Adidas has lured Houston Rockets guard James Harden away from the Swoosh with a 13-year, $200 million offer that was announced yesterday.
Right now, Harden will average $16.78 million on the final three years of his deal with the Rockets and $15.38 million annually. However, if Harden reaches certain benchmarks, it’s entirely possible that he will earn from Adidas than he will from the Rockets.
Adidas was in significant need of signing a marquee player. Under Armour has Stephen Curry, Nike has LeBron James and now Adidas has James Harden … all 2014-15 All-NBA first team selections. Nike claims approximately 95% of the U.S. basketball sneakers, while Under Armour is very quickly expanding its own line of products and passed Adidas last year as the second-largest seller behind Nike. In the first six months of this year, Adidas sold fewer shows in the U.S. than Skechers and New Balance. Part of Adidas’ underwhelming basketball brand performance can be attributed to big injuries to two of their main stars, John Wall and Derrick Rose.
Earlier this year, Adidas chose not to renew a deal with the NBA that had established it as the official outfitter of the league and in came Nike with an 8-year partnership that is worth roughly $1 billion. Moreover, Under Armour announced its own global marketing partnership with the NBA, which positions the brand as a title partner and outfitter of the NBA Draft Combine, presenting partner of the Junior NBA program in the U.S. and allows Under Armour to work with the league to launch an NBA FIT mobile app.
Adidas foresees Harden making a big splash in China, as the Rockets have remained a fan favorite in the Far East since the days of Yao Ming. The deal will feature a signature Harden shoe, his own apparel line, as well as Harden traveling on extensive brand tours in Europe and Asia. Additionally, Harden has started dating Khloe Khardashian who is a marketing machine herself and will undoubtedly raise his visibility into other demographics. Nonetheless, Harden’s jersey sales were only 14th in the league last year behind players like Damian Lillard, Dirk Nowitzski and Chris Paul. Adidas is expecting the deal to help move his merchandise sales upwards.
Harden’s endorsement deal with Adidas, which will officially begin on October 1st of this year, speaks to the increased value placed in brand marketing. Harden, who was not that long ago a sixth man for the Oklahoma City Thunder, will now be making more money from this deal than what seven-time NBA All Star Tracy McGrady and eleven-time NBA All Star Allen Iverson made throughout their respective careers from on-court earnings. In basketball and major U.S. sports in general, a highly marketable player and personality like a James Harden can earn more money by pushing a brand than his performance on the court. While on court performance and off-court marketability are highly correlative, Harden’s Adidas deal speaks to how marketability is valued more so now than ever.
One thing remains the same, Nike is still firmly established as the dominant shoe and apparel company in basketball, as they hold long-running endorsement deals with the three most globally popular (active or former) players in the world in LeBron James, Kobe Bryant, and Michael Jordan. And so they have the luxury of being able to allow MVP runner-up and All-NBA mainstay James Harden bolt to their three-stripe rival without much fuss. Nike had the option to match Adidas’ offer but chose not to, perhaps because of their recent large investment in getting the NBA league wide deal.
One “arena” of the sports business world that is often overlooked is the athletic training facility for professional athletes, specifically for the sports of football and basketball. Many of the high profile collegiate or amateur athletes who declare themselves eligible for the NFL or NBA drafts chose to do their training at a world-class sports training facility. With the NFL draft less than 2 months past, and the NBA draft only 5 days away, this seems to be a highly relevant topic.
I think it might be important to understand the dynamics of this business before diving into the details of it. While these training facilities exist for athletes across all sports, the training facilities that focus on athletes preparing for the NFL and NBA drafts are easily the biggest. That is because those two drafts are the biggest in magnitude. The MLB draft has 40 rounds and thus loses its luster. Moreover, many of those prospects spend several seasons in the minors or play college ball before seeing a major league roster. Similarly, the NHL draft does not give fans the immediate satisfaction of seeing players that are “NHL ready.” It takes most top picks in the NHL draft 3-4 years before they are actually playing in an NHL game. Conversely, the NFL and NBA drafts generate lots of buzz, interest, and excitement from fans because nearly all first round picks are just about guaranteed to make their teams the following year giving fans a reason to watch the event on TV.
Many of the top agencies will sign athletes right when they declare themselves eligible for the NFL and NBA drafts. Both the NFL and NBA have formal pre-draft combines that are essentially showcases for NFL and NBA management to examine players. They both happen 1-2 months before the draft and allow NFL and NBA GM’s, coaches, and scouts to see all of the athletes’ performance measurements (bench press, vertical jump, etc). Because so much weight is put into these athletic measurements, agents will pay top-dollar for their signed athletes to do their pre-draft training at the very best facilities in the world. With GM’s making million dollar-drafting decisions sometimes based upon a tenth of a second in a wide receiver’s 40-yard sprint, the return on investment for agents on sending their clients to the very best facilities is ever important.
