Estimating the 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 contract 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 shoe contracts like Harden’s for some time now, and these deals 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.
We decided to look at some data surrounding these shoe contracts and cross-reference them with our pricing data. With this information, we can determine how effective each athlete is at selling their respective shoes and whether or not these deals are as expensive as they sound. With the product 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.
The Data on Shoe Contracts
Let’s start by taking a look at the top shoe contracts today. The chart below shows the 2015 shoe contract values for the seven most expensive deals (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 of 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 calculate how many shoes have to be sold for each shoe contract to be profitable:
And finally, we can use estimates of total sales to determine the number of total shoes sold (data for James Harden’s shoe contract isn’t available for last year):
Despite having a smaller shoe contract than Durant, Lebron is dramatically outselling him and everyone else. Everyone outside those two is 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 the profitability of the shoe contract, which explains why it’s so easy for brands to make such deals with these athletes. The shoe contract sizes are large regarding absolute dollars spent and are cheap compared to the revenue generated by each one.
With this information and analysis, we can see why a shoe contract is so large. Even lower-performing shoe contracts like Chris Paul’s are still generating more sales than the value of the shoe contract. In fact, Lebron James is selling over 15x the number of shoes to make his shoe contract worthwhile. This probably explains why Nike just re-upped their agreement with James to a lifetime shoe contract worth more than $300 million. Even this deal will probably be under-paying James.