December 19, 2000

NFL/REEBOK CONFERENCE CALL WITH NFL COMMISSIONER
PAUL TAGLIABUE AND REEBOK CEO PAUL FIREMAN

BRIAN McCARTHY: Thank you for joining us. I am Brian McCarthy, Director of NFL Corporate Communications. On hand to make the announcement from New York is NFL Commissioner Paul Tagliabue. From Canton, Massachusetts, we have Reebok International's Chairman and CEO Paul Fireman. Mr. Fireman is joined by Denise Kaigler, Reebok's PR contract.

We'd like to keep our remarks brief; then we will turn it open to some questions. We'd like to get going starting with NFL Commissioner Paul Tagliabue.

COMMISSIONER TAGLIABUE: Good morning, everybody. We are very, very pleased to be announcing today a major new strategic partnership between the NFL and Reebok.

It is a first of a kind partnership. It involves all 32 teams of the National Football League. It involves a vision for our apparel business, and a vision for serving our fans which is very new and very fresh and for that, I want to thank Paul Fireman because he has been working with us very closely for more than six months to make this partnership a reality.

From my perspective the most important thing about it is No. 1, the quality of Reebok and of Paul Fireman as an individual. We have been working with our ownership. We have had many owners involved for the past year and evaluating our apparel business, led by Wayne Weaver, Jerry Jones, Pat Bowlen and Bob Kraft and others and we have all come to the conclusion that the opportunity to work with Paul Fireman and Reebok on this new strategic partnership is very exciting for the League.

From the standpoint of our fans, I think it means better service. It means very high quality apparel and more importantly it means comprehensive lines of apparel focusing on the game, on fitness, on the classics, the history of the League, the history the heroes in the League and also on cutting-edge fashion.

As I mentioned a few minutes ago, all 32 teams will be involved with this. It is a major new venture. We are enthusiastically working on it and at this juncture, I think I'd turn it over to Paul Fireman to get his perspective on what we are launching today.

PAUL FIREMAN: Thank you, Commissioner. I'd like to just stay a few words in support of what the Commissioner said. This, for Reebok, is a great opportunity. We recognize that the NFL is not only one of the largest sports leagues in the world but clearly one of the most preeminent. It is the largest viewership in North America. It sets a trend and a declaration for what can and will be the fashion of the future for sportswear. The NFL is a great brand which, as we said, and the Commissioner has said will be redeveloped to serve more consumers.

We will be focused on increasing the quality both of materials and design. We will look to add more inclusively more fashion for both younger people and people who have a tendency to want a little bit more style as well as the constant replication of products that are presently being worn.

We will be more inclusive for the women's market which we think is a great opportunity. There is a significant viewership in attendance of women in the audience and very much our focus which has been one of Reebok's in general and one of our expertise is to develop the fitness business. And if you look at the NFL, we are talking about the ultimate specimen in fitness preparation.

Clearly, the three hours or more that are on television every week are the highlight of what people watch. It is no secret to how important the preparation for those hours, those 40 plus hours that they spend in preparing their bodies and their minds and their efforts to become so expert on Sunday or Monday.

We are going to expand it to new products which include exercise wear, which will include both men's and women's in those categories as well as exercise equipment which we think can be quite expansive for the NFL and be more inclusive for consumers who want to have an experience of dealing with the properties of material and clothing that the pros wear and I truly mean the pros. So we are well equipped to handle this. Reebok has spent the last six months developing the kind of resources needed to make this thing work. We understand and we clearly hold the responsibility of this at a very high commitment on our part. And we are clear that we will support this program with the utmost effort and hopefully all will go well and we will do a great job for each other.

We thank the Commissioner and the owners for this opportunity and we stand here tall, ready to do our work. Commissioner.

BRIAN McCARTHY: At this point we'd like to open it up to questions.

Q. How will the deal benefit the NFL?

COMMISSIONER TAGLIABUE: Well, in several ways. First of all, it puts us in a position to be proactive with a major partner in addressing the interest of our fans in the apparel area. We can address lifestyle, design, quality, in a way that we have not been in a position to do before when we have been operating with a multiple licensee, a large number of licensees as our business model.

