Nike Cortez and Onitsuka Tiger Corsair
Nike Cortez and Onitsuka Tiger Corsair

Phil Knight and Bill Bowerman, co-founders of Blue Ribbon Sports (BRS) had thrown down the gauntlet. Despite being in a successful relationship since 1964 with Japanese sports shoe manufacturer, Onitsuka Tiger, and in the middle of an exclusive 3-year agreement to market the increasingly popular Onitsuka Tiger sneakers in the United States, the relationship in early 1973 had disintegrated.

At the end of 1971, BRS produced and sold sneakers under its own brand – Nike, thus challenging the integrity of their agreement with Onitsuka. But it was BRS which fired the first legal shot, filing a suit against the Kobe-based manufacturer, Onitsuka Company. As explained in Sneaker Wars Part 8, Knight and Bowerman believed that Onitsuka had breached their agreement by soliciting other distributors in America before the end of their agreement. Onitsuka then countersued claiming that their trademarks were violated and that they did not solicit other partners in the US until after BRS began marketing Nikes.

According to Kenny Moore in his book, Bowerman and the Men of Oregon, BRS and the leaders of Nike were facing an existential crisis. “If Onitsuka won, BRS would lose the exclusive right to sell the shoes Bowerman had designed. ‘This lawsuit,” Bill said, ‘is win or die.'”

Phil Knight and Bill Bowerman

You can read up on the details of the trial in Moore’s book and various articles on the internet. In the end, a federal judge ruled in Blue Ribbon Sports’ favor, although allowing both companies to market the same shoes in the US, under the condition that BRS had the right to sell them under the trademarked names, including the Cortez, according to this article in The Oregonian.

In the end, Onitsuka Company agreed to pay BRS an out-of-court settlement to end their legal conflict. It took a while to agree to an amount acceptable to both parties, but they finally did. When it came time to sign the agreement and receive payment, Phil Knight and a member of his company’s board, Doug Houser, went to meet the lawyers from Onitsuka company. Houser went on to explain the bizarre interaction that ensued:

The Onitsuka lawyer explained the unorthodox payment method as the result of the difficulty of transferring money out of Japan. He encouraged Knight and Houser to sign some documents.

“And I said, ‘Is that X dollars?'” Houser said.

“And they gulped and said, ‘Well no. It’s illegal to bring that much money out of Japan. And we couldn’t’ bring it all. That’s all you get. But it’s a lot of money and you ought to sign.’ They knew we were desperate and needed money badly.

“But it was grossly unprofessional. Grossly wrong. Morally wrong. Everything about it stunk.

“And Knight said, ‘Eff you. We’re out of here.’

“And we left the conference room and went out into the lobby, punched the elevator button and just like in the movies, just when the elevator opened, the conference room door opened and they hollered, ‘Don’t leave. We’ve got the rest of the money.’

“So we went back into the conference room, they opened a door to an adjoining conference room where there was a second steamer trunk and they said, ‘Now sign the papers.’

After they had officials from BRS’ bankers count the money to assure that their agreed-upon amount was paid in full, Knight signed the papers that brought an end to their legal conflict, and breathed new life into BRS. From that point on, Nike, the goddess of Victory and an emerging brand, began to spread her wings and fly.

Advertisements

Blue Ribbon Sports ad marketing Onitsuka Tiger sneakers

It’s the end of 1969. Blue Ribbon Sports (BRS) is selling Tigers well enough that he, the CEO, Phil Knight, decides to finally become a full-time employee of his own company. BRS has had a fruitful relationship with Japanese sneaker manufacturer, Onitsuka Tiger. The shoe that BRS co-founder, Bill Bowerman, designed – The Cortez – became a dominant running shoe in the run-up to the 1972 Munich Olympics, taking advantage of a running and jogging boom in America.

In the last month of the last year of the tumultuous 1960s, Knight makes his annual trip to Kobe, Japan, to meet the founder and head of Onitsuka Tiger, and later the global brand Asics, Kihachiro Onitsuka. They renew their vows by signing a three-year contract, giving Blue Ribbon Sports rights to market Onitsuka Tigers in the United States, with the condition that BRS sells Tigers exclusively.

