eBusiness Weekly
By Joseph Pompliano
After buying Reebok for $3,8 billion in 2005, Adidas has continuously written down its book value since — all the way to $995 million in 2019. But have they finally found a buyer?
After buying the historic brand in 2005 for $3.8 billion, apparently in an attempt to challenge Nike’s market-leading position in the US, Adidas has continuously written down its book value since — all the way to $995 million in 2019.
Now, they appear to finally have found a buyer.
Who?
Hip-hop business mogul Percy “Master P” Miller and former NBA All-Star Baron Davis, according to Culture Banx.
The price?
Around $2,4 billion — representing a steep decline from the $3,8 billion Adidas paid in 2005.
Before we get into the future of Reebok, we must first understand the past.
A brand rooted deeply in culture with rich history and tradition, Reebok was a powerhouse throughout the late 1900s — riding the aerobics wave as the premier athletic fashion brand.
As the aerobic craze started to fade into the 1990s, and Nike saw tremendous gains by focusing on performance rather than fashion, Reebok decided to pivot also.
Attempting to compete through a mix of performance & fashion like we see today, Reebok introduced athletic shoes like the Reebok Pump and the Question — which were worn by NBA All-Stars like Dominique Wilkins, Shaquille O’Neal, and Allen Iverson.
Additionally, their status as the leading athletic brand within culture enabled them to sign multi-billion-dollar contracts with the largest major professional sports leagues — including the NFL, NBA, and NHL.
The only problem?
Adidas lacked authenticity.
After purchasing the brand in 2005 for $3.8 billion, Adidas tried to reinvent the business — focusing on technology-driven-performance rather than the cultural-centric partnerships with celebrities like 50 Cent and Jay-Z that got them there.
The result?
Massive underperformance.
Global Nike Revenue
2006: — $14.9 billion
2019: — $39.1 billion
Global Reebok Revenue
2006: — $2.4 billion
2019: — $2.1 billion
Even more interesting, after an attempted revitalisation of the brand in 2016, Adidas appears to have completely forgotten about the multi-billion-dollar brand over the last couple of years.
Simply put, Adidas is done with the Reebok experiment.
As serial entrepreneurs, with extensive investment experience in categories like media, technology, sports, music, and fashion, Percy “Master P” Miller and Baron Davis will look to rejuvenate the brands’ image through cultural connection.
Here’s what Baron Davis had to say, via Forbes:
“I think Reebok is being undervalued. I left Nike as a 22 year old kid representing myself and made the jump to Reebok, which took a chance on me as a creative and as an athlete. I want the people I know athletes, influences, designers, celebs to sit at the table with me.”
As for Percy Miller, he made his intentions clear also:
“As we focus on turning Reebok into a lifestyle brand not just a basketball brand, our most important initiative will be to put money back into the community that built this company.”
“Imagine if Michael Jordan owned Reebok? That’s what I’m talking about — making history.”
Smoke and mirrors aside, the opportunity is obviously exciting — but what’s their actual plan?
With the sneaker resale and streetwear market projected to reach $6 billion in value by 2025, and brands like Nike, Lululemon, and Adidas riding the athletic fashion wave, look for Miller and Davis to return to Reebok’s roots — teaming up with celebrities that have cultural influence and currency, focusing on fashion rather than performance.
We’ve talked about it before and we’ll most definitely talk about it again, but in today’s society of diminishing attention spans, declining sports viewership among younger generations, and an increasingly large moat being built through social channels, celebrities have all the power. In the end, would I be surprised if Percy “Master P” Miller and Baron Davis accomplished what Adidas couldn’t — connecting with celebrities and bridging the gap between corporation and culture?
No, but it’ll certainly take a lot of work to get there.
To be clear — although Adidas has placed a self-imposed deadline to sell Reebok by March 2021, this deal is not finalised. — Huddle Up (Online)