Secondly, I think that the partnership with Reebok gives us a partner whose interests are aligned with ours, who has a great understanding of our fans and of their interest in their heroes, in their teams. And thirdly, it is a partner with a tremendous track record in this business. It is just in recent years a track record that includes partnerships with Ralph Lauren, Greg Norman and others. So it is the ability to be proactive in ways that will produce really good quality apparel and to do it with a world-class partner.

Q. Commissioner, could you describe the evolution of this deal? For years you have been operating with multiple licensees. What changed yours and the owners' view of this market to go away from? I don't know how many partners licensees you have this year or last year, but if you can go over that and trace it back to wanting to go for one?

COMMISSIONER TAGLIABUE: I would say it really evolved at two levels.

The first was about a year ago we were reassessing how we are doing business across the board. We felt that we had really strong partnerships with the television networks, with our Players Association in our Collective Bargaining Agreement, developing very strong relationships in new media. We were planning our Internet Network, which has turned out to be so successful. We are building new stadiums. And we felt that we had arrived at business models in every area which were strategic; very well thought out and working very well.

In contrast to that, we felt that the historic business model in the apparel area was outdated; that it left us with too passive a role relative to quality, relative to fashion, relative to fitness and lifestyle serving the fans across the board, so we began a search for a new model. That has taken us about twelve months.

In the middle of that process we started to talk to Paul Fireman and to his colleagues at Reebok. Their assessment of the opportunity to have a strategic partnership was strikingly similar to ours. That we were lacking a real vision. We were not creating exciting products. We were too tied to replicas and what was on the field, to outerwear that people would use for utilitarian purposes - go to a stadium on a cold day-- but we didn't have comprehensive high-quality product in the four areas that I mentioned before: The game related apparel, the fitness, the classics, and the fashion.

The more we talked to Paul about his vision for what the NFL could represent; not just 16 Sundays or 16 or 17 weekends of the regular season or three or four weekends of the postseason but 365 days a year in terms of lifestyle and fitness, we both realized that we had an opportunity to create a partnership, to make an unprecedented commitment of our resources and their resources to the partnership and to make a statement about lifestyle and fashion that could be very, very powerful for our fans.

So we came to this new business model recognizing, I think, two things. No. 1, we needed a strategic partnership. No. 2, we had to have an unprecedented commitment of resources on both sides to that partnership and that is what we have done.

Q. Could you describe how many licensees there are now and how they are split up?

COMMISSIONER TAGLIABUE: In the past our licensees have numbered in the hundreds. We will be making a dramatic reduction in the number of licensees under this plan because that enables us to, like I said, be proactive to focus on quality, focus on those areas of design which we know are important to young people and to people of all ages who are in love with their NFL heroes and NFL teams.

Roger Goodell could give you off-line some more specific information, but if we started with 300 we will be reducing that probably by at least half, if not two-thirds.

Q. I was trying to get at the amount of sideline uniformed partners you have right now?

COMMISSIONER TAGLIABUE: As you know, we have had a number of relationships and we have had a number of different brands represented on the sideline, on the field, Adidas, Puma, Nike. We have had relationships in the past with Logo, Starter, Apex and now you will just see one brand on the field for all 32 teams beginning in 2002 when the Houston Texans come online, Reebok will be exclusive on the field with all product for all 32 teams. That will be in sharp contrast to where we have been in the past. Next season, 2001, will be a transition year. Paul Fireman and his people are working very actively right now to handle 2001 in two key areas:

Some new product that will just be illustrative of the broader range of product that will come online in 2002. Secondly, servicing the needs of our teams for the players beginning with the mini camps in the spring running through training camp and into the 2001 regular season. The full array of product and the full representation by Reebok of all 32 teams commences in 2002.

Q. In parallel with this deal we have also heard some rumblings that there has been also a shift within the revenue sharing agreements that have been traditionally tied to merchandise and apparel sales. Has anything actually been enacted among the owners along those lines?

