Should Nike and Under Armour Fight Over Kevin Durant?

Kevin Durant is arguably the NBA's hottest commodity. Should sponsors fight over him?

Aug 3, 2014 at 11:55AM

Kevin Durant made $14 million from endorsements last season, Forbes estimates. And after winning the NBA MVP in May, his stock may be even higher. ESPN reports Durant, not LeBron James or Kobe Bryant, is now basketball's most liked player. Understandably, this might bring a new sponsor to the table.

Is a new deal brewing?
Nothing is official yet. But rumors suggest Durant could replace longtime sponsor Nike (NYSE:NKE) with Under Armour (NYSE:UA).


Keith Allison, Flickr.

That's according to ESPN's Darren Rovell, who says Under Armour "is preparing a robust offer" for Durant once his Nike deal ends this week.

Durant has been with the apparel behemoth since 2007, when he signed a seven-year, $60 million endorsement contract. At the time, he reportedly chose Nike instead of Adidas, which offered a slightly more lucrative arrangement. But it now may be Nike who loses the Oklahoma City forward.

How marketable is Durant?
At the very least, competition from Under Armour -- and Durant's elevated superstardom -- will force Nike into a much more expensive contract if it wants to keep him.

James, for example, is in the midst of a long-term deal with Nike that likely pays near $20 million annually. Estimates vary, but it's probable that the company also pays Bryant at least eight figures a year in endorsements. Even the oft-injured Derrick Rose makes an average of $14 million a year from Adidas.

Given the income of his peers, Durant should net a new endorsement deal that pays him 40%-70% more than his current Nike contract. Over a seven-year time frame, that would be worth $84 million-$102 million. If the deal is Rose-esque in length, it could be more than $175 million in value. At 25, Durant is four years younger than LeBron and the same age as Rose.

Assuming Under Armour and Nike do square off, fair market value won't be the only thing pushing Durant's endorsements up. His MVP acceptance speech could be the X-factor. In a rare display of emotion for a professional athlete, he thanked everyone from teammates to his mom for the award back in May. 

"Everyone is calling and saying that's the kind of guy we want to be affiliated with," an associate with Durant's sports agent told CNN Money after the comments went viral. "[H]e's America's favorite son, someone every mom and every dad can identify with," the source added.

Will he go to D.C.?
If the MVP speech was a slam dunk, the possibility of Durant joining his hometown Washington Wizards is a contested three-pointer.

Everyone from The Washington Post to USA Today has pondered the scenario of late. Speculation has been around for some time, but was reignited when Durant last week told the Post, "Who knows what'll happen? You never can close a door on anything."

According to a new ESPN poll, 33% of its readers believe there's a "good chance" Durant will play for the Wizards after he becomes a free agent in 2016. Another 43% see at least a "slim chance."

What's next?
While it might be too early to start a #DurantToDC hashtag, it's undoubtable that Nike, Under Armour, and other sponsors are paying attention. In terms of market size, Washington D.C. is the eighth largest in the country, Nielsen reports. Oklahoma City, by comparison, ranks 41st, behind non-NBA cities like Austin, Texas, and Grand Rapids, Michigan. Television coverage in D.C. reaches about three times as many households as Oklahoma City.

Still, Durant should be able to boost his endorsements significantly without changing teams. His popularity and play alone warrant a level of income second in the NBA only to LeBron James. That, and the possibility of a journey home, not only indicates sponsors should fight over Durant -- they probably already are.

Jake Mann has no position in any stocks mentioned. The Motley Fool recommends Nike and Under Armour. The Motley Fool owns shares of Nike and Under Armour. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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