Sneaker Companies Offering “Blank Checks” to AAU Programs Run by Parents of Star Players

Bagley

The Oregonian released a piece worth reading, detailing how sneaker companies skirt NCAA regulations by sponsoring grassroots teams run by the family members of top prospects. Sponsors are permitted to provide shoes, uniforms and cash for under-funded travel to teams; but, the story describes a system where Nike, Adidas and Under Armour are targeting the family members of star prospects who control their own programs, offering a “blank check” for their allegiance. The cash being pocketed by the family (it’s alleged Josh Jackson’s mom gets $10,000 mo.) equates to a “direct endorsement” of the player, an “extra benefit” that theoretically would make a prospect ineligible under NCAA guidelines. Of course, the sneaker companies are writing these checks, are doing so for good reason; an analysis of 2017 NBA first round picks indicated that most players signed professional shoe deals with the company who sponsored their grassroots team(s).

Howie Long-Short: Basketball sneaker sales have fallen off a cliff in the last 24 months, down 26% to $950 million. Nike (NKE) controls 80% of the market, with Under Armour (UAA) in a distant 2nd place (12.1%). Adidas (ADDYY) accounted for less than 5% of all U.S. basketball sneaker sales in ’17; but, Mark King, the President of Adidas Group North America, has said the brand will “focus on improving its basketball products this year.”

Fan Marino: The NCAA has never investigated the Bagley case, but the circumstances appear to be particularly questionable. In 2008, the Bagley’s filed for Chapter 7 bankruptcy; claiming a household income of $44,000. Four years later, shortly after Nike sponsored the Phoenix Phamily (the team Bagley III played on, coached by Marvin Jr.), the Bagley’s moved into a California home estimated to be worth between $750,000-$1.5 million; with rent in the area ranging from $2,500-$7,500/mo. The elder Bagley readily acknowledge he was using Nike money to “make ends meet.” That’s not great news for Duke fans. In 2010, Renardo Sidney (Mississippi State) was declared ineligible after it was found his family received “preferential treatment” from Reebok. It was later announced Reebok had signed Sidney’s father to a $20,000/year consulting agreement. Duke is headed to the Sweet 16, but their appearance very well may be vacated at a later date.

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Author: John Wall Street

At the intersection of sports & finance.

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