Originally Posted by RollTrackTake
Nike makes a hefty profit on shoe sales. It is their cash cow. When kids buy Jordan's, Kobe's, Ballistics etc.. I can safely say they earn more than $15/shoe. My brother works in the corporate office for a major athletic apparel company that includes shoes. The money the can make off shoe sales is why addidas can give Derrick rose $250 mil. And the cost of manufacturing a pair of nikes, factory+labor is no more than $20 best case scenario. When phil knight + Nike were busted for running sweat shops in Taiwan the cost of each shoes with labor attached was half. Basketball sneakers alone do $2 Bil in sales annually. I'm sure tennis doesn't do as well but even a slight fraction of that is a nice profit. And if u think shoe companies spend more than 5% of their budget on R&D then can I interest you in some moon rock I want to infuse into the next line of tennis racquets?
The fact that shoe companies pay athletes contracts like $250 million or $100 million is exactly why they can only make a profit of $15 or less per pair of shoes. Those salaries are included in marketing costs, which are deducted before net profits. The question is, did Nike make more net profits after paying Agassi $100 million or would they have made more net profits from their tennis business if they hadn't paid Agassi $100 million? What was the net incremental profit after paying Agassi?