The N.F.L. and Nike Make Room for Fanatics

The N.F.L. and Nike Make Room for Fanatics

The N.F.L. has proved very good at making money — from getting networks to pay eye-popping amounts for broadcast rights, to finding new sponsors to pay yet more for the right to affix their brands to the sport.

Now, the league is focusing on maximizing its profits from jerseys, sweatshirts and other licensed gear.

Nike currently holds the league’s most valuable merchandising rights. On Wednesday, the 32 team owners approved a plan to split the rights to sell Nike’s merchandise between two companies instead of one.

Starting in 2020, Nike, which now has the rights to produce and sell products worn by the players and coaches on the field, will provide that gear only to outfit the teams. Fanatics, the largest online seller of licensed sports merchandise, will produce and sell replicas of that merchandise for consumers, either online or through retail stores.

The 10-year deal is an echo of the arrangement Major League Baseball approved in 2016, when Under Armour signed a 10-year deal to produce on-field merchandise once Majestic and Nike finish their current licensing agreement in 2020.

By bringing in Fanatics to make and sell Nike merchandise for consumers, both leagues hope the arrangement will lead to an increase in sales of licensed goods. Nike currently pays the owners a percentage of the wholesale price of all N.F.L.-related merchandise that it sells. Fanatics will pay the N.F.L. a percentage of the wholesale price of goods it will provide to stores like Dick’s and Modell’s, and a percentage of the retail price for everything it sells directly to consumers. The retail price is typically twice as much as the wholesale price.

Unlike Nike, which has a wide range of businesses, Fanatics is focused primarily on selling to consumers, and has the capacity to produce jerseys and other items on demand, which means it can react to an increase in demand for hot items. Fanatics expects to introduce a wider range of products than is now available from Nike.

“Our goal is to give the fan what they want when they want it, that will net in a higher sales base in a few years,” said Michelle Micone, the senior vice president for consumer products at the N.F.L.

With Fanatics taking over the production and sales of all Nike N.F.L. merchandise for adults, sales are projected to rise by about 50 percent over the life of the deal, according to people with knowledge of the deal.

The new arrangement will require Nike to sign a new, more limited agreement with the N.F.L. In 2010, Nike replaced Reebok as the exclusive merchandise provider of N.F.L. goods. No financial terms were released at the time, but Reebok’s deal was believed to originally be worth at least $250 million for the league.

In March, the N.F.L. extended Nike’s rights to produce on-field gear through 2028. The league’s annual revenue is now roughly $14 billion. Several years ago, Commissioner Roger Goodell set a target of reaching $25 billion in annual revenue by 2027.

To meet that goal, the league needs to increase sales by about a billion dollars a year, something it has been doing despite declining television ratings, persistent worries about player safety and player protests during the national anthem. This year, Fox agreed to pay more than $660 million annually to broadcast “Thursday Night Football,” nearly 50 percent more than CBS and NBC paid together.

Verizon agreed to pay more than $450 million a year, up from $250 million, for the mobile phone rights to N.F.L. games. And after the league and Papa John’s Pizza parted ways, the N.F.L. announced a more lucrative deal with Pizza Hut the next day.

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