who don't play. Hence, the shoes with "innovative grip technology" or whatever that absolutely wreck a green just by walking on it.

 

Having said that, there was a line of Adidas shoes that was banned from a lot of courses in the U.K. a few years back for that same reason.

 

https://www.golfonline.co.uk/golf-news/adidas-looks-ease-doubts-adizero-golf-shoes-nd-801283857

[27x10.5]

You know I can make my business look 'non-profitable' and still pay my mortgage and do everything I did before. They made money or they wouldn't have been doing it.

[jpdx]

I was a Demo Tech Rep (or ES) for Nike Golf for 6 years. The quality of the product was not the issue.

 

The biggest issue was the bias. I would be set up between 2 other vendors (say TM and Callaway) and people would make their hike down the fitting line. When they would get to Nike, it was a 50/50 shot if they would even want to hit a Nike club because of whatever bias they had towards Nike/Tiger. Some would come out specifically to hit our product at times, but that was rare.

 

I remember one event where I was there with a co-worker. We had a guy basically tell us that our product was junk and couldn't hold a candle to his driver. We had a FlightScope and asked if he could prove that so we could inform Nike R&D (basically goading him into hitting it). Not only did ours outperform his driver, but it did by a large margin. He said our machine was wrong and stormed off.

 

The other issue Nike Golf had, IMO, was their advertising. Whenever you would see a commercial with Tiger or Rory, they were all swooshed out but it never really talked about the equipment. Hitting balls into a washing machine is cute, but tell the consumer about the product. The compression channel (or speed pocket or speed channel depending on other manufacturers) was released by Nike in 2011, years before some other manufacturers incorporated it...but Nike never let anyone know.

 

Nike Golf never made the best equipment for everyone, but no one does. The sad part was the lack of effort on Nike's part to get new people to play their product and the bias from those that maybe hit one years ago or never gave it a fair chance to try their newer models.

 

I 100% agree with the bias statement. I have found that whenever I've let someone hit my nike clubs, every single person is impressed with 1. the quality and 2. the performance. It wouldn't matter if the clubs out performed what they were hitting at the range, they were just impressed that it performed, know what I mean? They already had that bias that nike was junk.

 

 

 

Bomber and Ziggy make excellent points. Nike got gimmicky, and gimmicky nearly killed Wilson. A friend of mine had some Slingshot irons, gimmicky name, and the little piece of steel across the back made them whistle. An idea that was a gimmick to make them seem different, and poorly executed. The latest Nike driver I tried to hit had the big cutout in the sole (copied from Faultless) and the trailing edge of the sole caught in tee box grass. Awkward. As Ziggy posted, golf is not the first thing that comes to mind when Nike is mentioned.

 

you call it gimmcky, I call it innovation and that's one thing that comes to my mind as a company. Nike is not afraid to try something outside the box. Innovation isn't always accepted, and seems to never be accepted by traditionalist. Waffle pattern on running shoes - Nike Innovation. Air pockets - Nike Innovation. As said above - compression channel - Nike Innovation. Some ideas work better than others. In fact, a two piece multi material driver? I think you've heard of the M1/M2 and epic...yet the Vapor Flex 440 (nike guys help me out here...release date was 2015?) came out first...and it's a multi material driver head. hmm...must've been a gimmick right? But I really do like the colors they came out with, but wish they gave options like with shoes or apparel. Probably would be cost-prohibitive though. Nike id clubs! lol

[Z1ggy16]

What comes to your mind the very first second? For me, it's shoes, and gym clothing, not golf.

 

While true, it applies to multiple companies who are doing fine.

Bridgestone and Dunlop are the first 2 to come to mind. Wilson and Mizuno cover multiple sports, all of which Golf is likely the least popular or well known.

 

As for people blaming colors, I think that's silly. Cobra has had crazy colors for years, although to their credit they always had a black option available. TM shocked the world with a White driver and are still doing it better than anyone.

Mizuno had the EZ in orange, everything since in blues, Callaway is on a green kick right now.

 

 

In my opinions Nike's issue was very simple.

They're a young mans company and golf is an old mans game.

They were never going to step in from day 1 and steal a significant share of customers.

Nike, in order to succeed, had to concede loses for at least 1 generation of golfers, if not 2-3.

You have to wait for the young men, who grew up with your clubs/clothes, to grow into old men who continue to do so.

I'm 32 and wear Nike to the course every time I play, but my grandfather is never going to be wearing Nike clothing on the course or off.

In 30 years, I'd like to think I'll still be wearing Nike on and off the course, but I can't say for sure.

But the point is it will be another 22 years before my generation becomes the 'average golfer'.

 

I do think you made a great point about what 'could have been' if Nike opened a sister company under a different name. But when you're a company as big as Nike, sometimes it makes sense to try and ride your establish brand out rather than start from scratch. In Nike's defense, all of their pre-golf products, sold themselves simply by the athletes that wear them. It was probably a shocking revelation to them that just putting their equipment in the hands of famous people didn't work from an advertising standpoint, because it's literally been a successful business model for them, for as long as I can remember.

At the end of the day though, it's all about revenue vs costs. If you aren't profitable.... you'll get shut down. Big, small ... anywhere in between, a smart business owner won't hemorrhage money forever. It's very likely that while Bstone, etc aren't super popular in the golf industry, I'd bet a lot of pennies that they still turn a profit most, if not every single year. Nike's costs (overhead or otherwise) was out running their sales, it's as simple as that.

 

Big name contracts, wasteful spending, R&D that goes nowhere, etc... All contributed to this I'm sure.

[I'_rather_be_golfing]

I highly doubt it took Nike 20 years to figure out they were losing money. And then say hey it's time to jump out while we can. Makes no sense and there is more to the story then what Nike is telling. I'm not a Nike golf fan. The only thing I've ever owned was 2 of their wedges cause they were on sale for $20 each brand new. But, something seems really off if that really matters.

[sfiggins]

Tiger sold a ton of golf shirts for Nike.

[KYMAR]

Sasquatch

 

 

Dymo

 

 

THE WORLDS FIRST CAVITY BACK DRIVER!

 

 

yep, it's a head scratcher.

[ryuartz]

I still think Nike's target audience was mostly young golfers.