Zion May Set-Off the “Biggest Bidding War Ever”, But the “Math Simply Can’t Work Out”

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Sonny Vaccaro told ESPN that he believes Zion Williamson is about to set-off “the biggest bidding war ever” – between competing footwear companies – for a professional athlete; suggesting as many as 6 brands could be after the 18-year old’s services. When Williamson takes the floor again in October, he will become just the 10th rookie in NBA history and the first since LeBron James in ’03 (if you ignore Lonzo Ball, BBB) with a signature shoe deal. It’s a rare combination of strength, speed and likability, that Vaccaro says makes Williamson “the most marketable athlete I’ve seen”; the famed sneaker marketing executive even suggested “what Michael did for Nike, Zion could do for somebody new” (see: Puma, New Balance, Anta). But NPD Group retail analyst Matt Powell tells JohnWallStreet that “the math [on a 9-figure contract] simply can’t work out. Even if you look at the deal as an investment in marketing and not in merchandise sales, I don’t think he can create a return in proportion to $100 million.” The Duke star is currently fielding offers and is expected to make his decision before the May 14th NBA draft lottery.

Howie Long-Short: Vaccaro has an eye for talent – he’s responsible for Nike inking Jordan back in ’84 and Adidas signing Kobe Bryant a dozen years later – but suggesting Zion is more marketable than Jordan (or even Kobe) is a stretch. Historically speaking, big men (see: Shaq, KG, Dwight Howard) have never sold a ton of shoes. That’s because the designs tend to be “less aesthetically attractive” due to structural constraints and the target consumer (+/- age 12) isn’t necessarily identifying with the league’s most physically imposing players; “they’re more inclined to try and emulate Steph Curry than Dwight Howard. Simply because of the style of game played at that age.”

The sheer number of brands courting Zion make it likely he’ll see a deal worth $100M+, but as Powell mentioned, don’t expect the company that lands the hoops star to generate a positive return on the signing – at least not in merchandise sales. “Brands spend 10-11% of sales on marketing expenditures. If he’s earning $17 million annually, that means he needs to earn out $150 million. He would need to sell 150 million pairs at wholesale or about 300 million at retail to hit that mark; the entire U.S. basketball business did 860 million last year. He would have to grow the market by 1/3. It just doesn’t make sense.”

The Knicks, Cavs and Suns have the highest probability of landing the #1 selection in the 2019 NBA draft and the right to select Zion Williamson. Where the player lands will have an impact on how many shoes he can sell, which is why his decision is anticipated before the lottery. “New York City and the mid-Atlantic region (Philadelphia, Boston, D.C.) is the epicenter of basketball in this country, so the Knicks would be the preferred destination from an endorser standpoint. The further west you go, the less interest there is in the sport and in basketball shoes; a small market would also impede Zion’s ability to sell sneakers. But even if he lands in NYC, he’s not going to sell 300 million pairs.” 

Brands offering $100 million pacts will point to the 7-year $87 million contract that James signed and argue that Zion is worth more because of the tremendous social following that he’ll enter the league with; Williamson has 3 million IG followers. It’s a valid distinction, but rookies don’t come into the league and move merchandise. Even LeBron’s shoe “didn’t start selling until the 6th iteration. It took time to establish himself as a superstar in the league, Nike was putting forth a bad product and when James entered the league, much like today, we were in a down cycle for basketball shoe sales.”

Many – including Vaccaro – have pegged Nike as the “odds on favorite” to land Zion (despite the highly-publicized blowout), after all, Williamson chose to play at a Nike school (Duke) this past season.

Fan Marino: Brands would be better off investing big money in teams than in individual players. As Powell pointed out “European soccer teams are getting massive amounts of money, but those deals provide for the opportunity to generate a return on investment – in terms of merchandise sales – because they’re going beyond shoes into the sale of jerseys that can be lucrative.”

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Author: John Wall Street

At the intersection of sports & finance.

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