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Monday, April 27, 2009

LeBron's Rookie Contract With Nike — The Last Mega Marriage of Its Kind for Awhile

Posted By on Mon, Apr 27, 2009 at 2:31 PM

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Athlete endorsements have always struck me as an odd business practice for corporations. Not in every case, since an endorsement still carries some economic weight to it, I suppose. It's the mega-mega-mega deals that have always befuddled me, and especially those given to rookies. Does Nike really reap all the benefits from paying Kobe or LeBron bajillions of dollars? Do they even break even?

Well, with the current economic climate, we're probably not going to see anything like the $13 million/year deal that LeBron signed with Nike as a rookie. That doesn't mean we won't see anything like that for veterans, but for unproven rookies with nothing but hype and some high school stats, that generous contract is probably never going to cross their hands. Numbers in the seven figures are now going to be numbers in the five figures. Maybe.

According to CNBC's Darren Rovell, that's not entirely because of the economy. It's because Nike and Adidas and others are realizing it's just a pretty freaking stupid business practice.

The answer is no. And the scary thing about the business is when that the economy bounces back, aside from the rare guy, a lot of the shoe deal numbers that existed in the past won't return.

The same is even true for the NBA draft picks. Six years removed from LeBron James signing a deal that averaged $13 million a year, sources are telling CNBC that it's not likely that any NBA draft pick this year will make more than $1 million a year off a shoe deal.

Since shoe companies can only really hit paydirt off a signature shoe, Nike, Adidas and Under Armour are now in the driver's seat.

Dwyane Wade's initial bargain deal with Converse in 2003 ($400,000 a year) is going to seem expensive when looking at this year's picks. One agent told us that shoe companies that would have offered kids $250,000 a year two years ago, could now offer $25,000.

Well, maybe until and unless another kid like LeBron shakes David Stern's hand on draft day.

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