It's still early, but it looks as if Nike has landed itself the deal of the century. Last week the company signed Tiger Woods to a five-year endorsement contract worth an estimated $100 million. That's the largest deal ever offered to an active athlete and eclipses even Michael Jordan's contract with Nike. (It is not, however, the largest athletic endorsement deal in history: In December 1999, George Foreman signed a five-year, $137.5 million deal with Salton, maker of the George Foreman Grill.) Sure, Woods's numbers seem excessive—the average American worker, after all, tries to get by on a meager $25,000 a year. But on closer examination, what's striking isn't the size of the Nike contract, but the value of what the company is getting. In other words, at $20 million a year, Tiger's a steal.
When Woods turned pro in 1996, he signed a five-year, $40 million contract with Nike that, at the time, was shocking. Tiger's father, the sage and prophetic Earl, said then that before the contract was up it would look like "chump change." Earl was right. Since the deal was signed, Nike's fledgling golf division has grown from $100 million to $250 million in revenue.
Looking beyond the spreadsheet, Nike gets far more from its association with Woods. Nike is ubiquitous, and so is Tiger. Viewed that way, Nike can't afford not to have him. The crux of the company's marketing strategy is to be everywhere, to have the swoosh stamped into the unconscious, so that when you go into a Foot Locker you head straight for the Nike rack. Michael Jordan did mat for Nike for 15 years. Tiger Woods does it now, and given the length of a golfer's career, he can serve as the standard-bearer for the brand for far longer. "There were three people for whom the American public has broad, powerful associations: Bill Cosby, Colin Powell and Michael Jordan," says Ravi Dhar, a professor of marketing at the Yale School of Management. "Now there are four."
To date, Nike is barely in the golf business. In May it had 1.3% of the $1.5 billion ball market. Then, within two months, Woods won the U.S. Open, the British Open and the PGA Championship using a ball with a swoosh on it. By July, Nike's share of the ball market was 2.3% and rising. Watch what happens when Nike starts selling clubs—even if Tiger doesn't use them. Nothing but upside.