The $90-million shoe saleskid
High school basketball phenom LeBron James signs a multiyear endorsement deal with Nike.
By Associated Press,
© St. Petersburg Times
published May 23, 2003
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[AP photo]
Nike is banking on LeBron James following in the footsteps of that other No. 23, Michael Jordan, both on the court and on Madison Avenue.
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AKRON, Ohio - LeBron James went to school Thursday with enough lunch money for everyone.
The high school senior and expected No. 1 pick in next month's NBA draft, signed a multiyear endorsement deal with Nike worth at least $90-million, a risky move by the shoe and sports apparel giant that helped make Michael Jordan famous.
Nike won a heated bidding war against sneaker rivals Reebok and Adidas to sign the 18-year-old James, considered a possible successor to Jordan on the court and on Madison Avenue.
"It truly came down to which company LeBron was most comfortable with," said Aaron Goodwin, his agent. "Up until the end, I thought we were going with Reebok."
Terms of the deal were not released, but several media services reported it was for seven years and valued at more than $90-million.
James' choice of Nike, a $10-billion company and the market leader in athletic shoes, closed a frantic final week of negotiating by Goodwin with representatives for all three companies bent on signing the 6-foot-8 St. Vincent-St. Mary star.
Despite the huge deal, James didn't miss classes after signing the contract, driving his pewter-colored Hummer to school and parking it in the lot.
"Nike is the right fit and has the right product for me," James said. "They are a great group of people who are committed to supporting me throughout my professional career."
James' deal dwarfs any previous initial contracts given to a young, unproven player who is skipping college and has yet to shoot his first jump shot in the NBA.
"There's no question about it, there is a tremendous risk here," said John Horan, publisher of the Sporting Goods Intelligence newsletter.
Nike is playing for big stakes - an $8-billion market for athletic shoes in the United States. By outbidding rivals Reebok and Adidas for James, Nike hopes to block erosion of its U.S. market share for basketball shoes, which depends almost entirely on teenage boys, said David Carter, a University of Southern California sports marketing professor.
If the James endorsement deal helps Nike preserve just 1 percent of that market share, the company breaks even, Carter said.
"So when you're talking $90-million, the question is, would you bet 1 percent of your market share on LeBron James? Absolutely," Carter said.
Bob Williams, president of Burns Sports & Celebrities, a marketing group that matches athletes with advertisers, said Nike had no choice but to extend itself.
"This was a full-blown, all-out price war," he said. "Nike won it. I think that Nike is the leader in the industry, and the leader in the industry cannot have a player with the potential of LeBron James sign with a competitor."
Nike's package includes a personal shoe and apparel line for James, who will have artistic input into his sneaker model.
After Adidas pulled out of negotiations early Wednesday, Goodwin said, representatives from Reebok and Nike pushed hard, hoping the other would buckle. Reebok reportedly offered $75-million.
Nike signed Syracuse's Carmelo Anthony to a shoe and apparel deal on Tuesday. Anthony, who led the Orangemen to the national championship in April, is a close friend of James and is projected to be taken second in the June 26 NBA draft.
James also signed an exclusive multiyear contract with Upper Deck trading cards Wednesday. That deal includes a $1-million signing bonus.
CBS Sportsline.com reported in March that an estimated 5 percent of players are receiving shoe deals above $100,000; 20 percent are looking at $40,000-$100,000 endorsements. Fewer than 1 percent of basketball shoe deals are worth $1-million or more, down 3 to 4 percent from the mid 1990s.
Of the three companies, Nike got the final chance to make a lasting impression with James, his mother, Gloria, and Goodwin. The group spent last weekend at Nike's corporate headquarters in Beaverton, Ore., where the company made its final presentation.
James had seen offers from Reebok and Adidas, whose final push included putting up billboards and placing messages on buses in Akron directed at James.
Goodwin denied that getting a deal done before Thursday's NBA draft lottery was a priority.
For James to maximize his earning potential, it would benefit him to be drafted by a large-market team like Chicago, New York or the Los Angeles Clippers. The Cleveland Cavaliers won the draft lottery Thursday night, and are expected to pick James. In a smaller market like Cleveland, his national exposure would be smaller and endorsement opportunities could be less attractive.
"We just wanted the right fit, and it turned out to be Nike," Goodwin said.
The $90-million shoe saleskid
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