COMMISSIONER TAGLIABUE: No. This arrangement will be conducted with the traditional equal sharing of the revenue. And if there are changes, they would be brought up in the future, but we basically have all 32 teams strongly committed to this business model. I guess the other thing I would emphasize is that the ownership is focused here, as I said, on the quality of the product and they feel that with increased quality, a broader range of high quality apparel, the returns to the League will be in a lot of areas including intensified passion and fan interest and not just royalties.

So there is really a shift of the paradigm here away from a short-term focus on royalties or exposure fees on television to quality with a conviction that with a partner like Reebok and the vision of Paul Fireman and his design team have, business will take care of itself over time as the fans get more and more excited about what they are able to find and where.

Q. Was the vote to approve this contract unanimous among the ownership?

COMMISSIONER TAGLIABUE: We had 30 clubs I believe in favor and the other two either abstained or I think one abstained and one "no."

Q. Those teams were?

COMMISSIONER TAGLIABUE: The Raiders were the only club opposed. All 31 other teams expressed strong support for the concept. The Dolphins have abstained at this point but we will be coming back to further discussion of this at the upcoming League meetings and I think the Dolphins will be supportive of the Reebok partnership.

Q. How many years does this deal run for and in both money and product what does the League net on average?

PAUL FIREMAN: This is a 10-year program. There is obviously a revenue stream that is generated. It is based on sales and typical to the past of commissions, but we don't give out information financially as to each one of our business and we have asked if the NFL would do the same with respect to us being a public company.

Q. You had talked about the evolution of the deal going from many companies sponsoring teams on an individual basis like the Tampa Bay Buccaneers and Adidas and the Cowboys and Nike. Are those agreements expiring now or are they forced to expire with the agreement that you have reached today?

COMMISSIONER TAGLIABUE: We were generally coming to the end of most of our deals. Let me ask Roger Goodell to comment on some of the specifics there, because as I said, there is a transition year here into 2002. But basically, yes, we were coming toward the end of all of our relationships including the umbrella relationships that gave the Bucs for instance a relationship with Adidas and with the Cowboys a relationship with Nike.

ROGER GOODELL: The short answer to your question is that for 2001 will be a transition. Adidas and Champion will stay on the field with 10 teams. And by 2002 all 32 clubs will be under the new structure with Reebok on the field.

Q. Two part-er. Mr. Fireman, one, all the leagues over the years have made periodic tries to court the women's market. None have done it successfully. What gives you confidence that you can do that? Second is that retailers have become noticeably skittish or have pulled back square footage in their stores about sports licensed product in general and have gone more towards the branded product. What part can you take in reversing that trend?

PAUL FIREMAN: The women's business is something we are quite versed in. It really emulates out of a focus on fitness and I think what needs to be here is that the idea of a woman just wearing an NFL costume out of a replica, I don't think is good enough by any means. I think the issue comes down to: The NFL is not simply a sports league. They are a major brand known worldwide and what we need to do is to focus on the viewership which I think is as high as 40% in women. We have to start to bring them into the fold of knowing that the NFL stands for a brand that brings technology, new materials, and state of the art fashion and design in fitness and in preparation. A person getting fit, i.e., a treadmill or exercise equipment or particular compression shorts or any kind of exercise outfit, they don't think of it in terms of football or otherwise. They think of it in terms of preparation to play a game at an intense level; in their case just getting their body in shape. So I think it is a natural occurrence. Women highly respect the NFL for what they do. They may not look at it the same way men do but they look at it from what the preparation that goes into it. That's what we will focus on.

Q. Getting back to the women's part of this, will that be where the NFL brand fits in as opposed to the various team marks?

