The Origin Story Behind LeBron's Billion Dollar Relationship With Nike
The Origin Story Behind LeBron's Billion Dollar Relationship With Nike
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Hey Friends,
This weekend was the anniversary of when LeBron James signed his first deal with Nike in 2003. He was just 18 years old at the time, and nearly two decades later, their relationship has become one of the most lucrative partnerships in sports history.
The story goes like this: LeBron James was the most hyped high school athlete of all time. He was on the cover of Sports Illustrated, labeled “The Chosen One,” and every shoe company wanted him — but only Nike, Adidas, and Reebok could afford him.
So Reebok went first. They brought LeBron and his mother, Gloria, to their offices and offered him a life-changing $100 million deal that included a $10 million signing bonus — a Reebok executive literally wrote a $10 million check on the spot and handed it to LeBron James.
But there was just one stipulation. If LeBron accepted the $10 million check, he was essentially committing to Reebok and wouldn’t be allowed to talk to Nike or Adidas.
"When [Reebok] slid [the check down the table] and [they] said, 'Listen, if you take this right now, you just promise me you won't go talk to Nike or Adidas. You know, you can take this right now,'" James said on an episode of Uninterrupted's "Kneading Dough" with Maverick Carter.
"And I was lost for words at the beginning. I mean, I flew in from Akron, Ohio, out of Spring Hill, from the projects. I mean, our rent was like $17 a month. And now I'm looking at a $10 million check — and go back to high school and go back to the classroom the next day. I was going to homeroom the next morning. I'm like,' Holy s---.'"
James continuted, "I started thinking, like, 'If this guy... if he's willing to give me a $10 million check right now, what is it to say if Nike or Adidas isn't willing to give me $20 or $30 [million] upfront.' Or to say if maybe the upfront money isn't the biggest thing. Maybe let's start thinking about the backend.”
So LeBron said thanks but no thanks to the $10 million check and returned to Akron.
Adidas was up next. And according to Brian Windhorst at ESPN, Adidas executive Sonny Vaccaro “had hinted to LeBron his company was going to offer $100 million guaranteed.” Of course, that represented a massive commitment for someone that hadn’t played an NBA game yet, and although the total dollar amount was similar to Reebok’s offer, the German brand pulled out all the stops for its recruiting pitch.
They sent a private jet to pick up LeBron and several of his friends. The group flew to Los Angeles. They sat courtside as they watched Kobe Bryant drop 39 points in the playoffs. And they arrived at a Malibu mansion overlooking the Pacific Ocean the next day to hear Adidas executives pitch them with marking plans and shoe mock-ups.
But there was just one problem — the $100 million vanished, according to Windhorst:
“In the final paperwork from Adidas headquarters in Germany, the company had balked and offered significantly less guaranteed. There were incentives and royalty offerings that could have made it more than $100 million under certain circumstances, but the guarantee was for less than $60 million. Before Reebok, this would have been an awesome offer. After Reebok it didn't measure up. Everyone knew it. The air went out of the room.
Vaccaro personally apologized to LeBron and his mother. He was crestfallen and demoralized not just because he knew he wasn't going to land LeBron but because he'd looked bad in the process, his bosses didn't back him up. He decided that day he was going to leave Adidas.
Within two months he resigned. LeBron flew home thinking about Reebok and that $100 million.”
Adidas was out, which left Nike as the last remaining company to make a pitch.
Nike picked up LeBron James, his mother Gloria, his friend Maverick Carter, and others on a private jet the following weekend and flew them to their headquarters in Beaverton, Oregon. The pitch was massive and included the work of more than 100 employees. Still, the offer wasn’t as strong as Reebok — it came in around $70 million.
LeBron left Nike without a deal. And with the NBA draft lottery scheduled for the following week, his agent Aaron Goodwin set a mid-week deadline — he didn’t want the market size of LeBron’s eventual NBA destination to play a role in the negotiation.
So Reebok sent lawyers and executives to LeBron’s hometown, thinking they had won the deal. The two continued to negotiate the details, and Reebok even increased its offer to a reported $115 million. But at the last moment, Phil Knight gave Nike executives the go-ahead to increase their bid, and LeBron James signed a record-breaking seven-year, $87 million deal that included a $10 million signing bonus.
Reebok was pissed; Nike was happy, and LeBron James’ life changed forever.
The details of how this deal went down are fascinating, and I highly recommend everyone read the full excerpt from Brian Windhortst’s book “LeBron, Inc.: The Making of a Billion-Dollar Athlete." But the most interesting part is what has happened since.
Despite nearly two decades and record inflation, the ~$90 million deal LeBron James signed with Nike is still the largest shoe deal for a rookie in NBA history. And if you adjust for inflation, that ~$90 million deal would be worth ~$140 million today.
Secondly, Michael Jordan has monetized his brand with Nike better than anyone in sports history. He makes a ~5% royalty on all Jordan Brand sales and now brings in more than $150 million annually from his Nike deal alone — that’s nearly 2x the $90 million Michael Jordan made throughout his entire 15-season NBA career.
But LeBron is probably second when it comes to monetizing his name, image, and likeness. He has signed two extensions with Nike since 2003, including a “lifetime” contract in 2016 that will reportedly pay him more than $1 billion in total.
Not to mention Nike also opened the “LeBron James Innovation Center” at its global headquarters last year. The 750,000 square foot building has an NBA-size court, a soccer field, a track, tributes to his mom Gloria, and more.
So why has Nike remained so (financially) committed to LeBron James? Well, because he is good for business, of course. According to The Undefeated, LeBron’s “overall signature business, including shoes, apparel, and accessories,” makes an estimated $600 million per year. That’s not quite Jordan-esque, but it’s certainly impressive.
I hope everyone has a great day. I’ll talk to you tomorrow.
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