As the Raptors prepare to face the Cleveland Cavaliers and LeBron James, there is a ton of speculation that LeBron James is a lock to sign with the New York Knicks in 2010, in large part because of the 'huge spike' in endorsement income he will enjoy if he's in the Big Apple.It isn’t happening – at least not for the reason commonly stated which is that King James will generate an endorsement windfall in New York, New York.
LeBron may decide to leave the Cavs in 2010, but it will be because he believes he can win an NBA championship somewhere other than Cleveland.
The major sports endorsement world has changed
There has been a significant shift in the sports endorsement world over the past decade, where top endorsement dollars are no longer paid to 'big' market athletes like they were in the 80's and 90's?
Elite athletes like LeBron James, Kobe Bryant, Yao Ming, Tiger Woods and Michael Jordan have become major global brands who transcend a specific market.
With YouTube, 24/7 sports on tv/radio and massive online coverage along with hundreds of cable and satellite feeds - it doesn't matter where a top athlete plays ball in 2009.
Diehard fans can watch their every move without leaving home, wherever home may be. If LeBron is your favorite player, living outside of Cleveland doesn't prevent you from being a mega-fan, like it did even a decade ago.
Question: Of the top 10 sports endorsement athletes in the USA, how many play in a major US market?
Answer: Only ONE .... Kobe Bryant.
In fact, 5 of the top 7 don't play in any specific market or city (Tiger, Phil M., Dale Jr, Michelle Wie and Jeff Gordon).
Question: Do you know where the #1 endorsed NFL player plays?
Answer: Its in small market Indianapolis .... Peyton Manning. And he earns considerably more in endorsements than his younger brother Eli who happens to play in NYC.
LeBron is already the King
Now, let’s check LeBron's endorsement income as reported in FORTUNE. He's clearly not held back by being in Cleveland:
2007 endorsement income: $25 million
“King James is the true king of endorsements in the NBA, bringing in close to $10 million more than the next-highest earner in the league, Kobe Bryant.”
LeBron is the #1 earner in the NBA by a wide margin and #3 overall in the USA despite playing in northern Ohio. He's a whopping $10 million above Kobe in earnings, who is a distant second in the NBA.
How much more can King James command when he already earns 66% more than #2, particularly as ad budgets are cut in an economic downturn? Tiger just lost a $7 million endorsement deal with GM this week and more cuts are expected. Last week LeBron's Microsoft deal lapsed, even though it had been dormant for sometime.
The factors that lead to mega endorsement deals
Elite athletes are global brands and the most important factors that lead to their marketability and desirability are:
1. Dominant Talent (Tiger, LeBron, Kobe, etc)
2. Winning Personality (big smile, good in front of a camera)
3. Compelling Storyline (Michelle Wie)
4. Titles Won (Tiger, Kobe, Peyton, etc)
Lebron has the first three attributes and his large endorsements reflect that. If Lebron is going to see an increase in endorsements, it won't be because he moves to NYC. Instead, the most important 'missing' factor will be "winning an NBA Championship".
Bottomline is that elite talent trumps everything. The current NHL endorsement star is Sidney Crosby who plays in Pittsburgh and not in New York or Los Angeles. "Sid the Kid" has a winning smile, he's well spoken and most importantly - he's the best damn hockey player in North America!
Lets look at the top NBA stars from an endorsement perspective and you see that only one is in a major market (as of 2007):
1. LeBron - CLEVELAND
2. Kobe - LA
3. Shaq- MIAMI
4. Wade - MIAMI
Vince Carter had more endorsement income when he was a Toronto Raptor (nearly $20 million at his peak) than Kobe or Shaq who were big market players at the time and who both won NBA titles. That despite Vince playing ball in Canada. When Vince was traded to the greater NY area in 2003, his endorsements dropped! If being in a major market was so important, that should not have happened.
Lebron is a dominant talent, who handles himself well in front of the camera and who exhibits a winning personality. He will continue to earn massive endorsement dollars regardless of where he plays ball.
If LeBron wants to make a jump to the next level, then he needs to sign with a team that gives him a shot at the ring! Hopefully for Cleveland fans, LeBron sees his best chance to win is with the Cavs.
The Nike rumor is false
It has been reported that LeBron James is headed to New York because of an endorsement fee escalation clause with Nike. Sorry, but its just not true.
LeBron does NOT have a major market escalation clause in his Nike contract. That's a rumour fueled by the media and fans. Last week, Darren Rovell - sports business guru of CNBC & ESPN wrote:
"For the millionth time, LeBron James has no bonus in his current contract with Nike—still his original contract—that pays him more if he plays in New York or any other big city for that matter.
I find myself writing this because with speculation that James will be headed to New York in 2010, as the Knicks have cleared out cap space for that season with the rumored express purpose of landing LeBron, people have started to talk again about this mythical bonus. As James played at the Garden and questions about 2010 and New York reached its greatest height, we started hearing about this bonus again. "
Cavalier fans can relax a little because on the main reasons given for King James' supposed imminent departure just ain’t true.
2/6/2010 11:41 AM