PAUL FIREMAN: I think that is true. I think it will mostly be NFL branded because the equipment line which we are calling it, which is the exercise will be that about what the player wears to become proficient in their sport from an exercise and fitness regulatory. To answer your question, retailers have shrunk their departments down from a licensing business. Our job is not to build the licensing business back. It's to build the brand back, the NFL brand. I think the NFL brand can be redesigned so it is not simply a "licensing business with replicas," but actually a line of product that can offer many, many opportunities for the consumer to buy into that brand. Long term, if we look ahead four to five years from now, we want to make sure the NFL is the brand in question here not about simply a licensing business as you put it.

BRIAN McCARTHY: As we get ready for the next question I will read from The Licensing Letter to give you an idea of the scope of the business that we are talking about. Now the NFL is operating from a position of strength, according to the licensing letter, 1999 sales at retail, NFL: three billion dollars; NCAA: 2.7; Major League Baseball: 2.4; NBA: 1.4; and NHL: 1.0. .

Q. I wanted to ask Mr. Fireman in particular or either of you can speak on this topic, what was the genesis of the idea to bring kind of the whole fitness concept and the fitness apparel into this? This seems like one of the newest aspects of the agreement as opposed to what has been done in the past with previous apparel licensees, having this as a major part of the whole program, can you speak about how that idea kind of unfolded?

PAUL FIREMAN: What we did was when we first met we actually made a presentation to the Commissioner and his staff, they came here to Reebok, and in doing so, our presentation included what as you heard the commissioner said earlier, a mutual vision for where things should go. We seemed to get in alignment very quickly.

We believe strongly that there was too much emphasis on licensed products and only about selling things on a royalty basis; whether it be from the NFL or be the people that were selling the product. They weren't really being expressive enough in new product development, new design, new inclusive consumers. That is where the women's market and don't forget, the men's fitness market. We think in terms of women, but the men's fitness is unexplored totally. There is gigantic business out there inclusive. As well as remember that at the moment it's really a 16-week focus on the NFL, but the equipment around it and a lot of the different fashion elements can go year-round and our job is to expand this business so that it elongates for a complete 12-month cycle.

Q. Can you address whether this has -- whether the NFL is going to get an equity interest in Reebok or in this division of Reebok as part of the deal and if so, can you explain any options you might have and how they maybe exercised?

COMMISSIONER TAGLIABUE: Yes, this is more than a licensing relationship. We are viewing it as a joint venture and our expectation would be that if it evolved in a powerful way as we expect that we would have an equity position in this business with Reebok. That assumes that it is going to work out and be successful. We think it will be. It will evolve over time. That will not occur immediately. It will evolve over time as this business begins to be successful in the marketplace.

Q. Can you explain more on that equity interest portion? The release said that an option to get equity interest in the division. Is this an equity interest in Reebok as an entire the entire company or just this standalone division?

COMMISSIONER TAGLIABUE: Let me ask Roger just to comment on that from our perspective then maybe Paul Fireman might want to comment on your question relative to the division because that goes into how he would expect to be managing this piece of the business from the beginning and how that might evolve. But let me ask Roger here just to comment on the narrow question of where the equity is and then Paul can talk about how he expects to manage the business and his own role and the role of the CEO who would be dedicated to this new enterprise.

ROGER GOODELL: The NFL’s vision here we have is that we would operate this essentially as a license for a number of years until we can develop this business and then there would be an option for us to flip this into a joint venture with Reebok which we would term as right now "newco." Essentially that would be something that we would both share equity in, both Reebok and the National Football League at that point in time. As far as any other details let me ask Paul Fireman to talk about those, but that is essentially the structure that we would envision.

PAUL FIREMAN: I can't expand on that much greater actually. The fact is that this has an opportunity for the NFL and Reebok to end up in the joint venture right now. We are going to operate as if we are but it is at an arm's length licensing agreement in its early years.

BRIAN McCARTHY: We thank you for joining us. Just a reminder, the release which you should all have is on Reebok.com or you can log on to NFLmedia.com where the password and login is simply the word "media." You have Denise Kaigler's phone No. She is at 781-401-7869. She is at Reebok or contact myself Brian McCarthy at the NFL or Steve Alic 212-450-2000.

Once again, thank you for joining us and have a good day.

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