Air Jordan: The negotiation elements underpinning the greatest endorsement deal of all time

Today, athletes sign endorsement deals with many different perks, such as royalty payments and personalised products. However, this was not always the case. In 1984, a landmark endorsement deal between Nike and Michael Jordan completely redefined how sporting companies endorse athletes.

The Deal

In 1984, Nike’s basketball division was struggling to compete with Adidas and Converse and needed to do something extraordinary to stay afloat.[1] So, Nike adopted a bold plan to pool all their funds together to sign one player only, Michael Jordan.[2]

This proved challenging, as Jordan personally loved Adidas, had previously worn Converse, and had zero interest in signing with Nike.[3]

 Through careful negotiation, an unprecedented 5-year deal was made, which included endorsement payments of $500,000 USD per year, a personalised Air Jordan range, and equity in the form of a share of the revenue from Jordan products.[4] A deal like this was unheard of, with Michael’s mother Deloris credited for the negotiations.[5]

This deal has been extremely beneficial. In the first two months, Nike sold over $70 million USD of Air Jordan products after only expecting to sell $2 million in the first twelve months.[6] Today, Air Jordan is Nike’s largest division, amassing $7 billion in sales in 2024, with Michael receiving over $350 million in royalties.[7] In 2014, Jordan became the first NBA billionaire, and a significant part of his current $3.5 billion USD net worth is attributable to Nike.[8] The deal has also been the subject of several different productions, including the 2023 biographical movie Air.[9]

These extraordinary results would not have occurred without the careful and cooperative negotiations that occurred in 1984. To understand the factors that led to this outcome, the integrative bargaining model is useful.

Integrative Bargaining

Integrative bargaining relies on cooperation between the parties, which allows for relationship building and outcomes that satisfy the parties’ interests.[10] This is particularly important in sporting negotiations, where the commodity being traded is the brand value of the athlete, and there are many different interests involved. The importance of strong relationships with athletes for both sponsors and clubs also suggest that these factors must be considered in maximising value. The model contains seven elements.[11]

Communication

Effective two-way communication is crucial for building relationships, and most importantly where the parties have drastically different expectations.[12] An example of this is the belief of Deloris that her son would obtain a share in the revenue of Jordan products, contrary to Nike’s understanding.[13] Careful communication allowed this to be incorporated into the final deal.

Relationships

Outcomes are optimised where the relationship between the parties improves their ability to work together.[14] A healthy and effective relationship between an athlete and the club or brand seeking to sign them is crucial in ensuring performance and profit.

A helpful indicator of the relationship-building strategy required is the aspirational future relationship value.[15] In the Jordan negotiation, the potential future relationship value was extremely high for both parties given the potential growth to both Nike as a company and Jordan as a player.

The strength of the relationship built in 1984 is exemplified through the long-time success of the Jordan Brand and the ongoing deal between Jordan and Nike.

Interests

Understanding “why” a counterparty wants a particular position is crucial to understanding interests. Interests can be grouped as either shared, complementary or conflicting.[16]

 The shared interests of gaining revenue and Michael becoming a star NBA player were held by both Nike and the Jordan family, and complementary interests included both parties wanting to grow their individual brands. The final deal satisfied all of these.

 A conflicting interest surrounds royalty payments, which Nike were initially unwilling to concede. However, by understanding that the Jordan family insisted on these to provide an incentive for Jordan’s performance on the court, the parties were able to problem-solve to alleviate this conflict whilst connecting over their shared interests.[17]

Options

Having numerous options available for an agreement increases the ability to meet all interests. The number of options is increased through collaborative brainstorming whilst negotiating.[18] For Nike, the availability of options such as royalty payments, the purchase of a car, and the option of a personalised shoe were fundamental in securing the deal.[19] By being willing to adopt terms never seen before in endorsement deals, Nike increased the options available.

Legitimacy

Legitimacy relates to objective criteria that constrict the options available, which includes things such as the salary cap in the AFL, FFP rules in the Premier League and other standards and regulations.[20] Whilst player signings to clubs are heavily regulated, sponsorship deals face fewer constraints. In 1984, Nike had a large degree of freedom and any limitations on their deal were ignored.[21] The value of the deal was above industry standards at the time, and the neglect of NBA rules exhibits this.[22] Notwithstanding this example, it is crucial that sporting negotiators understand the applicable constraints, given the high level of regulation in most sporting codes.

Alternatives

Alternatives define what a party can do individually if an agreement is not reached. It is crucial to consider both the best and worst alternatives.[23] As Jordan’s best alternative was accepting the significantly lower offer from Converse, Nike gained some power in the negotiation given their best alternative of signing other players could have been profitable. However, given that the worst alternative for Nike could potentially lead to the downfall of their basketball division, their position is weakened due to the Jordan’s worst alternative being signing with the brand which offered the least lucrative endorsement deal. Understanding the counterparty’s alternatives if a deal is not reached is clearly crucial in shaping outcomes that are significantly better than these alternatives.

