UNDER ARMOUR FINDS FACE
Durant nearing huge deal with apparel company
Nice guys finish last, huh? Tell that to Kevin Durant.
The Oklahoma City Thunder star finds himself on the verge of landing a landmark shoe contract that would take his brand to the next level and speak volumes about the state of the NBA.
Under Armour has offered approximately $250 million over 10 years to make Durant, who won over millions with his touching speech after winning his first MVP award last season, the face of its sporting apparel company, a person with knowledge of the negotiations told USA TODAY Sports. The person requested anonymity because the negotiations remain fluid.
SportsOneSource analyst Matt Powell, an expert in the basketball shoe market, called the offer unprecedented.
“We haven’t seen an athlete get that kind of money in a long time for a shoe contract,” Powell said. “It’s a significant amount of an investment for Under Armour. I estimate it to be about 10% of their annual marketing budget. It’s substantial in terms of that.”
The deal would triple what Durant currently earns from Nike in terms of the base salary and rank No. 1 ahead of LeBron James, Kobe Bryant and Derrick Rose. Nike can retain Durant with a competitive offer, and it continues to negotiate with his agent and head of Roc Nation Sports, music mogul Jay Z.
The fact Durant has reached these heights while playing in Oklahoma City should make former NBA commissioner David Stern smile, as he always championed the merits of a league in which the small markets were as important as the big ones.
“(Durant) has grown as a player, as a pitchman, and I think overall as a brand about as steadily as anybody (in the NBA),” said David Carter, executive director of the University of Southern California Sports Business Institute and contributor to the USA TODAY Sports business website Fields of Green. “The fact that he’s in a small market doesn’t matter if the league in which he’s playing has international appeal.
“And I would imagine that both Nike, and maybe even more so Under Armour, are looking at being able to leverage his poise, his genuine nature and ... the fact that this is about as risk-free of a guy as you’re going to find when it comes to caring about himself and the sport from the standpoint of being very unlikely to get in trouble. Somebody is going to pay a premium for that.”
But is it worth this kind of a premium for Under Armour? That’s debatable. The Baltimorebased company is a relative nonfactor in the basketball shoe game with less than 1% of the market share. But landing Durant to go with its other star, Golden State Warriors All-Star Stephen Curry, would raise the company’s profile in basketball.
Powell questions whether the deal is a worthwhile investment for Under Armour.
“It’s good news for Durant, and we’ll see how it works out for Under Armour,” Powell said. “We’ll know when we get to the end of it. If they sell a lot of shoes and establish themselves as a significant player in basketball, we’ll know. But again, it’s really outsized.”
Powell has a formula he uses to determine if a shoe deal is worth it for the brand. He estimates Under Armour would have to sell $225 million in Durant shoes annually to make money on the deal. Last year, Nike sold $95 million in Durant shoes, Powell said.
“You really have to ask yourself what the potential is for Under Armour,” he said.
Under Armour’s small percentage of the basketball shoe market is overshadowed by Nike and its Jordan Brand, which has 95% of the shoe market. But Powell has noticed one trend: Nike has shied from spending significant money on endorsement deals for basketball players.
“The non-Nike brands seem to be willing to pony up some big money whereas Nike has let some athletes walk because Nike wasn’t willing to pay,” he said. “Nike’s sending a clear signal that they’re not seeing the return on investment on big shoe contracts.”
The profitable Under Armour might be less interested in making money on a Durant deal than it is increasing its exposure in the basketball shoe and apparel market. Temporary financial losses might be worth it for Under Armour if it is ultimately able to gain a bigger percentage of that market. Landing an NBA MVP possibly can help Under Armour achieve that.
“He handled himself well (in recent years) and represented the league in a way that justifies him being one of these NBA brand ambassadors, a guy who the league can really hang their hat on,” Carter said. “You add to that that he’s still relatively new to the scene and has tremendous longterm upside. You factor those kinds of issues, from being poised and a genuine guy to having the talent and so on down that checklist, he’s a pretty good investment for a lot of companies.”