The problem for BRS – while they enjoyed the success of selling Tiger shoes, they realized that their contract limited their business range to distributorship, and thus created an increasingly uncomfortable level of dependency on a single manufacturer of sneakers.

The problem for Onitsuka – while they were able to breach the huge American market via BRS, they realized that every year they continued to market in the US through this relatively small and inexperienced player, they were likely leaving millions of dollars on the table unless they expanded the number of distributors in the American market.

Onitsuka was apparently hearing from other American shoe distributors that the potential for US growth was huge, so he realized he had to push harder into the international markets, particularly the US. With that understanding, he hired an aggressive international sales director, Shoji Kitami, to realize his “Onitsuka of the World” strategy, according to Kenny Moore, author of the book, Bowerman and the Men of Oregon. So despite the three-year agreement of exclusivity, midway through, Kitami met with as many as 18 other shoe distributors in America.Bill Bowerman and the Boys of Oregon cover

Knight was concerned that Kitami’s actions were going to lead to a contractual dispute, but Kitami viewed the exclusive nature of their agreement as shackles. Acoording to Moore, as discussions between Knight and Kitami became more contentious, Kitami suggested that Onitsuka Tiger and Blue Ribbon Sports form a joint venture, with Onitsuka holding a 51-percent share of the company.

This was a moment of truth. According to Moore, “the choice was between surrendering the company to Onitsuka or making their own shoes.” And when they thought about it, they were liking less and less their submissive role as middle man. Bowerman had designed a successful shoe – the Cortez – that they could not get manufactured by other companies. And ironically, while Kitani was saying that they need to expand the number of distributors in American to sell more shoes, Knight and Bowerman would scratch their heads since Onitsuka was regularly guilty of not manufacturing sneakers fast enough to meet demand. BRS would put in an order and Onitsuka would routinely export fewer shoes than ordered. How were they going to meet the other distributors’ demands if they couldn’t even meet the demands of their sole distributor?

Knight and Bowerman realized they needed to prepare for a break up with Onitsuka. Soliciting the help of a large Japanese trading company – Nissho Iwai – BRS were able to find another shoe manufacturer as well as secure financing for the initial manufacture of new BRS branded shoes, including 6,000 pairs of The Cortez, which Kihachiro Onitsuka believed to be their own design. This was the chance they needed.

As Moore quoted Knight as saying, “we have them right where we want them. Onitsuka is too slow to react to product development ideas we give them. They never ship what we order. And they’d probably yank the distributorship at the end of the contract in 1972 anyway. What we need is a brand we can control, because we have everything else, the shoes, the top runners. This is the best thing that could ever happen to us.”

Original 1971 Swoosh Design Nike

The logo design was set to grace the new sneaker. Barbara Smit claims in her book, Sneaker Wars, that a design student was paid $35 when he presented the “inverted comma” design, which later was dubbed, The Swoosh. Knight wanted to call the new brand, Dimension 6. As the deadline for producing the sneaker boxes approached, they still did not have a brand name, other than Dimension 6. That is until Jeff Johnson, Nike’s first full-time employee, woke up with an image of Greek goddess of victory in his head. So with a little forceful nudging under the gun of a production deadline, Knight reluctantly agreed to the name, Nike. After all, it was a short name, one that easily fit on a shoe box.

So in the winter of 1971, the Nike brand was born.

barkley and johnson draped in american flag
Picture of Charles Barkley and Magic Johnson with the American flag draped over their shoulders to cover the Reebok logos on their jacket. Barkley and Johnson had agreements with other footwear brands. John Stockton and Chris Mullin, 1992 Dream Team teammates, look on.

Here’s a fascinating article from Yahoo Sports about the sports footwear industry and the NBA, and a few facts:

Fact #1: Only 10 NBA players currently have their own “signature shoe” with a US-based brand. In case you’re interested, they are: LeBron James, Kobe Bryant, Kevin Durant and Kyrie Irving at Nike; Chris Paul, Russell Westbrook and Carmelo Anthony at Jordan Brand; Derrick Rose and Damian Lillard at adidas (James Harden’s shoe will launch in 2017); and Stephen Curry at Under Armour.

