We all know that athletic sponsorship deals can be downright lucrative, and many of the most mind-blowing deals belong to the top stars in the NBA. This makes sense, though. With Air Jordan representing the largest athlete brand in history and with the NBA particularly adept at expanding its global market, there is simply an enormous market for products worn by the best basketball players in the world. But Kevin Durant’s recent Nike deal, even in this climate of lucrative endorsements, borders on insanity.
Let’s backtrack a bit. Durant has been signed with Nike for years, but with his shoe and apparel deal coming to a close, Under Armour attempted to snag him for the bulk of his remaining career. More specifically, as ESPN noted when the development occurred, the company offered Durant a deal worth somewhere between $265 and $285 million over 10 years. It also included an unspecified amount of stock in Under Armour and other incentives, including a community center built in Durant’s mother’s name. To be clear, that means the worst version of this offer would have amounted to the community center honoring Durant’s mother, a small amount of stock, and $26.5 million per season. That last bit exceeds the expected maximum contract for an NBA player in 2014-15 by several million, as listed by Sherdian Hoops.
The only catch was that Nike, evidently foreseeing competition when it came time to renew their deals with Durant, had worked a clause into Durant’s existing contract allowing them the opportunity to match any competing offer.
Still, for a few days, this looked like a remarkable maneuver by Under Armour. Many believed there was simply no way Nike would commit those kinds of assets to a single player when it has so many other options for endorsements. The sheer absurdity of the offer may have come quite close to making Under Armour a major player in the NBA apparel market.
But then, as was probably inevitable, Nike came right along and matched the Under Armour offer, keeping Durant in its fold for the next decade—and possibly the rest of his career. Now, the question remains: did Nike do the sensible thing, or were they tricked into it?
Here’s a quick look at why Nike likely decided to match the offer.
We’ll start with the obvious: Kevin Durant, technically speaking, is the best player in the NBA right now. Granted, any reasonable basketball fan will assign this title to Lebron James, but Durant is coming off his first MVP season and has youth on his side when compared to James. He’s also taking a top team into contention next season; a veteran group of guys familiar with one another, in a league full of change. This could give KD decent odds of winning his first NBA title in 2014-15, which would only add to his ever-expanding legacy.
Speaking of those odds, KD figures to have a huge season once again this year when you look at what he’s expected to accomplish. Specifically, the Betfair basketball betting section lists the following for Durant in this season: Strong odds to take home the MVP award (with James first); the top odds of leading the league in scoring (yet again); and the fifth-best odds of winning an NBA title. It’s worth noting, however, that these numbers change with each passing game.
Any way you cut it—looking at his age, last year’s numbers and accomplishments, and projections for 2014-15—Durant is on top of the basketball world, and losing a player of that caliber could harm even Nike’s image.
Then, there are the numbers. Really, there’s only one batch of them that need to be looked at for Nike’s decision to make sense. According to Forbes, Kevin Durant’s signature sneaker sales jumped 400% in one year, from $35 million to $175 million. That’s right: KD sold $175 million worth of shoes in a single calendar year. That’s not even considering the numerous other Nike products with KD’s name or initials on them. This incredible figure, in addition to the apparently ridiculous upward trajectory in KD shoe sales, shows it’s not really a big deal for Nike to allocate $25 million-ish a year for Durant.
But perhaps most of all, there’s the simple fact that Nike is the dominant force in professional basketball, and there’s something to be said for upholding that image. International Business Times did its own breakdown of why Nike matched the offer and revealed that Nike (combined with Jordan) owns 93% of the sneaker market share and has endorsement deals with 322 NBA players. Under Armour, by contrast, has 0.35% of that market share and 13 players signed to endorsement deals. The article notes that if Under Armour had sought to poach a smaller star, Nike might not have flinched. But to give up a player of Durant’s stature (and money-making clout) to a company seeking to gain footing in the market would be nonsensical.
In the end, Nike’s decision to match looks like a no brainer. It’s a huge deal, but it’s one that can be backed up by both numbers and expectations. It’s also made Kevin Durant one of the highest-earning athletes in endorsement history.