Thursday, August 04, 2005
Although I think of them all as running shoe companies, the addidas/Reebok merger is really about every sport except running. addias is all about soccer, of course, and Reebok has deals with the NFL and the NBA. What's the real bottom line? I think Skip Sauer at The Sports Economist nails it: "[S]ince the opening of trading on Tuesday, Nike's share price has risen $5.50 to $87 - a healthy, statistically significant return for a two day holding period. The market for Nike stock thus assesses the deal somewhat differently than the spin offered by Adidas.
"Students of antitrust economics will immediately understand what the market is suggesting. Rather than creating a more effective competitor to Nike, the merger eliminates a rival responsible for price competition in the market for sneakers. Less vigorous price competition would increase the value of existing competitors, i.e. Nike."
Athletic wear is a funny commodity: there are certainly people who are prepared to pay a premium for the technical qualities of the products, but I suspect that we constitute a minority, and a fussy one at that. It really is a fashion industry, driven by celebrity endorsements, which makes the survival of places like Fleet Feet seem precarious. Fleet Feet is my default, but they didn't have the shoes I wanted for my late Summer/Fall replacement pair, so I bought 'em at DSW for $20 bucks less. Last season's colors, but color doesn't matter to me-- all I wanted was a pair of addidas Supernova Control.
"Students of antitrust economics will immediately understand what the market is suggesting. Rather than creating a more effective competitor to Nike, the merger eliminates a rival responsible for price competition in the market for sneakers. Less vigorous price competition would increase the value of existing competitors, i.e. Nike."
Athletic wear is a funny commodity: there are certainly people who are prepared to pay a premium for the technical qualities of the products, but I suspect that we constitute a minority, and a fussy one at that. It really is a fashion industry, driven by celebrity endorsements, which makes the survival of places like Fleet Feet seem precarious. Fleet Feet is my default, but they didn't have the shoes I wanted for my late Summer/Fall replacement pair, so I bought 'em at DSW for $20 bucks less. Last season's colors, but color doesn't matter to me-- all I wanted was a pair of addidas Supernova Control.
