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Reebok's slam dunk

In hiring Sonny Vaccaro, Reebok jumps into the wooing game

Sonny Vaccaro has won his share of fights over the years. He bet his job in 1984 that signing Michael Jordan would be worth whatever money Nike Inc. could muster. He risked his job again in the mid-1990s at Adidas-Salomon AG, signing high school basketball stars Kobe Bryant and Tracy McGrady to multimillion-dollar deals before they ever played a day in the NBA.

Still, it's LeBron James, the one who got away, that eats at him.

Vaccaro, 64, has scouted high school basketball talent for nearly four decades. He helped turn Nike from a small Oregon shoe company into an international marketing powerhouse before he was fired in 1991. He moved on to Adidas, taking with him the camps, all-star tournaments, and legions of connections to high school and college coaches that make him one of the most influential players in the multibillion-dollar endorsement game. Vaccaro knew the first time he saw James play as a sophomore in high school that he had the makings of the "greatest high school player to play the game."

Vaccaro and Adidas wanted him badly. Vaccaro outfitted James's Akron, Ohio, team with free Adidas shoes and uniforms. He befriended the James family, hosting them at his California home and inviting James to his summer camp. When it came time to talk shoe deals this spring, Adidas put James and his family up in a beachfront Santa Monica hotel, presented him with a prototype shoe that sported an Asian-inspired logo with his initials, and unveiled an ad campaign with taglines such as "Will you use fame to change the world?"

Vaccaro's old employer, Nike, was just as determined to add James to its top-shelf stable of athletes, including Jordan and golf superstar Tiger Woods. Nike showed James one sneaker after another, all in his size 15 and all sporting his initials. It also ponied up more money than Adidas -- a tidy $90 million over seven years bolstered by a $10 million signing bonus.

Unlike the usual Nike-Adidas slugfests, there was a third player involved this time -- Reebok International Ltd. of Canton. With profits rising after emerging three years ago from a decade in the doldrums, Reebok offered James more money than Nike. But its presentation lacked luster. The cast of executives tried to convince James he shouldn't sign with Nike, telling him he'd get lost in the all-star lineup, but all they showed him were a few sketches of his signature shoe. In the end, Nike got its man, and James became the NBA's top draft pick, signing with the Cleveland Cavaliers.

Vaccaro walked away from the bidding impressed with Reebok's resolve to get in the game, and the money it was willing to spend. Reebok came away realizing that if it was going to compete at this level, it badly needed the contacts and marketing savvy that are Vaccaro's stock in trade. Last week, Vaccaro joined forces with Reebok, a move that sent shock waves throughout the sporting world.

"Reebok has never even attempted to play in this game," said Dan Wetzel, author of "Sole Influence," a book on sneaker companies' efforts to woo high school basketball players. "Now they are. You don't hire Sonny Vaccaro unless you want to play."

Vaccaro is anything but a typical executive. He doesn't shy away from controversy or back down from fights. He spends most days in a T-shirt and sweatpants. He works out of his home in California, fielding a minimum of 50 calls a day from players, parents, coaches, and agents. People whisper that Vaccaro has mob connections. His brother, Jimmy, is a nationally known bookmaker in Las Vegas, and Vaccaro himself gambled in his younger days.

But he brushes aside the rumors. He says he hasn't gambled since going to Nike in 1978 and his basketball connections have never been used for gambling-related activities. He's fought with the NCAA over rules governing a player's amateur status. He bristles at critics who charge he's exploiting youngsters by using them to promote a sneaker company that is paying their school or coach.

"My allegiance is to the kids and families," Vaccaro said. "Commercialism starts in America the day you're born. You can't escape it. Most of these kids are minorities from poor neighborhoods. I'm showing them their opportunities and allowing them to say yes or no."

A dozen years ago, Reebok executives were publicly critical of Nike and Vaccaro for their relationships with high school and college teams. In 1990, John Morgan, then a marketing director at Reebok, said: "One of the things we don't believe in is recruiting high school kids. There's a group of elite high school kids getting things from people. They don't get a sense of reality when they're wined and dined as seventh-graders."

That was then. Wetzel believes schools should think twice before entering into any relationship with a corporate entity -- be it Nike or Coca-Cola Co. Cash-strapped schools jump at the money before thinking through the ramifications of these less-than-altruistic deals, he said. But like it or not, he said, today the practice is business as usual. To be a contender, a sneaker company has to play in basketball. And to play in basketball, a sneaker company has to play the endorsement game.

"The reality is it's the only way you can compete," Wetzel said.

Basketball is the second-largest category, behind running, in the sneaker business, and it targets a key demographic. Teenage boys account for 60 percent of athletic shoe sales in this country, in some cases buying a new pair of sneakers each week, said Wells Fargo Securities analyst John Shanley. Reebok's comeback is due at least in part to its association with such hip hop stars as Jay-Z and 50 Cent.

By outfitting top high school and college players in its gear, a company not only gets an early line on potential endorsers but it also ups its "cool" quotient among teenagers. James may have gone with Nike, but for a few years, he played in Adidas gear in front of a national audience, when ESPN televised the games.