This opens up a market space for facilities that specialize in training professional athletes. To begin with, it’s a very saturated marketplace with hundreds and hundreds of trainers and facilities doing various versions of the same thing. One of the biggest training facilities is EXOS, formerly known as Athletes Performance. EXOS was founded in 1999 by Mark Verstegen and has exponentially grown to where now they have facilities in Tempe (AZ), Phoenix (AZ), Carson (CA), San Diego (CA), Gulf Breeze (FL), Raleigh (NC), and Frisco (TX). They boast 523 players drafted, seven #1 overall picks and 105 first-rounders. Jadeveon Clowney, Greg Robinson and Blake Bortles all attended EXOS and obviously their hard work at these facilities paid off with big pay-days as the #1 overall pick in the NFL drafts.
Another top facility for NFL pre-draft combine training is IMG Academy in Bradenton, FL. The Academy started as a tennis academy with the one of the best tennis coaches of all time, Nick Bollettieri, who was responsible for training about half of the draw in the 1986 US Open. From there, the deep pockets of IMG (International Management Group) were able to take it from purely a tennis academy to a world class training facility for many more sports, football and basketball being two of them. Within the last 10 years or so, IMG has landed 86 first round picks, five #1 overall picks, including names like Cam Newton, LaDainian Tomlinson, Luke Joeckel, Luke Kuechly, Ryan Tannehill as well as Super Bowl MVP’s like Drew Brees and Eli Manning.
On the basketball side, there are a few workout facilities that stand out: Impact Basketball (Las Vegas, NV), Project Basketball (Oakland, CA), and Evolution Athletics (Chicago, IL). Impact Basketball began in 1997 when former Division 1 coach, Joe Abunassar, applied his unique approach to basketball development to guide the careers of several of the best NBA players. Today, Impact Basketball has three locations as well as programs running in over a dozen countries … they have laid claim to over 100 NBA draft picks in the last 7 years. Joe’s early group of clients was Kevin Garnett, Chauncey Billups, Tyronn Lue, Al Harrington, Tayshaun Prince and Dahntay Jones. From there, Joe was able to start the IMG Basketball Academy in Bradenton, Florida. He then added facilities in Las Vegas and Los Angeles that train over 200 professionals, men’s and women’s national teams, McDonalds and NCAA All-Americans, foreign professionals and young talented amateurs who train at his summer camps and his Impact Academy.
Jeff Pagliocca, with Evolution Athletics in Illinois, is a little newer to the game of combine training, although is quickly building an impressive list of alumni. Everyone from Luol Deng, to Will Bynum to most recently Frank Kaminsky as well as Aaron and Andrew Harrison have used Pagliocca and his staff to prepare for the NBA draft combine.
Virtually all of these training facilities feature cross-training components including mental conditioning, speed training, nutrition, and other components of how to be the consummate professional. In virtually all of these examples of world-class training facilities, the business model has started from a well-known coach or trainer being able to attract a few big name athletes. From there it becomes a snow-ball effect in large sense, where other young up-and-coming athletes want to train where the other best athletes are training. It is here where managing the relationships with the large agencies becomes crucial, as they are ultimately the ones spending the dollars. At this point it becomes a marketing exercise, where the coaches rely on a marketing and business development staff to generate the buzz of who is coming to train at their facility and to permeate that news to the youth athletes, the high school athletes, the college athletes and even the professional athletes.
The business is now off and running and new revenue streams open up for these facilities. With the ability to market these big names, the facilities generally then create youth summer camps, individualized private training sessions, team training, events, consulting and sometimes will even look to get into player representation and player endorsements. If executed properly, the pre-draft combine training niche marketplace can have a rippling effect over a potential very large business.
It is a very saturated market with lots of facilities trying to do similar things … and like anything else; the cream generally rises to the top.
It was just announced on Wednesday that Nike and the NBA have agreed to an 8 year, $1 billion jersey deal that will begin in the 2017-18 season.
This deal will represent approximately a 245 percent annual increase from the previous deal that the NBA had held with Adidas. In 2006, the NBA announced an 11-year, $400 million deal with Adidas, who at the time had taken over for Reebok (a brand which it now owns). It was reported that Adam Silver and the NBA had become unhappy with Adidas after they fell to third in the United States in shoe and apparel sales, behind Nike and Under Armour. This past March, Adidas announced that they would not seek to extend its jersey deal with the league.
You might wonder why the NBA announced this so early in advance, as their current deal with Adidas is good through the 2016-17 season. The simple answer is that both sides have already mutually agreed to part ways at the end of the deal. Adidas still wants a return on their investment, so don’t expect to see any letdown from them in the coming years. They have done some new things, such as jerseys with sleeves and their special Christmas Day branded jerseys. With Adidas and the NBA coming to this decision to split early, there was no reason for the NBA to not go ahead and search for their next official jersey supplier.
