LeBron James' Free Agency Decision Affects More Than Just NBA Finals Odds

The team LeBron James plays for next season will likely be a favorite to win the NBA Finals. But the superstar's 'decision' also has significant business ramifications.

Jun 26, 2014 at 8:56AM


Keith Allison, Flickr.

Carmelo Anthony was the hottest name in NBA free agency for about a day. Then LeBron James hit the market. The world's best basketball player opted out of his contract with the Miami Heat on Tuesday, prompting dozens of media outlets to brand the moment "The Decision Part II." Theoretically, he can go to any of the league's 30 teams, though only a handful are realistic targets -- the Bulls, Cavaliers, Rockets, Lakers, and Clippers -- if he doesn't end up back with the Heat.

It is tempting to think: "I don't want LeBron -- he's self-absorbed and worse, disloyal." It's a sentiment I've heard in Chicago, and one that's likely shared by many fans throughout the country. In fact, a recent ESPN poll reveals James is almost 30% less popular among average NBA fans than he was as a Cavalier. His image took a hit after his move from Cleveland to Miami and the first infamous "Decision."

Still, the team that nets James will likely be a favorite to win the NBA Finals. And equally as important, the addition of the superstar will have business ramifications that stretch beyond the court.

LeBron remains very marketable
Despite the criticism, James remains one of the most marketable athletes on the planet. Forbes ranks him second, behind only Tiger Woods. The outlet pegged his endorsement income at $53 million last year, over $20 million more than what Kobe Bryant, Derrick Rose, and Kevin Durant made from sponsors in 2013.

This advantage appears to be threefold. He's dominant, having won four of the NBA's past six MVP awards. He's finally won a championship, with two rings in the last three years. And he's arguably the game's only transcendent star under the age of 30 (sorry, Rose and Durant). As SportsPro Media explains, it may be the latter factor that's most important. "Brands see LeBron not so much as an athlete as a modern American phenomenon. His website is less a sportsman's homepage than a lifestyle hub," the outlet wrote in its latest sponsorship report.

Currently, James' sponsors range from McDonald's (NYSE:MCD) to Nike (NYSE:NKE) to Samsung (NASDAQOTH:SSNLF). And remember Apple's acquisition of Beats By Dre earlier this year? He made a reported $30 million from the deal. Unless James takes his talents to a small-market team like the Charlotte Hornets, it's likely he'll continue to collect a similar level of sponsorship income.
A boost to business
With that said, the addition of James may also boost his team's endorsements. Consider the evidence: In the '09-'10 season -- the year before he joined the Heat -- Forbes valued Miami's franchise at $364 million. This ranked 12th in the NBA, and included roughly $40 million in brand value.
Four years later, the Heat are now worth $770 million according to the outlet, good for seventh in the league, and the team's brand value is now $113 million. While endorsement income isn't public, it's reasonable to think it has risen in step with brand value. This is nothing new -- historical data suggests a similar boost could have occurred in Boston after the Celtics acquired Kevin Garnett and Ray Allen in 2007.

There's also reason to believe James can improve a team's live attendance. FiveThirtyEight recently analyzed this phenomenon. The outlet writes:

Even controlling for success, a "LeBron Effect" materialized in the data. The teams he's played for — the 2004 through 2010 Cavs and the 2011 though 2014 Heat — have home-attendance averages of 98.0 percent capacity, well above what their records would predict.

The bottom line
Of course, assuming the goal of every franchise is to win more games and ultimately the Finals, it's prudent to go after LeBron James in free agency. But given that he may also improve his team's endorsements and attendance, his arrival could be worth additional millions. For his sake, I only hope he doesn't broadcast his next decision in an hour-long TV special.

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Jake Mann has no position in any stocks mentioned. The Motley Fool recommends McDonald's and Nike. The Motley Fool owns shares of Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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