Under Armour's $50M Deal, Phoenix's New $45M Performance Center, and LeBron's Tequila Company

Today's email covers a variety of topics, including Under Armour's $50M buyout agreement and how LeBron James & Anthony Davis plan to cash in on tequila.

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Friends,

With so much going on in the world of sports business yesterday, we’re going to cover a few topics today. Between the NBA Draft, Under Armour’s continued struggles, the Phoenix Suns’ new $45M practice facility and LeBron’s investment in tequila, I’ve got you covered.

Let’s get right into it.

The Financials Behind The 2020 NBA Draft

(📸 / ESPN)

The 2020 NBA Draft took place last night—virtual of course—with the Minnesota Timberwolves selecting Georgia’s Anthony Edwards with the No. 1 overall pick. Rather than go through every pick individually, let’s take a look at the financials.

Here are the top 10 picks and their projected contract value:

  1. Anthony Edwards (Timberwolves): $44 million

  2. James Wiseman (Warriors): $39 million

  3. LaMelo Ball (Hornets): $35 million

  4. Patrick Williams (Bulls): $32 million

  5. Isaac Okoro (Cavaliers): $29 million

  6. Onyeka Okongwu (Hawks): $26 million

  7. Killian Hayes (Pistons): $24 million

  8. Obi Toppin (Knicks): $22 million

  9. Deni Avdija (Wizards): $20 million

  10. Jalen Smith (Phoenix Suns): $19 million

All first-round contracts are guaranteed for the players first two years in the NBA, with team options for years three and four.

Great, but how do these numbers compare to other sports?

Here’s what the top pick signed for in each major US professional sport last year:

  • NBA (Zion Williamson): $44 million

  • NFL (Kyler Murray): $35 million

  • NHL (Jack Hughes): $11 million

  • MLB (Adler Rutschman): $8 million

Furthermore, it was an interesting year as LaMelo Ball was the only premier pick to sign a shoe and apparel deal prior to the the NBA draft (PUMA) — despite having 5+ extra months to hammer out the details.

Why is that?

Nike claims “not to have a budget [for it right now],” which I just can’t even believe. More likely, it’s a combination on Ball being the only household name from a marketability standpoint and brands taking their time due to challenges from the pandemic. Simply put, the performance basketball shoe business is down over 20% this year — companies are treading lightly.

Lastly, here’s a good illustration of how NBA salaries have changed following implementation of the NBA rookie wage scale.

Next up — Under Armour.

Under Armour Strikes A Deal With Cincinnati

(📸 / Cincinnati)

Since we’ve talked about this before, I’ll keep this one short.

In case you aren’t aware, Under Armour—a stock that has fallen more than 70% from it’s all-time high—is desperately trying to restructure their business and cut costs.

Yesterday, as part of their plan to cut marketing costs, Under Armour reached a deal with the University of Cincinnati to get out of the 10-year, $50 million sponsorship agreement they signed in 2015.

Here are the details of the buyout agreement (Source):

  • Under Armour will pay a $9.75M exit fee

  • Under Armour will provide $3.65M of product through June 2021.

  • Under Armour’s exit fee will be paid in 8 installments—due every 3 months—with the first $1,437,500 payment coming due within 30 days of full execution of the buyout agreement.

To be honest, it seems like a fair deal — that’s the cost of doing business.

Under Armour’s next challenge will be ongoing legal battles with UCLA and the University of California, Berkeley, where they are trying to exit contracts that have them tied up for hundreds of millions of dollars for the better part of a decade.

We’ll see how that plays out.

If you want to read more about UA’s struggles and their plan to fix it, check out my previous breakdown here.

LeBron James’ New Tequila Company

(📸 / Lobos 1707)

Lobos 1707, a premium tequila brand backed by LeBron James, Maverick Carter and Anthony Davis, officially launched yesterday. Financial details of their partnership haven’t been made public, but the deal signifies a continued interest in celebrity alcohol entrepreneurship.

With George Clooney selling his tequila brand “Casamigos” to Diageo for $1 billion, and Ryan Reynolds seeing a $600M+ return on his brand “Aviation Gin,” celebrities from Michael Jordan, Joe Jonas, Jeanie Buss, and now LeBron James have partnered up with entrepreneurs to get involved.

But how does it taste?

I’ll let you know :)

Phoenix Suns New $45 Million Practice Facility

Perhaps the most impressive news yesterday was the unveiling of the Phoenix Suns new $45 million performance center.

Here are the details:

  • 53,000 square feet

  • Privately-funded $45M facility

  • Two regulation size basketball courts

  • Sensory deprivation chamber

  • Full-service kitchen with chef

  • Hot/Cold tubs & underwater treadmill

  • State-of-the-art training and weight room

Furthermore, through a partnership with Verizon, the Suns might have built the most technologically advanced training facility in the NBA. For instance, the new facility has 150 cameras—compared to 4 at the old facility—to track player movement, mechanics and progress.

The best part?

The facility is located in Arcadia, perhaps the best neighborhood in Scottsdale and where majority of Suns players already live (Source).

Think that doesn’t matter?

Think again.

Remember that multiple NBA players, including DeAndre Jordan, have mentioned the NY Knicks practice facility being located 45-60 minutes outside NYC as a deterrent to playing for the Knicks.

Not saying the Suns will start getting big-time free agents because of a practice facility, but it certainly has its advantages.

Here are a few pictures of the incredible facility (Source):

Have a great day and we’ll talk tomorrow.

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