A major win in this jersey deal for Nike is that the Nike Swoosh will appear on all NBA jerseys, a first for the league. Nike President and CEO, Mark Parker, is extremely excited about the deal, “In Nike, Jordan and Converse, we have three of the most connected brands in the world, and look forward to making the global growth of the game a successful strategy for both the NBA and Nike.” Since 1992, Nike has been a marketing partner of the NBA. At retail, they have been able to successfully produce replica NBA jerseys under their Swingman line. Furthermore, Nike and its affiliated brands, control more than 90% of the U.S. basketball shoe market at retail. The company holds endorsement deals with many of the league’s top stars: Lebron James, Kevin Duran, Kobe Bryant, Kyrie Irving and Russell Westbrook to name just a few.
In 2012, Nike was able to win the bidding war for the official uniform deal of the NFL, and they have extended those rights until the end of the 2019 season. Most industry experts would agree that Nike has been relatively conservative with their NFL jersey designs, excluding a few franchises like the Jaguars, Buccaneers and the Seahawks. NFL owners tend to be more conservative businessman compared to those owners of NBA franchises. It is expected that Nike may have a little more creative freedom with these NBA jerseys. Having said that, with the limitation of space on the NBA jersey canvas (no sleeves, shorts and not pants, no high socks, required number on the front of the jersey), Nike’s design team will have to be resourceful to create a groundbreaking design.
One issue of debate with the new Nike NBA jerseys is whether or not there will be advertising on the jerseys. That question may largely be tied to the television deal with Turner Sports. ESPN Sports Business Reporter, Darren Rovell, says, “With such a large and lucrative ESPN/Turner deal getting done, it brought into question the worry that there might be some companies who might try to cannibalize the business of TV and not buy television advertisements. I think that’s enough of a concern to keep advertisements off jerseys until the end of the TV deal and maybe forever.”
Now, Adam Silver shares a much different opinion on the NBA’s jerseys than former commissioner David Stern maintained. Stern felt strongly that there should be no other competing brands on the NBA jerseys besides the team brands, which is what negated Adidas putting their trademark logo on the jerseys. Silver, however, not only feels strongly about putting the supplier’s brand on the jerseys, but is also pushing for corporate advertising on the jerseys.
This new deal will have no impact on a few teams who have new uniform designs coming out. The Philadelphia 76ers will be unveiling new uniforms next week; while the Toronto Raptors and Atlanta Hawks will be announcing new uniform designs later this summer as well.
Regardless, this is a huge win for Nike. Nike will now have the official jersey deals for the two US professional sports leagues with the widest global marketing reach.
The NBA Finals this year features perhaps the most entertaining matchup since Larry Bird and Magic Johnson in the 1980’s. LeBron James, the 4-time NBA MVP and the 2-time NBA Finals MVP is considered the best basketball player on the planet and certainly has the personality to back up his game. His polarizing presence has made him hated by many and a villain looking to dethrone MJ as the best ever. On the other side of the court is Stephen Curry. The humble, soft-spoken kid who got passed over by all the top college programs, to later prove everyone wrong and become the best shooter of the game’s generation, and perhaps of all-time.
While Cleveland and Golden State are not exactly big market basketball cities, the matchup of James vs. Curry is making this Final one of the more hyped matchups in recent years. It is good versus evil. Two kids both born in Akron, Ohio; one of whom exploded as a youth, was a can’t miss athletic specimen, went from the preps to the pros, and was taken #1 in the NBA draft, while the other was a skinny lanky kid who struggled to make his High School basketball team, was overlooked by almost all big college basketball programs, surprised everyone in the NCAA tourney at Davidson, and then exploded to win the 2014-15 NBA MVP.
The story of these two could not be any more different. One is a pure athlete, the other is a pure shooter. Many dislike one, while the other seems to be loved by all. One is supposed to win everything, whereas the other wasn’t supposed to win anything. And yet both were born in the very same town of Akron, Ohio and they meet for the first time in the NBA Finals.
The NBA, as a whole, does an extremely good job at marketing. Their International Global Marketing division has greatly contributed to the league expanding to Latin America, Europe and Asia through various exhibition events, leveraging marquee foreign players, and developing key strategic global partners.
Moreover, the League tends to be opportunistic with moments like this one. Golden State and Cleveland are not exactly huge markets, and yet they have already strategically branded this Final as “James versus Curry.” James and Curry are 1-2 in jersey sales this season, while Curry edged James for the most All-Star votes. Between the two of them, they have been mentioned 28.8 million times since October on Twitter.
Both are marketing machines, as James has deals with Nike, Kia, Samsung, among several others, and has his own TV production company. Meanwhile Curry has become one of the most sought-after endorsers in the game today, as he has deals with Under Armour, Muscle Milk and Degree. The baby-faced 25-year-old has about a dozen endorsements that he didn’t have when he was left off last year’s All-Star team and is pulling in about $3.5 million a year off the court.
Simply put, LeBron James and Stephen Curry are the two best in the game today. For that reason alone, the NBA Finals matchup this year is special. On the surface, they are polar opposites: personality, playing style, their paths to this point. And yet here they are, pitted against each other on the game’s largest stage.
The NBA Finals Game 1 is on tonight … and you better believe, people will be watching.