Why can Nike dump the Fuelband? With friends like Apple, it doesn’t need its own hardware

Nike Fuelband

If you want to track your fitness with Nike software, you’re probably going to have to use Apple products.

The news that Nike had laid off a majority of its digital sport hardware engineering team last week meant the reported end of Nike’s FuelBand, the oldest of the current generation of wearable fitness trackers. Nike will still be a player in the wearable space, but it will no longer be producing hardware, according to reports from CNET and Recode.

If Nike exits the physical wearable market, as now seems likely, Apple will be the primary sensor maker for Nike’s future wearable apps given the length and depth of the two companies’ close ties. Although there are a handful of Nike apps available for Android, there is no app (on any other mobile platform aside from iOS) that supports Nikefuel, which Nike describes as the “heart of the Nike+ ecosystem.” In many ways, this is the culmination of a process that’s been taking place between the two companies for the better part of a decade: Nike will design the fitness app experience, and the hardware will be made by Apple.

Apple and Nike have a long history

Apple CEO Tim Cook, who has been spotted sporting a FuelBand, sits on Nike’s board of directors. Nike has had partnerships with other innovative tech companies in the past, releasing a Nike+ Kinect game with Microsoft in 2012, and a GPS watch with TomTom in 2011. TomTom currently makes its own GPS watches, and the public face for Nike+ Kinect, Jay Blahnik, now works for Apple.

Apple CEO Tim Cook looks on, wearing a Nike Fuelband, before the Apple Store opens to sell the new iPhone on September 20, 2013 in Palo Alto, California. Photo by Justin Sullivan/Getty Images

Apple CEO Tim Cook looks on, wearing a Nike Fuelband, before the Apple Store opens to sell the new iPhone on September 20, 2013 in Palo Alto, California. Photo by Justin Sullivan/Getty Images

Nike is an important partner for Apple. The iPhone 5S includes an advanced motion coprocessor, the M7, which allows fitness apps to track motion without turning on the full power of the main processor. At the iPhone 5S announcement, the demo app was Nike+ Move, which is almost identical to the Nike+ FuelBand app but does not require an external wearable sensor. Currently, Nike+ Move is available only for the iPhone 5S.

Nike’s first foray into the digital activity tracker market was a product called Nike+iPod, released in 2006. That consisted of a piezoelectric sensor that tucked into a shoe and a dongle that attached to an iPod nano, and the software was eventually expanded to include the 2nd generation iPod Touch and iPhone 3GS. Eventually, Apple integrated enough sensor capabilities into the iOS platform so that the separate dongle was no longer needed. Now there are seven different apps available on the App Store which include the Nike+ brand. Only one now requires separate hardware — Nike+ FuelBand.

There is still no NikeFuel app for Android. In previous statements, Nike has said there isn’t an Android app in development. And while Nike hasn’t ruled it out, it seems unlikely. If Nike wants to stop the fragmentation of its sensors, there is no easier way to do that than to make Apple products the preferred hardware for the platform. In fact, this is Apple’s advantage over other handset makers — because there are so few iPhone models, there is no need to finely calibrate sensor readings for a multitude of devices.

Nike’s platform, built on top of Apple’s platform

Nike’s expressed plan is to make its Fuel fitness tracking system into a platform for other developers on which to build applications. This makes sense — hardware is difficult and expensive, and requires specific engineering expertise and supply chain mastery in order to produce decent margins. Other companies may have good hardware or data expertise, but are unlikely to grab the attention of the toned and tan. Fitness trackers are bought with high hopes, but many end up forgotten after a few weeks, like a diet.

Nike CEO Mark Parker and Apple CEO Steve Jobs during the May23, 2006 unveiling of a partnership between Nike and Apple. Photo by Mike Ehrmann/WireImage

Nike CEO Mark Parker and Apple CEO Steve Jobs during the May23, 2006 unveiling of a partnership between Nike and Apple. Photo by Mike Ehrmann/WireImage

While Nike has never released sales data for the FuelBand, a report estimated the entire fitness tracker market to be worth $330 million in 2013, and the FuelBand only accounted for 10 percent of brick-and-mortar sales during that period, according to a report from the NPD Group. Nike revenue for the third quarter of 2013 was $7 billion, so it appears the FuelBand was not moving the dial. Taking into account research and development costs, it’s possible the FuelBand was a money pit.

But as the world’s largest sportswear designer, Nike already has the attention of fitness fanatics, and knows the exact kind of marketing will best hook athletes into a new product category. It’s that kind of large, committed user base that will compel competitors, like Strava and MyFitnessPal, to build features on top of the Nikefuel API, whereas they may not have considered the FuelBand platform important because there is a limited install base. To better reach potential partners, earlier this month Nike opened up a new tech office in SOMA, the heart of San Francisco’s tech district.

While it might not make competitive sense for some of the smaller fitness apps to team up with Nike, if there’s a large contingent of customers who associate Apple’s fitness features with Nike+, they might not have a choice.

By making Nike software and Apple hardware one and the same, Nike not only gains a huge installed user base, but Apple gets a user-facing feature no other handset maker can match: fitness from a world-famous fitness company.

Nike Fuelband close-up. Image from Flickr/Angel Navedo

Nike Fuelband close-up. Image from Flickr/Angel Navedo

Nike’s hardware exit has been a long time coming

Nike executives have been hinting at their plans to get out of the hardware market for some time. Talking to Fast Company earlier this month, Steven Olander, the Nike vice president of digital sport — the department which just lost 80 percent of its staff — said,

When Nike developed the FuelBand SE, people asked if we were becoming a technology company. But that was never the intention. We weren’t so much excited about the thing as what the thing enabled, which is motivating people because they have a way to measure how active they are–we have a saying that you can’t improve what you can’t measure.

Last year, Nike CEO Mark Parker said at a Fast Company conference:

It’s really important to understand what we do well . . . what we bring to the party, so to speak, and actually amplify that and not to expect us to really go in and compete with the latest, greatest development of sensor technology.

Apple’s strength is is making slick, well-engineered hardware that sells well. Now these devices, as a matter of course, have advanced sensor technology built in.

Nike’s strength is making fitness cool. Regardless of whether Apple introduces a wearable product this year, or simply introduces new features like the rumored Healthbook app, Nike’s fitness software will be a big part of it.

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