Nike: Out of the golf equipment business

[chspeed]

1 hour ago, jbishop15 said:

Millennials (like myself) would like golf more if it wasn't so expensive. So many fixed costs: balls, clubs, green fees, cart fees. If it wasn't for the fact that I'm still covered under my parents membership, I wouldn't be able to afford to play anywhere. Not consistently, anyway. 

A little OT, but fixed costs are ones that don't change regardless of how much you produce (or in this case, how much you play). Clubs and membership dues are fixed costs. Green fees, balls, cart fees, etc. are variable costs that change depending on how much you play.

I think the fixed costs of golf are relatively low (you can buy a cheap pair of used clubs), but greens fees and other variable costs are too high for many people. I'm worried about the future of U.S. golf, and the viability of many rural clubs and munis that just can't turn a profit. Like other sports (e.g. US tennis), I'm afraid we're in a bit of a downward spiral. The fewer kids that play, the fewer top American players we'll see, which in turn discourages even more young promising athletes from pursuing golf and discourages municipalities from subsidizing courses.

I don't know what the answer is, and I'm not an alarmist, but I'm afraid that Nike divesting from golf, Adidas trying to get out, and other equipment manufacturers struggling are harbingers of rough times ahead.

Edited August 4, 2016 by chspeed

[Chris223]

This is dissapointing to me. Not ready for new irons yet but was planning on another set of Nikes.  I have loved my Ignite irons since I got them.  They are still a joy to use.  Never really did care for many of the balls and shoes and other Nike stuff.  But love my irons.  Maybe I'll take a peak and see if I find a good deal on a set.

 

so does this mean Rory and Tiger go back to Titliest or do they continue playing their current sets of Nike for a while?

Edited August 4, 2016 by Chris223

[Hardspoon]

29 minutes ago, chspeed said:

Like other sports (e.g. US tennis), I'm afraid we're in a bit of a downward spiral.

Participation in tennis is actually increasing (not much, but increasing).  Of course, if you instantly eliminated 20% of golfers in the US, participation would still exceed that of tennis.

(http://www.tennisindustry.org/cms/index.cfm/news/tennis-participation-in-the-us-grows-to-179-million-players/)

[Jeremie Boop]

I think Nike had hung a lot of their marketability on Tiger. When Rory failed to pick up in popularity enough to fill the void in Tiger's absence they struggled to keep their brand in the forefront enough to keep up with the other companies. I could be way off, of course, but that's just my take on it.

[Shindig]

Huh.  I was debating the now-discounted Nike Vapor hybrids the other day.  I have a $300 gift certificate burning a hole in my pocket.  I might just wait until I can get a Titleist fitting and go with their hybrid, since I think it's safe to say they'll stick around longer. 

[Gunther]

15 minutes ago, Shindig said:

Huh.  I was debating the now-discounted Nike Vapor hybrids the other day.  I have a $300 gift certificate burning a hole in my pocket.  I might just wait until I can get a Titleist fitting and go with their hybrid, since I think it's safe to say they'll stick around longer. 

Who cares how long they're around?  You could get a Nike driver, 3-wood, and a hybrid for $300.  They're decent clubs, not like you're gonna need maintenance on em in a year.  That's the better move.

[mvmac]

Live look at Rory's phone 

Calling it now, Tiger will go with PXG 

[Golfingdad]

1 hour ago, Gunther said:

Who cares how long they're around?  You could get a Nike driver, 3-wood, and a hybrid for $300.  They're decent clubs, not like you're gonna need maintenance on em in a year.  That's the better move.

That was my first thought too.  It's not like we're talking about computer software here where you need continued support. ;)

[pganapathy]

This would actually be the perfect time to buy Nike golf clubs.  You get something at a good price that you can keep for years together.  I have a set of Dunlop irons that are a rip on an Ernie Els iron set that are over 15 years old and they still play perfectly well with my dad using them.  All you really need to change on golf clubs is the grip and those are standard to all sets.  Buy buy buy.  Nike sets on fire sale is the perfect way to go

[Spitfisher]

10 hours ago, Hardspoon said:

Huh. I hadn't heard about this.

Rumors of golf's decline are greatly exaggerated. It is just no longer profitable for what is basically an apparel company. 

Your notion of  "greatly exaggeration"is false, golf has been flat on growth since 2000 and is now experiencing a steep decline in participation. Ages 10-21 playing 3 times a year has not been this low since the 60s.

why do you think Titleist was sold, Taylormade is for sale, rumours of cobra for sale and now Nike is just shutting their doors?

Tiger got people to watch golfs,not play golf.

[boogielicious]

10 hours ago, dennyjones said:

Makes one wonder what becomes of the tour pros that use Nike products.   I'm sure they will be courted to go other places.   Nike gambled on Tiger and Rory and it hasn't turned out the way they envisioned.

I'm sure they made back their money on Tiger. Rory on the other hand...I wonder if they have to honor they whole contract? They gave him something like $200MM, correct?

They do make excellent clothing.

[imsys0042]

Golf was profitable for them, but it was their least revenue producing division and I think with Tiger out and the potential that you know have several top players instead of one dominating (and Nike only having one of them) coupled with what a lot of people think is a decline for the game, they got out.

