LeBron's Midas touch

Originally Published: July 21, 2003
By Darren Rovell | ESPN.com

His nickname is King James, but it might as well be King Midas.

LeBron James, the Cleveland Cavaliers' rookie and the No. 1 overall pick in the NBA draft who already has signed two endorsement deals that collectively approach $100 million in value, has not yet proven himself in the league, but so far everything with his name on it has turned to gold.

LeBron James, Julius Erving
And the ESPY for greatest expectations for a prep phenom goes to ...
LeBron Inc. is generating hundreds of thousands of dollars in business each day for the companies he represents. By November, when his first Nike shoes hit store shelves, that number figures to jump into the millions.

In late June, memorabilia company Upper Deck made tens of thousands of dollars by requiring collectors at a popular national card show to purchase a full box of trading cards in order to receive a single LeBron card. A week later, the Orlando Magic broke with its tradition of offering free seats to its summer league tournament, and instead charged $5 for most of the of the 15,123 fans who showed up to see James play his first game in an NBA uniform. Some scalpers outside the TD Waterhouse Centre received $30 per seat.

A three-coin set featuring James' name and image made by The Highland Mint is selling well even with a $129.99 price tag, and orders for James' autographed Upper Deck memorabilia are brisk despite high price points. Some of the items, in fact, already have sold out.

And perhaps the most impressive statistic of all: Since the Cavaliers unveiled James' No. 23 jersey on the night that he was drafted, retailers across the country have sold about 4,000 of them a day, ranging from the $36 youth model to the $400 pro cut version.

"That's another dream come true, to see little kids with your jerseys on them," James, the 18-year-old money-generator, said. "It's unbelievable."

But James isn't shocked to hear that more than 74,000 jerseys bearing his name have been sold across the country since June 26. Neither are those close to him.

"I'm not surprised," said James' mom, Gloria. "LeBron sells."

And that's even before the shoe battle begins.

Nike, which signed James to a seven-year, $90 million endorsement deal in May, is scheduled to unveil a limited edition James shoe on opening night that likely will be in the Cavs' wine and gold colors. The regular shoe, along with James apparel featuring its own logos, could hit shelves as soon as late November. James was wearing his logoed gear that featured an "LJ" and "23" on it last week at an ESPY party. Other logos are believed to make use of his nickname "King James," which hangs around James' neck in silver. But Nike spokesperson Celeste Alleyne said the company was not ready to announce exact details of their partnership with James.

Reebok, which actually lost out on the race for James despite reportedly offering him more money than Nike, hopes to beat its competitor to the punch. The shoemaker will unveil its own wine- and gold-colored shoe called Fusion in October. It will sell for $80.

James declined to talk about specifics of his shoes, including color or its name, only saying, "I know they are going to sell. We're going to be great partners. I'll do my part, but there's more pressure on Nike to make this work."

Already, James is showing his marketing savvy. He mentions Nike whenever he can and makes sure not to support competitors in any way. On Saturday, he told reporters in Boston at the Reebok Pro Summer League that he couldn't stand in front of the banner because he was a swoosh supporter.

Since James will average $13 million a year from Nike and will make only $12.96 million over three years with the Cavs, it has been suggested that James is a Nike employee first. But Cavs owner Gordon Gund says the team and the brand are jointly interested in James' success.

"The Cavs and Nike certainly have the same goal to make sure LeBron James is part of a championship team," said Gund, emphasizing that he has never had a conversation with Nike officials about team decisions. "How he plays with us obviously has something to do with how he does with Nike."

Gund has become accustom to losing millions of dollars each season, but thanks to James, he will see the Cavs' attendance rise by thousands this year which he says should allow him to "approach or achieve profitability."

Although it was speculated that the Cavaliers would raise luxury suite prices by 4 percent due to the demand with James now in the lineup, Gund said there will be no such thing as the LeBron inflation factor.

"If the suite prices increase for those who already have suites, there will be no surprises," Gund said. "It will be part of the cost-of-living increase that is already written into the contract."

For a team that finished 17-65 last season and averaged 11,497 fans per game, having a hometown star who is commanding the most attention out of anyone in the entire sporting world is a godsend.

"In our marketplace, some of our fans had a chance to see him and get to know him as opposed to the rest of the country who has only come to really know him in the last six months," Gund said.

The team wasted no time to have James voice on a digital telephone message that went out to 15,000 potential season-ticket holders. And given James' nationwide appeal you can bet that opposing teams will be cashing in when the Cavs' star is scheduled to be in town this season.

There won't be any shortage of wine and gold around the country this year, including at opponent's arenas. Sales of James' jerseys have grossed $3.26 million so far, according to Neil Schwartz, director of marketing and business development with SportScanINFO, a sporting goods industry marketing research firm.

Business of doing
business with LeBron
Some executives that work with James are also seeing a bump in business, including his publicist.

"We've picked up a couple clients since being associated with LeBron," said Alexandria Boone, a former public relations consultant with the Cavs who now runs Cleveland-based Gap Communications Group. "If you can deal with all the media requests and issues associated with LeBron James, you can deal with anyone."

Erroll Williams, whose company On Sports made James' St. Vincent-St. Mary uniforms, said his business could triple from $2 million last year to $6 million this year. Although Williams' jerseys cost $135 for silk screened design and $245 for tackle twill, he says everyone wants it to look like LeBron's jersey.

