Rory McIlroy Joins Highest-Paid Athletes After Blockbuster Nike Deal

Rory McIlroy (Photo credit: internetsense)

The worst kept secret in golf was confirmed today when Nike announced the signing of Rory McIlroy to a long-term endorsement deal that covers apparel and equipment. McIlroy is making his season debut this week at the Abu Dhabi HSBC Golf Championship and will use a Nike ball, putter and driver.
The deal is worth a reported $20 million annually, although multiple sources told me the deal is worth significantly less than $20 million (terms of the deal were not announced). Even at $10 million to $15 million a year, the deal catapults McIlroy near the top of the world’s highest-paid golfers. McIlroy ranked fifth in our August look at the sport’s top-paid players, but after leading the PGA and European Tours in earnings in 2012, as well as signing with Nike, McIlroy will jump to third behind only Tiger Woods and Phil Mickelson among active golfers.
“Rory is the sport’s new number one and its future,” says Ed Kiernan, president of sports marketing agency Engine Shop. “Nike fills its global rosters with the best athletes in every sport, and clearly it has decided that Rory is the future of the sport based on his performance on the golf course and his ability to attract the public eye.”
The deal has been telegraphed over the past few months as McIlroy ended previous endorsement deals so he could sign a “head-to-toe” Nike pact. Acushnet announced in October that it would not extend its deal with McIlroy. The Irish golfer used the company’s Titleist and FootJoy gear since he turned pro in 2007. Longtime partner Jumeirah said this month it would part ways with the golfer after five years. McIlroy’s agreement with Oakley was set to expire at the end of 2012, but the sunglasses-maker sued McIlroy and Nike, citing breach of contract because Oakley did not receive “right of first refusal” to match the Nike deal. McIlroy will continue his endorsement deal with watchmaker Audemars Piguet.

Nike’s golf division had revenues of $726 million for the fiscal year ending in May, up 10% from 2011. This comes on the heels of three straight years of declining revenues. The McIlroy signing pairs him with Woods, who Nike used to launch a golf division when Woods turned pro in 1996. The two recently filmed a TV commercial together that Nike aired at Monday’s press conference.
What does this mean for golf and Nike’s alpha dog Woods? “This shows that Tiger has been moved into second position when it comes to the future of Nike Golf,” says Kiernan.
McIlroy might be the future of Nike Golf, but Woods is still expected to cash a bigger annual check from Nike under his current agreement (ranking and tournament bonuses will ultimately determine who earns more). Woods re-signed with Nike in 2006. The deal paid Woods as much as $30 million a year, as Woods racked up 14 major championships. Woods’ latest deal was scaled back, according to multiple sources, after his 2009 car accident that knocked Tiger from his perch as the perfect pitchman. Woods’ Nike deal and Mickelson’s deal with Callaway Golf are the only endorsement deals in golf comparable to McIlroy’s.
Woods is still the most dominant brand in the sport, delivering nearly 50% more airtime for sponsors than McIlroy in 2012, according to a study done for Forbes by brand analysis and research firm Repucom. Woods is a polarizing figure, but he remains a much more popular player among sports fans in the U.S. than McIlroy. Repucom’s monthly survey of fans asks people to select their three favorite golfers and 45% picked Woods. Mickelson ranked second at 42%, while McIlroy ranked fifth with 16% between Fred Couples (19%) and Tom Watson (15%).

McIlroy is gaining momentum though as only 10% of U.S. sports fans choose him among their favorite golfers at the start of 2012. Nike will put its full marketing muscle behind McIlroy because the demographics of golf fans make them an attractive target. Die-hard golf fans are twice as likely as general sports fans to earn more than $100,000 annually, according to Repucom. This group buys a lot of golf balls, equipment and apparel. Golf fans are also loyal with 78% of die-hard golf fans saying they’d consider a sponsoring company’s brand, behind only Nascar (80%) among the major sports. This is what Nike had in mind when committing millions to McIlroy.
“Nike needs the faces of its brand to be competing at the elite level, and it has determined that Rory is the next superstar of golf,” says Kiernan. “By signing this deal, Nike is making a huge statement about who it thinks is the new face of golf on a global scale.”