Though Reebok struck a deal with the National Basketball Association two years ago to stamp its vector logo on team uniforms and boasts Philadelphia 76ers guard Allen Iverson as a star endorser, the company is woefully behind in wooing young talent.

Nike sponsors about 35 programs a year for high school players, including its namesake All-America camp. It outfits more than 100 high school teams and many of the nation's top college teams including Duke University, the University of Connecticut, and the University of North Carolina. Adidas outfits Arizona State University, the University of Notre Dame, the University of California at Los Angeles, and scores of other teams. Meanwhile, Reebok has less than a dozen such deals.

"It's the missing link in our overall plan to succeed in this business," said Paul Fireman, Reebok's chairman and chief executive.

With Vaccaro aboard, Reebok promises to be a formidable player in basketball. His all-star tournaments and camps are now Reebok events. As he has in the past, he'll use his vast network of connections to sign high school and basketball teams and to search for the next LeBron James. He has ambitions to extend his network to Europe, Asia, and around the globe.

Nonetheless, the odds are stacked against Vaccaro and Reebok. Nike's sheer size makes it a fearsome competitor. It owns 40 percent of the nearly $8 billion in athletic shoe sales last year in the United States. By comparison, Reebok has about 12 percent of the market. With a 65 percent share, Nike's dominance in the basketball market is even more stark. Its more than $10 billion in annual sales dwarf Reebok's 2002 sales of $3.1 billion.

Nike can outspend and outmarket its rivals at virtually every turn. It shells out about $1 billion a year, or a tenth of its revenue, for advertising and marketing. It planned to dole out $274.2 million on endorsement contracts in its 2003 fiscal year, according to documents filed with the Securities and Exchange Commission. Reebok spends less than $300 million on total advertising and marketing, analysts estimate.

"Picture yourself at a schoolyard outside the fence watching kids playing basketball," Vaccaro said. "I can't promise we'll win every battle. The only promise I can make is that Reebok will never have to stand outside the fence again."

Though Vaccaro's age and wealth set him apart from those kids on the schoolyard, he is, in many ways, one of them. He grew up in Trafford, Pa., outside Pittsburgh. His father worked in the steel mills, his mother at Gimbel's department store. The oldest of two boys, he was a natural athlete. He turned down an offer to play with the Pirates, opting instead to go to college on a football scholarship. An injury cost him the scholarship from the University of Kentucky, but Youngstown State took a chance on him.

The basketball coach there made him an offer: If Vaccaro recruited players, he could keep his scholarship and finish college. He became a teacher and a coach after graduation. In 1965, he started the nation's first all-star game for high school basketball players. Now dubbed the Roundball Classic, it set into motion a series of events that led Vaccaro to Nike.

In 1978, he approached the company's chief executive Phillip Knight with prototypes of basketball shoes. Knight wasn't interested in the shoes -- he was interested in Vaccaro's idea for building Nike's presence in basketball, then dominated by Converse.

Vaccaro's idea was simple: Pay the coaches to outfit their teams in Nike shoes and gear. But at the time, no one was doing it. Within four months, Vaccaro signed 20 high-profile coaches, including Lefty Dreisell then at the University of Maryland and Jerry Tarkanian then at the University of Nevada-Las Vegas. The following year, he brought 60 more coaches into the Nike fold, including John Thompson then at Georgetown University. Vaccaro then began signing high school coaches, supplying teams with free shoes, travel bags, and in some cases, money.

But his coup de grace came in 1984, when Vaccaro persuaded Nike to sign Jordan to a shoe deal. The deal catapulted Nike to new heights. (By 1999, when Jordan retired from the NBA for the second time, Nike had sold $2.6 billion worth of Jordan-related products.) Then, in 1991, Nike fired Vaccaro. Nike won't comment on the matter. But Vaccaro likens it to being a hired gun brought in to clean up a town only to be cast out when the dirty work is done.

"I felt betrayed," Vaccaro said. "I never thought I'd leave Nike. I thought they'd bury me with a swoosh and a pair of Air Jordans."

Vaccaro moved on to Adidas, where he spent more than a decade building the German shoe maker's basketball business. He signed Celtics forward Antoine Walker, Washington Wizards forward Kwame Brown, and Portland Trail Blazers first-round draft pick Travis Outlaw. He built a roster of 75 high school teams and 45 college programs outfitted by Adidas. But when he lost James, he realized he'd done what he could. Despite its presence on the high school and college scene, Adidas still had only 10 percent of the market.

Unsure of Reebok's resolve, Vaccaro had turned down previous offers from the company. But its bid for James convinced him he had a better shot of beating Nike at Reebok than at Adidas. So for one last time, Vaccaro will use his network of high school and college coaches, his annual camps and tournaments, and his marketing savvy to see whether he can go out on top and take Reebok along for the ride.

"Do I want to beat Nike? Absolutely," Vaccaro said. "Is this personal? Yes, absolutely. No question about it."

Naomi Aoki can be reached at naoki@globe.com.

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