Commitment

Commitments of what a party will or will not do help a negotiation to sustain momentum and reach outcomes.[24] A major commitment that assisted in luring Jordan is Nike’s pledge that they would pay the fines associated with the illegality of the original Air Jordan design.[25] This meant that Nike could appear more attractive than their competitors, allowing a deal to be reached.

Conclusion

The groundbreaking 1984 Jordan deal is a prime example of effective sporting negotiation.  The willingness of both the Jordan family and Nike to build a relationship to come to the most effective option available highlights the importance of integrative bargaining to ensure success and prosperity. This willingness to cooperate and meet the interests of the opposing party is something that should be paramount in all sporting negotiations that have the potential to impact largely on clubs, brands, and the athletes themselves.

 
References

[1] Josh Peter, ‘Error Jordan: Key figures still argue over who was responsible for Nike deal’, USA Today Sports (Web Page, 30 September 2015) <https://www.usatoday.com/story/sports/nba/2015/09/30/error-jordan-key-figures-still-argue-over-who-responsible-nike-deal/72884830/>.

[2] Air (Amazon Studios, 2023). See also Satyaki Baidya, ‘How Adidas’s Misstep with Michael Jordan Made Nike a Household Name’,  News 18 (Web Page, 12 November 2024) <https://www.news18.com/sports/how-adidass-misstep-with-michael-jordan-made-nike-a-household-name-9117196.html>.

[3] Cady Lang, ‘How Air Tells the True Story of Michael Jordan’s Nike Shoe Deal’, Time Magazine (Web Page, 5 April 2023) <https://time.com/6268621/air-true-story-behind-movie/>.

[4] Thilo Kunkel, ‘How Michael Jordan revolutionized the sneaker industry – and our relationship to shoes’, Temple Now (Web Page, 3 April 2023) <https://news.temple.edu/news/2023-04-03/how-michael-jordan-revolutionized-sneaker-industry-and-our-relationship-shoes>.

[5] Lucy Ford, ‘The true story behind Ben Affleck’s Air gets much juicer after the movie ends’, GQ Magazine UK (Web Page, 6 April 2023) <https://www.gq-magazine.co.uk/culture/article/air-movie-michael-jordan-nike-true-story>.

[6] Darren Rovell, ‘Michael Jordan’s agent tries to set record straight on original Nike deal’, ESPN (Web Page, 5 May 2016) <https://www.espn.com.au/nba/story/_/id/15463041/michael-jordan-agent-tries-set-record-straight-original-nike-deal>. See also Thilo (n 4).

[7] Kurt Badenhausen, ‘Nike Revenue Disappoints, But Jordan Brand Hits $7B for Year’, Sportico: The Business of Sports (Web Page, 27 June 2024) <https://www.sportico.com/business/commerce/2024/nike-revenue-jordan-brand-billion-1234785967/>; Orlando Silva, ‘Michael Jordan’s reported Jordan Brand royalties beat out Steph Curry’s 2024 earnings by $194,000,000’, sportskeeda (Web Page, 23 October 2024) <https://www.sportskeeda.com/basketball/news-michael-jordan-s-reported-jordan-brand-royalties-beat-steph-curry-s-2024-earnings-194-000-000#:~:text=Joe%20Pompliano%20explained%20on%20X,NBA%20career%20(%2494%20million)>.

[8] ‘Michael Jordan Real Time Net Worth’, Forbes (Web Page, 20 February 2025) <https://www.forbes.com/profile/michael-jordan/>.

[9] Air (Amazon Studios, 2023).

[10] Jasper Kim, Persuasion: The Hidden Forces That Influence Negotiations (Routledge Press, New York, 2018) 80.

[11] Ibid.

[12] Ibid 81 – 82.

[13] Air (n 9).

[14] Kim (n 10) 82.

[15] Ibid.

[16] Ibid 83.

[17] Air (n 9) 01:30:01 – 01:31:57.

[18] Kim (n 10) 83.

[19] Air (n 9).

[20] Kim (n 10) 83.

[21] Air (n 9).

[22] Thilo Kunkel, ‘How Michael Jordan revolutionized the sneaker industry – and our relationship to shoes’, Temple Now (Web Page, 3 April 2023) <https://news.temple.edu/news/2023-04-03/how-michael-jordan-revolutionized-sneaker-industry-and-our-relationship-shoes>.

[23] Kim (n 10) 83 – 84.

[24] Ibid 84.

[25] Air (n 9) 01:11:36 – 01:21:34.