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CNBC special report: Swoosh! Inside Nike

Long after the end of his legendary basketball career, Michael Jordan continues to drive sales for footwear giant Nike.  A CNBC special report.
Image: Michael Jordan poses with the new Air Jordan XX3
The new Air Jordan XX3 basketball shoes feature earth-friendly materials and stitching where other versions use adhesives.Marcus Eriksson / AP
/ Source: CNBC

It was everything you'd expect of a movie premiere. But this premiere was for a shoe — the latest offering from footwear giant Nike. With flashbulbs popping, actor Michael Rapaport and rapper Warren G joined Denver Nuggets star Carmelo Anthony late last year at a Beverly Hills Jaguar dealership to launch Carmelo's latest shoe, the Air Jordan Melo 4.

Nike has this business of buzz down to a science. That’s not surprising from what may be the most successful marketing machine in history. It’s a juggernaut that began with Nike’s signature Air Jordan and continued for 23 more versions — a shoe that has become a part of basketball legend Michael Jordan’s legacy.

“It’s something that represented my name,” Jordan told CNBC. “And what I did to the game of basketball that has continually transcended over time.”

It’s no wonder that Nike named a building after Jordan. In 2007, the Jordan brand, now a separate Nike subsidiary with its own building, grossed about $800 million. That’s just $100 million less than the entire company was pulling in when they signed Jordan 23 years earlier.

No one knows just how much Jordan did for Nike better than Nike founder Phil Knight, who talked to CNBC in a rare interview.

“Jordan was huge and still is," said Knight. "He became, ultimately, probably the greatest basketball player of all time. And set the tone for what became, not just a great endorsement, but has now become a brand.”

Michael Jordan's last game was in 2003, but sales of his brand keep growing.

“Brand Jordan today sells about twice as much product around the world as when he was playing,” said Knight.

It almost didn’t happen. When Jordan left the University of North Carolina in 1984, he was leaning heavily towards signing with Nike’s archrival Adidas.

“The thing is, I never wore Nike shoes until I signed that Nike contract,” said Jordan. “All through college we wore Converse. And up to that point, my favorite shoe was an Adidas shoe.”

It was Nike’s basketball talent scout, Sonny Vaccaro, who convinced insiders that they should spend everything they had.

“I said, ‘Well, what do we have?’” Vacarro said. “And (they said) ‘We have about $500,000 to spend.’ And I said, ‘Well, give all to the kid. Give it all to Jordan.’ And they said, ‘Well, we don’t have to give all of it, we’ll give...’ I said, “No, if it takes giving him all, give it to Michael Jordan.’”

So Nike made the half-million-dollar bet. At the time, it was an unheard of price for an endorsement deal, especially for someone who had yet to play a minute in the NBA.

“We knew it would be good,” said Vacarro. “We paid him the most money we could afford. And we overpaid, according to other companies, for someone who wasn’t a proven commodity. But to Nike’s credit they did the right thing, and it caught fire, and this kid caught fire. And this sucker was good.”

Nike also offered Jordan his own signature shoe line, a promise that rival Adidas wouldn’t match.

“They didn’t feel it was worth it,” said Jordan. “Which in hindsight is perfect for me, because it made my decision much easier. And I ended up with Nike, and it became a great relationship.”

That first season started out with a bang when NBA Commissioner David Stern banned Air Jordans. Its colors didn’t match the league’s dress code and Stern fined Jordan for wearing them.

In typical renegade fashion Nike paid the fine — and then marketed the fact by reminding customers in ads that “the NBA can’t stop you from wearing them.”

People wanted the shoes worn by the kid who could fly through the air and was averaging 28 points a game. Sales moved almost as fast as he did.

“It was like election night,” said Vacarro. “Like, who’s buying what? Oh, my God, they sold 100 pair of shoes in Pittsburgh, yesterday. They sold 400 pair of shoes in New York City. That’s the way it was like. An election day count.”

Since 1988, most Air Jordans have sprung from the creative partnership of Jordan and former architect-turned-shoe-designer, Tinker Hatfield.

“Where (Jordan) has been really good over the years is that he always asks the question, ‘Will the best players in the world be able to play in this shoe? Will I be able to play in this shoe?’” said Hatfield. "It ultimately boils down to what I call the romance of trying to draw out something unique from the athlete, from the personality, from the relationship.”

Jordan says that the attraction was mutual.

"It’s like a romance, he said. "Once you fall in love, it’s hard not to fall in love with the person who brings you the most joy. It was like a marriage in a sense that he knew what I was thinking a lot of times. I knew what he was thinking a lot of times.”

Designing an Air Jordan often begins with a simple idea.The version known as “Eleven” was Jordan’s tribute to formal wear when he pushed Hatfield for a toe piece so shiny it looked like patent leather.

"'You just wait,' (Jordan said). 'This shoe’s going to be worn by somebody with a tuxedo,’’ said Hatfield.

Sure enough, Jordan’s prediction came true: R&B stars Boyz II Men soon showed up at a music awards event in tuxedos wearing shiny new Nikes. And Jordan says he had nothing to do with it.

But along with the style and popularity of Air Jordans came an industry-high price tag of more than $100 a pair. In the late 1980s, there were muggings — even murders — over the shoes.

“It’s certainly been sad about the fact that people would harm one another just for material purposes, to get a pair of shoes,” said Hatfield. “That’s always been a sort of sad commentary about culture. And I never once felt like I was the cause of it.”

When CNBC visited Nike’s Beaverton, Ore., headquarters the company was throwing everything it had at the release of its latest Air Jordan — the Air 23. The focus is the NBA All-Star game Feb. 16 in New Orleans. CNBC got an advance look at the design, which sports Jordan's fingerprint — "slightly modified so that no one could actually use his thumbprint for anything,” said Hatfield.

The shoes feature earth-friendly materials and stitching where other versions use adhesives.

"Personally, I think that it’s the most beautiful product that I’ve ever worked on,” said Hatfield.

Early indications are that Nike fans agree. Customers eagerly recently waited for the new sneakers’ limited release outside a New York City shoe store in 25-degree weather. Some had been in line for five days.

So how long can this go on? How long can Jordan and Nike continue to create the most successful shoes in all of sports?

“I look forward to it lasting another 23 years,” said Jordan.