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Why The Humongous New LeBron James Deal Makes Sense For Nike

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Earlier this week, it was announced that LeBron James has signed a lifetime endorsement deal with Nike, the first in the company’s history. The figures were not announced, but according to the experts, most notably Darren Rovell from ESPN, the deal involved figures north of $500 million, plus royalties. Like we said, this is the first lifetime deal that Nike has signed in 44 years they have been around. But, does it make sense for them? Is LeBron really worth forking over more than half a billion dollars?

To put things as simply as possible – yes. If we were feeling particularly blasphemous, we would even go as far as to say hell yes. While it can often be somewhat difficult to gauge how much exactly a star endorsement is worth, in the case of LeBron James, the best basketball player on the planet in the last decade or so, it is much less difficult.

For example, in the last fiscal year (ending with January this year), LeBron’s signature shoes alone sold for $340 million. In the United States alone. These are sales’ figures at retail, of course, but they still do not include the revenue made on James’ apparel and other basketball-related products. Also, one must understand that Nike makes plenty of money on LeBron outside of U.S. as well.

In short, the experts have worked out that Nike’s total revenue has skyrocketed three times since 2003, the first time LeBron signed with them. In the same 12-year period, the Nike stock prices have gone up more than 1,000 percent. That is not a typo. That is a thousand. In the statement Nike released following the signing of the deal, they very clearly stated that, “a lifetime relationship with LeBron [that] provides significant value to our business, brand and shareholders,”

It is really that simple. If we go back some more, we reach the summer of 2014, when Nike matched the offer Under Armour made to Kevin Durant, signing another huge NBA star to a 10-year contract, worth $300 million. When you consider the fact that Durant shoes make little more than half the money LeBron’s make, you can start calculating how much money LeBron must have made with this deal. And the weirdest thing is that it still makes very much sense for Nike to do something like that.

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