Tuesday, May 30, 2006

Apple deal a boost for Nike

Playlist writes another article on the recently announced Nike+iPod Sport Kit. This collaboration between Nike (NKE) and Apple (AAPL) will enable certain Nike shoes to wirelessly send training data to an iPod nano.

The article states that "while both companies will benefit from their newly announced collaboration on products for athletically minded consumers, it is Nike that stands to see the greatest benefit, by running alongside the red-hot iPod."

Ross Rubin at NPD Group said, "I think Nike has more to gain. The athletic shoe market has stronger competition at this point, and many Nike shoe buyers would have purchased an iPod anyway.”

Michael Gartenberg at JupiterResearch said, “I think it’s one of those deals where it really works out well for both parties. It gives Nike the ability to associate with a very strong brand like Apple that meshes well [in terms of] demographics. People running are spending a lot more time listening to music than they did in past. For Apple, it extends the iPod as a platform, not just as another portable media player, and creates a strong brand identification. It’s multiple wins for both companies.”

The article mentions Nike's previous failed attempts to "penetrate the MP3 player market for several years" and its relationship with Philips including the upcoming PSA 610, "an MP3 player made by Philips with a 4GB hard drive and GPS sensor built-in expected to ship in June."

Rubin and Gartenberg both thought that "although the Apple deal will raise Nike’s profile in the MP3 player market, it doesn’t necessarily signal the end of Nike’s relationship with Philips."

NPD's Rubin said, “The Nike-Philips relationship is a brand-licensing agreement that has served a niche. With music being such an important part of the exercise experience, though, Nike expands its reach by capitalizing on Apple’s great market share.”

Gartenberg added, “I can’t imagine the folks at Philips were too happy about it, but how unhappy they were and what they’ll do remains unclear at this point. But at the end of the day, a relationship with Apple is one many companies would like to have and build off of.”

Responding to comments that some think the deal represents a loss of focus for Apple, Gartenberg opined that "I think Apple is already a digital lifestyle company and the core of that is the personal computer—from Apple’s perspective that’s the Macintosh. The experience doesn’t stop and end at iPod. It goes back to iTunes Music Store with athletic playlists, uploading statistics to the Web, finding an online community of runners to interact with. If anything, it means more uses for a computer, not less.”

Gartenberg added, "I think that certainly anything is possible. The iPod is clearly becoming more than a personal media player, it is becoming a platform. A lot will depend on how well this first one does.”

Rubin also pointed out that "Nike isn’t necessarily limited to working with Apple. Not only might that mean that other Nike-branded MP3 players might integrate with the Nike+ Web site, but that iPod integration could possibly come to users of other athletic-shoe brands."

As a long-time runner, I think Nike and Apple are going after the casual, personal fitness lifestyle crowd personified by Runner's World magazine. It's a bigger more mainstream market where style and fashion is more important than form and function so being locked into only Nike running shoes shouldn't be as big of an issue.

This Apple/Nike partnership should also serve notice to the other players in the personal training gadget space, such as Garmin (GRMN), which seems to be targeting its Garmin Forerunner GPS devices
at the narrower more-serious running niche market.

As Jupiter's Gartenberg noted, the iPod is becoming a platform. It's a risky strategy to ignore this, and by extension, Mac users as well.

While Garmin currently owns the GPS personal training device market, by not supporting Macs (other than a beta agent for its MotionBased website) they are definitely not endearing themselves to a very loyal customer base...

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