Fact #2: A shoe deal for an NBA lottery pick (a person who is in the top 5 or 10 of the NBA draft of high school, college or available international players) could mean earning from USD200 to 700K per year. The article points out that Andrew Wiggins, who signed a 3-year contract with the Cleveland Cavaliers for over USD17million, also signed a 5-year agreement with adidas for another USD11 million.)

Fact #3: Every player in the NBA has a relationship with a sneaker brand; even the benchwarmers, players looking just to make a training camp roster, can get what is called a “merch” deal. Such an agreement with a footwear marketer gets them a free allotment of footwear for practices and games.

Fact #4: Sneaker brands scout out basketball prospects at the college and high school levels, just like basketball scouts do

Fact #5: Nike has dominant share of the NBA player market, as 68% of the 300+ players wear the Swoosh. Adidas is number 2 at 15.6% with about 70 players wearing the three stripes.

For past stories in “The Sneaker Wars” series, see below:

sebastian coe_head of IAAF.png

How do you clean up corruption when it is perceived that all parties are steeped in it?

According to this powerful opinion piece by Juliet Macur of the New York Times, better to go with the devil you know, than the devil you don’t.

She writes how the head of WADA (the World Anti-Doping Agency), Dick Pound, has consistently been blunt and hardline with regards to corruption in athletics, particularly as it relates to doping. (She cites in the article a hysterical quote from Pound about a famous cyclist’s testosterone levels as a case in point.) But for some reason, when it comes to the fate of IAAF leader, Sebastian Coe, Pound somehow found it in his heart to praise and support, not tear down. As Macur wrote, “What had WADA done with the real Dick Pound?”

Coe took gold in the 1500 meters in 1980 and 1984, was elected as an MP in the British Parliament, and has been a leader in the International Amateur Athletics Federation since 2007, recently becoming the head of the IAAF last August. To be honest, it’s a lousy time to be the head of the IAAF, which is under a dark cloud of suspicion.

SEbastian Coe wins gold in 1500 in Los Angeles
Sebastian Coe wins gold in the 1500 meter race at the 1984 Los Angeles Olympic Games

There are allegations of gifts made in exchange for awarding the 2019 world track and field championships to Doha, Qatar. There is the state-sponsored doping program in Russia that was conveniently ignored by the IAAF but eventually exposed by WADA, resulting in Russia’s track and field being banned from international competition, including the Rio Olympics in August. There is the suspected doping of Kenya’s runners, whose performance at the World Athletics Championships in Beijing last August was so superlative, they topped the medals tables for the first time ever.

And finally, there is Coe himself, who very reluctantly disassociated himself from his long-time paid association with Nike. The IAAF awarded the 2021 Athletics World Championships to Eugene, Oregon in the US, with apparently a formal bidding process. Oregon is definitely a hotbed for track, so Eugene’s selection is not a surprise. But Oregon is also the home to Nike. There’s no real indication that Nike, and thus Coe, had anything shady to do with the selection process. But taken all together, the IAAF is not currently a poster child for transparency and ethical decision making.

But as Macur explains, “It can be difficult to find purity at the top of international sports. In track and field, Coe, the former middle-distance star and Olympic champion, just might be the best option. He should serve his punishment for not speaking out against pervasive doping in track and field. His sentence: to clean up his dirty sport.”

Macur goes on to quote 5,000-meter runner and champion, Lauren Fleshmen as saying that Coe probably didn’t know all the corrupt things going on in the IAAF because of its

Nick Symmonds

There was a time when you could get kicked off your Olympic team for getting support from sponsors, an affront to the idealism of amateurism in the 1950s and 1960s. Today, you can get kicked off your team for not accepting support from sponsors.

Nick Symmonds is a USA Track and Field 800-meter champion, but will not be invited to the IAAF Championships in Beijing because he does not want to wear Nike gear outside of competitions, award ceremonies and press conferences. Apparently the sponsorship contract the USTF has with Nike includes “other official team functions.”

Symmonds is personally sponsored by Brooks, and believes he should be able to wear Brooks gear when not competing, accepting awards or talking with the press. “I deserve the right to know what an official team function is,” Symmonds said in a New York Times article. “They haven’t defined that yet.” the article continues to quote Symmonds as saying “the federation apparently wants him to wear Nike gear for the world championships from the time he leaves his apartment in Seattle. That’s absurd.”

According to Runner’s World, Symmonds had to sign a document saying