Sponsorships Uncategorized

Are shoe endorsement deals experiencing a market correction?

Andrew Wiggins' shoe deal was called unprecedented by Adidas, but at $2 million per year it is behind previous No. 1 picks.

Credit: Brad Penner-USA TODAY Sports
Credit: Brad Penner-USA TODAY Sports

While teams are offering huge contracts to NBA free agents, there is a different source of money coming in to rookies, specifically shoe endorsement deals. Andrew Wiggins settled on the company he will wear for the foreseeable future, and similar to previous draft classes, he stuck with what his college team wore by choosing Adidas.

This is the second top-five pick in the 2014 rookie class that Adidas has secured, the other being Dante Exum. Adidas trumpeted the deal as unprecedented, but at just $2 million per year, it is far lower than LeBron James’ $93 million endorsement deal with Nike when he entered the NBA.

Is the mega-shoe deal dead? Some experts have pointed out that big deals are risky propositions, using Derrick Rose as Exhibit A. Shoe companies haven’t turned a profit with Rose’s or John Wall’s deal.

(Adidas.com)
(Adidas.com)

That risk does not necessarily mean endorsement deals will trend downward. The truth is that more companies are moving into the market, which could create a bidding war. New companies are starting to make an impact, at least in terms of signing talent. Dwyane Wade has a deal with Li Ning, while Rajon Rondo and Kevin Garnett have deals with Anta. Both are Chinese shoe companies. Under Armour could also be waiting in the wings as a major player. Multiple companies entering into the market could drive up endorsement deals.

There could also be a shift in when a player receives a larger shoe deal. Wiggins $2 million per year deal may not stack up to LeBron James’ or Derrick Rose’s deal, but a young star, Damian Lillard, did sign a pretty lucrative endorsement deal recently. Lillard may have had added leverage as he signed his deal after his Rookie of the Year season.

In that case it could make sense for the brands to sign a player before he gets on an NBA court.  If Wiggins performs like Lillard,  it won’t be a market correction. . . it will be getting a bargain.

Michael Colangelo is Assistant Director at the USC Sports Business Institute and Senior Editor of The Fields of Green.

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