Phil Knight: Nike Lost Money For 20 Years On Golf Equipment

Talking to Bloomberg Television's David Rubinstein, the Nike founder declares that in spite of Tiger Woods, the company could never be profitable on equipment sales.

After mentioning their recruitment of Woods had started three years prior to Tiger turning pro, Phil Knight says the math was simple.

“It’s a fairly simple equation, that we lost money for 20 years on equipment and balls,” Knight told interviewer David Rubenstein, host of “The David Rubenstein Show: Peer-to-Peer Conversations.” “We realized next year wasn’t going to be any different.”

The Bloomberg TV interview airs Wednesday at 9 pm ET.

Comments

[Tom]

Nike equipment was always just a tad behind the other big name brands. Good but not great, with a high price tag.

[Steve Pike]

Nike wasn't in the clubs and balls business for 20 years, but Knight's point is well-taken.

[Sari]

That may be so, but their equipment wasn't as good as TM, Ping, Callaway, Titleist, etc..

[Chicago John]

Can we shed light on the accounting behind that? Were the endorsements deals of Tiger & Rory counted in the Nike Golf division? If so, then they have no one but themselves to blame.
I don't doubt that golf equipment is growing tougher and tougher to make money on. Like all industries, people are shopping online and saving boat loads of money. Why buy a $450 driver when you can buy it next year for $250?

[Greg B.]

No surprise. Their equipment, especially in the early years, wasn't as good as the competition, they had big expenses in R&D and marketing, plus the endorsement contracts were likely a large burden. Seeing various players struggle after switching to their clubs did not help, even if it wasn't totally the fault of the product.

[ChuckDietzenTNnotIN]

Not surpirsing. I was thinking same as Chicago John re: inclusion of player endorsements in the calculation of the bottom line.
This seems to me a tough, competitive business, and Ping, Taylor Made, Titleist, Cobra, Wilson, Mizuno, etc. are formidable.

I also wonder if PXG is capable of a profit. Also, Bob Parsons may have the means to sustain loss in his endeavor for some time.

[Greg B.]

I'm pretty sure pro golfer endorsements are charged to the golf division and not corporate.

Bob Parsons may well have the financial resources to finance losses year over year but you have to think that the ego involved would not tolerate that for very long and he would eventually want to move on to something newer and shinier.

[Insert Fish Hook In Mouth]

Yes, and Forest Gump was a box office flop that drained the studio dry!

Please! You mean to tell me that some of you don't smell the stinky fish here?!?!

[Marky Mark]

Maybe instead of going full bore into mass market clubs, Nike should have gone "Miura" and just created limited edition classic irons to develope a cult following. Just use players to endorse clothing like they do now and create a myth with the occasional production run of irons.

And should have stayed away from drivers and putters. Expensive R&D is essential but will hardly guarantee success.

[davidy48]

Surely Michelle Wie could have turned it around ?

[David]

Nike is not alone in finding that the golf market is none profitable.the major companies are to blame for producing over price clubs then dumping at half price.
The only creditable company is ping who do not dump .
You cannot blame the consumer for looking for a better deal and buying on line but if unless serious action is taken soon we will no longer be able to seek advice from the club fitters /golf pro as to what will be the best for us.

[Zimmer]

I look at all of these club companies and wonder how many sets of clubs have to be sold just to pay for ONE commercial placement on tv.
I just don't get it.

[Pat(another one)]

Nike's product was not so inferior as people like to claim. There is just a big bias against a Nike coming into the "established" golf companies' playgrounds. Their balls were made by Bridgestone for pete's sake.

From an accounting perspective, the Woods and later McIlroy endorsements probably hurt them large. But I think their other big mistake was insisting on head to toe. Look at how many guys wear Nike now. I can't help but think that would have helped club sales if that had been the case early on.

[ed]

Should have gotten Greg Norman involved.