Value play: Follow the money
Would coming to NYC increase LeBron's bottom line? Not as much as you might think
It seems like the entire planet has its eyes trained on LeBron James. Everyone wants to know, come July 1, what will LeBron do?
The speculation continues to run rampant. Which team makes the most sense for him? Which city would he be most comfortable in? Which wingman would be the best fit?
Let's start with a hard look at the bottom line, literally and figuratively: Where can King James accumulate the most dough?
After all, he has said that he wants to be the world's first billion-dollar athlete (even though Michael Jordan and Tiger Woods both appear to have beaten him to that milestone).
In pure salary terms, the choice is clear: James should stay with the Cleveland Cavaliers. Thanks to the "Larry Bird exception," built into the NBA's salary cap structure to help teams retain their free agents, James can earn considerably more money by staying where he is.
We won't know the exact numbers until July, but Cleveland will be able to offer LeBron a six-year deal worth approximately $126 million. The biggest contract the New York Knicks or any other team can offer will be a five-year deal worth approximately $30 million less.
No wonder LeBron told CNN's Larry King that the Cavaliers have "an edge" to re-sign him.
Then again, we all know that players as high-profile as LeBron make many more dollars off the court, via endorsements. In 2009, Forbes magazine ranked LeBron as the sixth-richest athlete in the world, with an estimated $40 million in earnings; less than half of that was his salary with the Cavaliers.
Many people have argued that New York is the other most appealing option for LeBron. Yes, there is the opportunity to play 41-plus times per season in Madison Square Garden. But perhaps even more alluring is the chance to play in the nation's largest media market, in proximity of Madison Avenue and its plethora of well-known advertising firms.
But does that really make much of a difference in this day and age?
You may be surprised to learn that the consensus opinion of experts is no, it does not.
"[LeBron] is already a megastar playing out of Cleveland," said Darin David, a widely quoted account director at Texas-based The Marketing Arm, which evaluates the appeal of would-be endorsers. "The NBA, better than any other league, markets their stars. They've marketed him already as one of their featured players. The Cavaliers get plenty of prime time and featured national [TV] games during the season. I don't know that a move to New York will affect that a whole lot."
"I don't know how big the effects would be from a marketing standpoint. [LeBron] can get pretty much any endorsement he wants," said agent Mark Bartelstein, who represents such NBA stars as David Lee and Indiana Pacers forward Danny Granger. "Obviously everything is magnified in New York, more of a glow shines on the franchise, with Madison Square Garden. But LeBron transcends that anyway, wherever he goes."
David also pointed to the enormous success NFL quarterback Peyton Manning has had in terms of endorsements even while playing in Indianapolis, as opposed to a bigger media market.
Playing in Cleveland doesn't seem to have hurt LeBron in terms of merchandise sales. He had the second-highest selling jersey in the NBA this season, behind only Kobe Bryant. His jersey was also ranked No. 2 in China (behind Bryant) and No. 4 in Europe (behind Bryant, Kevin Garnett and Pau Gasol) in 2009.
And LeBron is already awash in endorsements. He signed a seven-year, $93 million deal with Nike before he even graduated from high school, and just re-upped with Nike in March (terms were not disclosed). LeBron also has deals with McDonald's, Coca-Cola and State Farm, among others.
For those who believe being closer to Madison Avenue would help LeBron business-wise, consider this, reported by Jeremy Mullman in Advertising Age: "Of the top five spenders in 2009, according to IEG -- PepsiCo, Coca-Cola, Nike, Anheuser-Busch and General Motors -- exactly none counted a New York-based agency as its primary ad shop. And only one of the top 10 sports spenders uses a Big Apple shop -- AT&T, which is at Omnicom's BBDO -- as opposed to agencies in Illinois, California, Michigan and Oregon."
So, if moving to a bigger market won't help LeBron much, what will help him?
There's a consensus opinion on that, too: winning a ring.
"That's really the only other thing that he can accomplish that's gonna raise him to another level," David said. "When we look at him, the only guys that are ahead of him in the NBA world [in terms of public awareness] are guys that have won championships. That seems to be the next thing for him, to catapult him above other guys."
CNBC sports business expert Darren Rovell agrees. Rovell also says that China is much more important to LeBron's financial future than the United States. The Chinese market is growing at a 15 percent to 20 percent annual rate in terms of Nike orders, for instance, while the U.S. market is stagnant.
And, Rovell reports, Bryant (and his merchandise) is considerably more popular in China than LeBron is, primarily because Kobe has won four championships.
"It's not about getting closer to Madison Avenue, or playing for the team Michael [Jordan] played for, or getting close to Hollywood," Rovell said. "It's about winning championships. The Chinese place extra value on that."
So there you have it. In the end, it appears the key to LeBron making his billion dollars is winning an NBA title or two. It all comes down to basketball.
Kind of refreshing, don't you think?
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