"My numbers are going to go through the roof," said Williams, whose company is based in San Jose, Calif. "We'll have more than 100 schools buying in a day in age when school budgets are tight. That's the LeBron factor."

-- Darren Rovell

SportScanINFO stats of retailers reveal that the Cavaliers were 17th in merchandise sales in the NBA last season. Over the last couple weeks, they have vaulted to No. 3 in market share behind the Los Angeles Lakers and the Philadelphia 76ers.

"We have not seen a launch like this of a particular player in the licensed product market," Schwartz said. "How long this will be able to continue is going to be up to LeBron and his performance on the court." Of course, it helps that the Cavaliers changed their jerseys this year, reverting back to their traditional colors.

Upper Deck, which signed James to a five-year, $6 million deal, is currently selling LeBron memorabilia at superstar prices, including an authenticated signed basketball for $649.99 on the company's Web site.

"LeBron is a unique, once-in-a-decade player that appeals to a wide audience of consumers," said Tim Muret, Upper Deck's senior director of product development. "LeBron's appeal not only resonates with older sports fans but the highly coveted Gen Y consumer."

The company will unveil its first trading card of James in August in its Top Prospects set, but indications are that James is already an industry shaker.

"LeBron James has already been a slam dunk in the basketball card industry," said Greg Ambrosius, associate editor of Sports Collectors Digest, a weekly publication that covers the sports collectibles industry. "Several distributors and manufacturers have told us that pre-sale orders from dealers are at a 10-year high for basketball and that interest will only accelerate once LeBron becomes a nightly highlight show."

Topps and Upper Deck redemption cards of James have been selling for top dollar on eBay. The Upper Deck version, which is numbered to 499, has been averaging sales of more than $250 each, while the Topps regular version has been selling for about $150. The Topps gold refractor James card, which is numbered to 25, is selling in the $2,000 range, according to Trade Fax, a collectibles industry newsletter.

James himself also will be coming out with his own memorabilia. LeBronJames.com -- which has been visited by 121,000 people in the past two weeks -- will unveil posters of James in his high school uniform for $9.95 sometime this week. James reserved the Web site name when he was in ninth grade.

Counterfeit James collectibles are constantly growing as the business gets bigger. James' management team has sent hundreds of cease-and-desist letters to people selling unauthorized items on eBay.

"If it looks like it's really licensed and it's selling for a significant amount of money, we will go after people," said James' agent, Aaron Goodwin.

Goodwin also has to keep up with NBA licensees, who are allowed to make James' product without cutting a separate deal, if the company promises the league they will use other players in their product line. Goodwin was unaware of The Highland Mint's coins of James, though the company is allowed to do it since they make a series of products with other NBA players.

James makes about $14 million a year in endorsement rights fees, which is considerably less than Tiger Woods, who earns more than $60 million a year off the golf course. As far as sales, Woods has helped sell hundreds of millions of dollars worth of product, so James is still far off in that sense -- but he's off to a great start.

Aside from his deals with Nike and Upper Deck, endorsements with a sports drink, automobile and video games are next on the agenda.

Gatorade -- which already has a stable of athlete endorsers including Mia Hamm, Derek Jeter, Peyton Manning and Yao Ming -- is the favorite to land James. A deal would most likely include a companion endorsement with the brand's parent company, PepsiCo. But unlike other endorsements, a deal with LeBron won't necessarily translate into bottom line results for Gatorade, which already has about 80 percent market share in the sports drink category. Perhaps coincidentally, James won the Gatorade National High School Athlete of the Year on Wednesday. Goodwin is also talking with Coca-Cola, which owns Powerade, about a sports drink and soft drink endorsement tie.

"LeBron is so big, it doesn't really make sense to talk to anyone else," Goodwin said.

On the automobile front, it's an open race, although General Motors would be the natural fit. The company makes the Hummer brand, which became synonymous with James when his mother secured a $50,000 loan to buy LeBron a Hummer 2.

On the flip side, maybe that purchase hurt James' negotiating ability, since everyone associates him with the vehicle and other car brands might be hesitant to pony up if consumers won't see their partnership as a natural fit. Tiger Woods is in commercials for Buick, but few believe that would really be his car of choice if he wasn't getting paid to say it.

Little is known about the negotiating style of Goodwin, who was assisted on the two deals by former Nike marketer Fred Schreyer. When asked to comment on how shoe deal negotiations went, Tom Shine, Reebok's senior vice president of global sports and entertainment, declined to comment only saying, "that's history."

Sonny Vaccaro, director of basketball for adidas, who signed Michael Jordan to his first deal with Nike, said the power was not necessarily in the negotiating, but in the athlete.

"LeBron had all the power, given that this is an industry with only a few viable entities," said Vaccaro, who recruited James for two and a half years. "They all were competing for him, and in the end it built up to this big tidal wave that has never happened before and will never happen again. He's not only a great basketball player, but he's so good looking, photogenic and charismatic that he'd have to be pathetic on the court not to marketable."

Not only is James very charismatic and comfortable with the spotlight, but he at least says that he doesn't feel much pressure from what has now become the daily grind under the microscope.

"I have to be myself off the court and the stuff on the court will take care of itself," he said.

Darren Rovell, who covers sports business for ESPN.com, can be reached at darren.rovell@espn3.com

Darren Rovell | email

ESPN.com Sports Business reporter

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