LeBron James Signs New Deal With Nike
Cleveland Cavaliers star LeBron James has signed a new shoe and apparel deal with Nike , the company acknowledged on Wednesday.
"LeBron James is one of the world's best basketball players and a global sports icon that has transcended generations and cultures," Nike spokesman Kejuan Wilkins said. "Nike's relationship with LeBron has created innovative basketball products and captivating campaigns. We're proud to continue our partnership with him for years to come."
Terms were not disclosed, James' business partner Maverick Carter, CEO of LRMR, told CNBC the deal was for a longer period of time that James' last deal. LeBron signed a seven-year, $93 million contract with the company in May 2003.
"Our relationship with Nike is more than a shoe deal," Carter said. "It's more like a joint venture — meaning we are working to build a business. His latest shoe, the LeBron VII designed by Jason Petrie is the best selling shoe we've ever had in LeBron's line."
Carter wouldn't comment specifically on whether there is a clause that would pay him more should he sign with the New York Knicks this offseason, but one insider said such a clause is not in the current contract. The way James would make more money off his base contract would be by selling more shoes through a royalty agreement.
Perhaps going to New York would sell more shoes, but he'd likely sell more shoes in China and other emerging markets, where volume really counts, if he wins championships. One of the reasons why James is far behind Bryant in China is that he isn't revered as much because he doesn't have the rings that Kobe has. In that case, it might make more sense for James to stay in Cleveland, who made it to the Finals in 2007 under James and, at 58-16, have the best record in the NBA.
It is not known how much money Nike is paying James, but insiders say that it's not likely that the guarantee is more, on an annual basis, than his past deal.
While there might have been interest from other players, sources say Nike was the only one who was negotiating numbers with Carter. Carter says that's because the relationship was just too good.
But that's the big difference between now and in 2003, when James was the target of a three-way bidding war between Nike, Reebok and adidas. But when Reebok was purchased by adidas in a $3.8 billion acquisition two years later, it reduced the bidding capacity of a major competitor.
Sources say Adidas had interest, but felt good enough about focusing most of its big money on Dwight Howard and Derrick Rose and its NBA league deal. Under Armour basically took itself out of any conversation when it announced it wasn’t even making a basketball shoe this year, despite having Milwaukee Bucks upstart Brandon Jennings on its endorsement roster a couple years ago.
The Chinese brands such as Li-Ning, Peak and Anta, are new players in the game, but many sports marketers agree that these companies weren't even an option, as leaving Nike would certainly dilute the value of LeBron’s endorsement.
“He really couldn’t go anywhere else,” said David Falk, the agent who famously signed Michael Jordan to his then $500,000 a year deal with Nike in 1984. “It would just kill his credibility.”
Back in 2003, on the eve of the NBA lottery, as the shoe companies jockeyed for the services of LeBron, the idea was that if James lived up to the incredible hype, he’d finally be the one to live up to the commercial success of Jordan.
James did live up to the hype on the basketball court and off it too, as his personality was able to shine –- most notably in Nike commercials where he played four versions of himself.
But his shoes and apparel didn't fly off the shelves in the beginning as much as they could have.
“What happened with Nike and LeBron has proved that the days when a single athlete dominated like Jordan are completely over,” said Matt Powell, analyst for SportsOneSource, a sports market retail tracking firm. “It took Nike about six years to come up with LeBron shoes that were commercially viable and even then it paled in comparison to Jordan’s standard.”
“LeBron is one of the most important endorsers to Nike,” Falk said. “And I think, from the beginning, it was unfair to compare him to Jordan. The model everyone was talking about just couldn’t be replicated.”
Throughout the years, LeBron’s shoes still got buzz, as did the shoes Nike made for Kobe Bryant, who the company originally signed a month after James in June 2003. Bryant's deal was recently renewed as well.
But there recently came a point in time that the shoe companies just couldn't justify its dollar for dollar spend on some of its biggest contracts, much in the same way a team has trouble quantifying its biggest salaried players. The difference, of course, is that the shoe companies are public entities and shareholders matter more than fans when it comes down to making the financials work.
“I don’t think any basketball player is making $10 million a year in guaranteed money on a shoe deal ever again,” said Sonny Vaccaro, who has worked with all the shoe companies and convinced Nike to spend its entire basketball marketing budget on Jordan in 1984. “All my life, I said there would never be another Jordan and now we know. It wasn’t Kobe. And it wasn’t LeBron.”
Still, James can continue to be a powerful force for Nike — likely in a place where he can win championships as soon as possible. If it's about selling shoes and making more money, it appears like James doesn't physically have to be on Madison Avenue next year.
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