Sports Marketing

Case Study
LeBron James: An Endorsement Superstar
Problem Identification: * LeBron James was a basketball superstar right out of high school. At such a young age he possessed the talent that would make his name known throughout the world of basketball. His most important move in terms of revenue had been made off of the court, which lands him as one of the highest paid athletes to this day. * Aaron Goodwin was LeBron’s agent until 2005. He was a diving force in negotiating LeBron’s Nike endorsement. This endorsement was worth $90 million which propelled James into a league of his own in terms of the endorsement world. * When LeBron fired his agent, he produced his own “LRMR”, a firm established to focus on all of his business and marketing ventures. This is a smart move in the overall scheme of things because it would allow him to have more freedom to make his own moves. Also, the group consisted of a childhood friend Maverick Carter, which would reveal that the firm had a friendly internal relationship. Trust is a key factor when making business moves and that is what LeBron has with Carter. * A key problem from this move would be that Aaron Goodwin has prior experience in being an agent. He has prior experience in handling endorsement deals and business ventures for his athletes. When LeBron moved on, he made a big risk by making his own firm. He would risk his agents’ connections, experience, and guidance. * Decisions between which Videogame endorsement offers would be tough because of their reputations. Each had their own traits and drew in a certain crowd of consumers.

Situation Analysis: * In 2008, there were three major videogame endorsement offers that LeBron James and Maverick Carter had to discuss. His close childhood friend, Maverick, was chief executive of his business and marketing firm LRMR. * EA (Electronic Arts) is a well-known videogame provider, especially in sports. They generated $4.7 billion in revenue in 2008, which are very promising numbers for LeBron James to consider signing with them. EA had videogame titles such as NBA Live, NCAA Basketball, and NBA Street. This means they have their foot in the door in terms of the basketball videogame world and they have profited pretty well from those games. They wanted to make James the cover athlete to NBA Liveand offered him a two-year contract. The first year they would pay him $400,000, and the second year $300,000. EA would also need LeBron to be free for two days in order to do a commercial shoot to promote the game. He would not be offered any extra for this. It would allow James to get a lot of exposure throughout the videogame world and on TV. He is already a superstar athlete by playing basketball so I do not believe this is a issue that needs to be fixed. * 2K Games was a videogame endorsement offer that would make a lot of sense to take part in. 2K Games was a subsidiary of Take-Two Interactive, which was a well-known videogame producer. They did not take in as much revenue as EA did in videogame sales, but they did specialize in basketball videogames. 2K Games would offer James a more lucrative deal, and more flexible. It would be a two-year deal with payments of $300,000 in year one and $350,000 in year two. If the game was successful in sales, 2K Games agreed that they would extend the endorsement deal. If the sales were more than 2 million units in the first year, James would get paid $500,000. If it were 2.5 million units, he would gain an extra $250,000. In year two, James would receive $500,000 with 2.25 million units sold, $250,000 with 2.75 million units sold, and $750,000 with 3.75 million units sold. They would ask James for a considerable amount of time for “motion capturing” for the video game, commercial shoot, PR and media commitments, brainstorming sessions, interviews, and appearances. 2K Games has the best reputation for basketball games and they have proven that year in and year out. * Microsoft Xbox Live had proven to be a success through its Xbox 360 gaming console and it created Xbox Live. Xbox Live allows people anywhere around the world to play each other for a full time fee of $50 each year. Microsoft wanted to create an Xbox Live game that would be downloadable to consumers around the world. They offered him $250,000 in advance and considered giving him 20% of the games revenues. If it generated less than $1.5 million he would only get 10% of sales. The only way James would get 20% of the games revenue would be if it generated over $3 million in sales. That means he would make $600,000 at best.
Recommendations:
* James should most definitely sign with 2K Games because it would be the most significant in terms of financial gains. He could make the most money by signing with them and it was the most promising brand to sign with because of the respectable reputation of 2K basketball games. Although the other deals didn’t ask as much of his time off of the court as 2K did, it would be more beneficial in the long run. Maverick Carter even said, “There is no question that 2K makes the best game for basketball fans, and getting a reward for reaching certain sales targets certainly is attractive”. LeBron is the best basketball player in the NBA and arguably one of the greatest athletes of all time. A few days of his time would not deprive him so much that it would affect his career. 2K Games would provide the best deal in terms of generating revenue, and it already has the reputation of being the best basketball videogame provider.