Deep-Dive: The NBA Shoe Business

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Friends,

NBA All-Star Trae Young, who plays for the Atlanta Hawks, announced yesterday that he has signed a multi-year extension with Adidas, which will see him become just the 20th current NBA player to release a signature shoe — coming in the Fall of 2021.

The best part?

He’s only 22.

Outside of Trae Young, who plans to have a very “hands-on” experience designing the shoe, here is the list of current NBA players with signature shoe deals:

Nike

• LeBron James

• Giannis Antetokounmpo

• Kevin Durant

• Kyrie Irving

• Paul George

Adidas

• James Harden

• Damian Lillard

• Trae Young

• Donovan Mitchell

• Derrick Rose

• Aaron Gordon

Under Armour

• Stephen Curry (Curry Brand)

• Joel Embiid

Jordan Brand

• Russell Westbrook

• Chris Paul

New Balance

• Kawhi Leonard

Anta

• Klay Thompson

• Gordon Hayward

K8iros

• Spencer Dinwiddie

Peak

• Matthew Dellavedova

But the real question becomes, how do these deals actually work?

When it comes to the NBA, there are three types of shoe & apparel deals (Source):

• Signature Deals

• Cash Deals

• Merchandise Deals

Let’s run through them…

Signature Deals

Given only 20 current NBA players have signature shoe deals, these agreements are reserved for superstar players — think LeBron James, Kevin Durant, and James Harden.

Why?

Not only do they require allocated resources for research & development, marketing, and sales—meaning the player must be extremely popular—but the player also receives financial upside through a royalty structure.

Here are the economics (Source):

• Typically pay $5 million to $15 million annually

• The player receives ~5% royalties

• The player is given unlimited merchandise & signature gear

For a comprehensive picture of how much these players are actually making with the royalty included, here’s some data from 2019.

Even more interesting?

Rapper Kanye West takes home more than all of them — a total of ~$140M annually from Adidas.

Cash Deals

Cash shoe and apparel deals sit in between signature deals & merchandise deals.

These deals are reserved for good players that haven’t quite reached signature shoe status yet — think Bradley Beal & DeMar DeRozan.

While they may get a few player exclusives (PE), the athletes on cash deals won’t have their own signature shoe or apparel line.

Economics (Source):

• Pay $200k to $3 million annually

• Extremely incentive-heavy contracts

• Includes marketing appearances

• No royalty

In total, around 20% of the NBA has a cash shoe deal.

Merchandise Deals

Beneath signature and cash deals are merchandise deals, which represent about 75% of the NBA.

These players—think bench players and reserves—aren’t paid to wear the shoes, but they receive free merchandise throughout the year — typically $25,000 or higher depending on the player (Source).

In simple terms, they basically get an extremely large gift card.

Still, not bad.

Over the next decade, as new brands emerge and players continue to get educated around their financial ability, we should expect new options to emerge.

After all, with markets meant to be dynamic, why are we siloing players into three distinct categories?

Hope you enjoyed the breakdown, have a great day and we’ll talk tomorrow.

If you want a deeper dive on sneaker free agency, check out this breakdown by Alex Kennedy & Nick DePaula — it’s where most of this info was sourced from.

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