Estimating Sales Volume of Signature Basketball Shoes
I’m a big James Harden fan. The sweet step-back, the slithery drives to the net, the beard that rules the court like an Egyptian pharaoh. What’s not to like? Besides the defense, of course…
Defensive failings aside, the bearded one signed a monstrous new shoe deal with Adidas this past summer worth $200 million. That’s a lot of green. It got us thinking – what are the economics behind these mega-deals? The NBA is famous for them. Elite NBA players have had contracts like Harden’s for some time now, and these contracts are only getting bigger. Brands like Nike and Adidas are placing huge bets on the likes of Kevin Durant, Lebron James, and others to sell millions of shoes for them.
We decided to look at some data surrounding these contracts and cross-reference them with our own pricing data to determine how effective each athlete is at selling their respective shoes and whether or not these contracts are actually as expensive as they sound. With the data we have available in Datafiniti, and a few extra facts uncovered by a bit of Googling, we can determine which athletes are the most lucrative for their sponsors.
Let’s start by taking a look at the top shoe contracts today. The chart below shows the 2015 contract values for the 7 most expensive contracts (excluding Stephen Curry, whose terms with Under Armor haven’t been disclosed).
In 2015, Kevin Durant claimed the highest-paying shoe contract by far, with Lebron James taking the second spot. It’s interesting to see Kobe Bryant and Derrick Rose, two former superstars still commanding so much money, while Chris Paul sits just behind Carmelo Anthony at the bottom. Just looking at this data, you may wonder if Bryant (who hasn’t been good for a couple years now) or Rose (who never fully recovered from extensive surgery) still have the marketing power to sell enough shoes.
By using the Datafiniti Product API, we can first calculate the average price for each athlete’s shoe line:
With that, we can then calculate how many shoes have to be sold for each contract to be profitable:
And finally, we can use estimates of total sales to determine how many total shoes were actually sold (data for James Harden isn’t available for last year):
Despite having a smaller contract than Durant, Lebron is dramatically outselling him and everyone else. Everyone outside those two are not even selling 1 million shoes, which seems like a small number, considering that the total market for basketball shoes must be very large. Of course, all of them are still selling more than the minimum # of shoes for profitability of the contract, which explains why it’s so easy for brands to make such deals with these athletes. Even though the contract sizes are large in terms of absolute dollars spent, they’re actually cheap compared to the revenue generated by each one.
With this information and analysis, we can clearly see why shoe contracts are so large. Even lower-performing contracts like Chris Paul’s are still generating more sales than the value of the contract. In fact, Lebron James is selling over 15x the number of shoes to make his contract worthwhile. This probably explains why Nike just re-upped their agreement with James to a lifetime contract worth more than $300 million. Even this deal will probably be under-paying James.