Why Lebron James’ record-breaking deal with Nike is a game-changer
Nike has signed LeBron James to an unprecedented lifetime contract, the largest single-athlete deal in the company’s history, as first reported by Darren Rovell of ESPN.
While this is a great deal for James, this contract has the potential to be a game-changer for all top athletes, starting with how the deal came together.
LeBron James is no longer just a basketball player.
In some sense, James stopped being just a basketball player a long time ago, but this is different and much bigger.
Rather than use his agent to make this deal with Nike, James brought in his business advisor, Paul Wachter, whose background is in merger and acquisitions, a source familiar with the negotiations told Business Insider.
This is significant, as it means that this deal is going above and beyond the typical athlete endorsement. This is not Nike signing another athlete to promote shoes and maybe some apparel. This is a merger between two corporations, Nike and the LeBron James brand.
In other words, LeBron just ceased being a basketball player. That side still exists, but it is now just one department in a much bigger business.
While we will not see a spin-off brand in the same manner that consumers view Michael Jordan’s Jordan Brand, it shows that James and Nike are taking steps to further build the LeBron Brand under the umbrella of Nike Basketball, into something similar to what Jordan was able to accomplish.
It is safe to assume to that as part of the deal, we are going to see a dramatic increase in the amount of resources Nike commits to LeBron and his brand, including executives, products and advertising. It is also safe to assume that James and his team will have a bigger role in the business side of Nike as it deals with his brand.
The lifetime contract will also cause other top athletes to rethink their own place in the business world.
The next question is how this impacts other athletes down the road.
In 2009, LeBron signed his second contract with Nike. That 9-year deal was a no-brainer for Nike. James was 25 and already the best basketball player on the planet.
This deal is different. Rather than betting on LeBron James the great basketball player on the court, Nike is betting on LeBron James the business man and LeBron James the brand and its potential staying power long beyond his playing days are over.
What Nike is betting on is rare in the sports world. We can talk about Jordan, Arnold Palmer, maybe a David Beckham. But this is a different era.
A source familiar with the deal told Business Insider that this is the kind of deal that force other athletes to re-think their approach to these types of deals.
All of a sudden, just signing a 10-year deal worth $20-30 million per year to promote a shoe and some apparel doesn’t sound as impressive as a lifetime deal that instead turns the player into his or her own brand and grows their own business potential for generations to come.
Whether or not companies will be willing to make this type of commitment to other athletes is yet to be seen. But it can be certain that some of the top athletes will try and some will succeed.
A new era of sports endorsements.
In the end, what we are seeing is a paradigm shift. In one giant business decision, Nike and LeBron James just changed how the world’s top athletes will operate outside of their arenas of competition.
No longer will an agent negotiate a price for an athlete who will then sign a standard contract. Now it is financial advisors who will negotiate the merger of two businesses.
Michael Jordan set the precedent almost inadvertently, with the help of Nike. LeBron James just proved the move can be replicated and we will see it again.