I personally don't think that golf is in decline, but I think there was a boom and now we are coming down from that.   I don't think it's more of a challenge to get younger people into the game now compared to going out with hard to hit persimmons and irons years ago and golf being seen as a stodgy thing.  It might not be the coolest thing around, but it's not the plaid pants that your granddad wears kind of vibe anymore.

One problem is that so many of the newer courses in the past 20 years are just not accessible for beginners.  At least from what small perspective I have.   Overdone, too long and too costly.

As an aside on Nike's take, recently my daughters and I have been playing Disney Infinity (video game),   They love it and a lot of people do as well.   It's the number one game of it's type.  Disney discontinued it and got out of the video game business.  Why?   It was making money, but not considered to make "enough" money.   That's how big companies work and I suspect that post-Tiger Nike looked at the next few years and made a decision to focus elsewhere.   

[CarlSpackler]

11 hours ago, jamo said:

I guess my bag is all of a sudden full of antiques!

I was thinking the my son's set of Nike clubs just became collector's items.

[Spitfisher]

57 minutes ago, boogielicious said:

I'm sure they made back their money on Tiger. Rory on the other hand...I wonder if they have to honor they whole contract? They gave him something like $200MM, correct?

They do make excellent clothing.

Sponsorship is viewed two ways, 1 the influence of product sales.  clothing yes, clubs, balls NO. The second is brand associations and views. No doubt the number of branded swoosh views on national TV was huge. 

When Rory was with Oakley this was a huge win for Oakley. The $$$ paid vs the number of Oakley images to an audience they had never reached both for apparel and Eyewear on prime time TV.  By Oakley estimate the amount of Brand and logo views, Web hits, sales would have equated to  $50 million in advertising needed to be purchased. Rory  was being paid in the range of 3-4 mill for apparel per year.

 

The amount of nike advertising needed to be purchased for the same number of brand images gained would have been close considering Woods and a stable of other golf athletes. To those that think Nike sold a lot of hard goods, balls, bags and clubs are seriously mistaken and it's  the reason why they dropped out. RECENT SALES NUMBERS indicate YTD 706 million, estimates are 80% of that is soft goods  (apparel & footwear). These are world wide numbers for Nike golf. Which is a subsidiary brand of Nike. Looking ahead th e trend of Nike golf was trending downward for markets hare in all category, even their apparel was taking a hit by underarmour.

[imsys0042]

I had Nike woods years ago that I like quite a lot.   The driver was the first 460cc driver I ever had.  IIRC they had some really good people working on their equipment.   Shame that they are getting out.  

[Elmer]

14 hours ago, jsgolfer said:

Nike Golf getting out of equipment business.  I never liked their equipment anyway, at least they will still make apparell

http://www.bloomberg.com/news/articles/2016-08-03/nike-to-stop-making-golf-equipment-in-latest-blow-to-the-sport

I have a cart bag from Nike, used it for a year. Went back to Ogio.
I have hit many, many of their clubs and never liked them. Only recently did I like the new 3 wood.
I have used many Nike balls, which were all found feral, never liked any of them!

[jbishop15]

11 hours ago, chspeed said:

A little OT, but fixed costs are ones that don't change regardless of how much you produce (or in this case, how much you play). Clubs and membership dues are fixed costs. Green fees, balls, cart fees, etc. are variable costs that change depending on how much you play.

I think the fixed costs of golf are relatively low (you can buy a cheap pair of used clubs), but greens fees and other variable costs are too high for many people. I'm worried about the future of U.S. golf, and the viability of many rural clubs and munis that just can't turn a profit. Like other sports (e.g. US tennis), I'm afraid we're in a bit of a downward spiral. The fewer kids that play, the fewer top American players we'll see, which in turn discourages even more young promising athletes from pursuing golf and discourages municipalities from subsidizing courses.

I don't know what the answer is, and I'm not an alarmist, but I'm afraid that Nike divesting from golf, Adidas trying to get out, and other equipment manufacturers struggling are harbingers of rough times ahead.

Dammit! I kept thinking variable cost was the right term, but fixed cost sounded better. And to think I did well in economics in college...

I think that this is less of a sign of the golf apocalypse and more a sign of regressing to the mean. Golf has been in a bubble for a long, long time, and perhaps it's just returning to it's actual level.

[Elmer]

Back when I was buying my first set of real irons, 2008. I tried every brand that my local golf shop had. Consistently Nike came in last. I felt even Cleveland had a better feel than Nike.
I felt the same way about their putters, just never liked them. I have probably played 100 of their balls, platinum one, black, nike soft. I never liked the feel or response. Of course all these balls were given to me by someone who mows a lawn at a course and they were all found, feral balls.
I had a nike cart bag which worked well but went back to my Ogio stand bag which was far superior.

I will say at a demo day last year I hit a Nike 3 wood and it was fantastic.
However I can understand them wanting to get out of the golf gear business.
Of all the golfers I know not a one plays Nike gear. I know more people who play generic old gear, dunlop irons or Top Flite Putter, but No NIKE Gear!

Shirt, shoes & over priced belts, sure!!!
But no gear. I am surprised they lasted this long, but with their main advertiser out of the game it was only a matter of time.