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No Shoe Windfall for NBA Draft Picks

NBA Draft
NBA Draft

It's the Monday before the NBA draft and not one top draft pick has signed with a shoe company.

It’s partly due to the fact that there’s just not one standout slam dunk, marketable player in Derrick Rose, Michael Beasley or O.J. Mayo. But it’s also due to several other factors that can’t be ignored.

I’m going to say right now that the seven-year, $90 million contract LeBron James signed in 2003 with Nike will be the equivalent of the 10-year, $252 million playing contract Alex Rodriguez signed with the Texas Rangers in 2000. There will never be a shoe contract that will surpass LeBron’s deal in total dollars, unless it’s the extension LeBron signs.

But even that’s in question. Why? Because while James somehow lived up to the hype on the court, his shoes haven’t.

“Nike overspent on LeBron,” said Matt Powell, an analyst for SportsOneSource. “They haven’t gotten out of him what they paid for.”

The only reason why Nike has definitely made their money back on Dwyane Wade and likely made sense on Carmelo Anthony was because their initial contracts were for $400,000 and $3 million a year, respectively.

Here are some more factors to consider.

The basketball shoe market is down from the $4.5 billion the market was at when Nike signed LeBron. Powell says this year basketball shoes will gross in the $2.5 billion range.

Then consider how dominant Nike is. Adding up Nike, Converse and the Jordan business, Nike has a 93 percent share of the basketball shoe market, the largest take of any shoe business by one company.

And finally, consider this. Michael Jordan is still Nike’s best endorser by a mile. Powell says sales of the Jordan brand make up a larger percentage of the overall shoe business than they ever have. For every three pairs bought in this country, two of them (67 percent) are the Jordan brand. Nike has a 24 percent share, adidas has a 4 percent share and Converse has a 2.5 percent share.

Given these numbers, you can imagine what it would take for Nike to fork over big bucks when they already have a basic monopoly on the business. And you can imagine how marketable a certain player would have to be in order for adidas to jump at him.

Five years ago, the power was in the hands of the players and the agents. Agents like Aaron Goodwin, who structured LeBron’s Nike deal, made sure to get LeBron signed before the lottery so that a smaller market wouldn’t hinder his contract earning potential. (The persistent rumor that LeBron would have made more in New York is not true.) Carmelo was also signed with Nike before the draft.

But, given the state of the market, and the state of the players -- no, O.J. Mayo is already not “the next LeBron” -- all the power is in the hands of the shoe companies. And it looks like they’re content to wait to see who goes where before they decide how much to pay them or if they should go after them at all.

Questions? Comments? SportsBiz@cnbc.com

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