The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of SnoQap, any other agency, organization, employer or company. Assumptions made in the analysis are not necessarily reflective of the position of any entity other than the author(s). These views are subject to change and revision.

Balling for a Budget

We live in the era of crazed sports parents. With much more adult involvement, youth sports have begun to resemble the pro games in terms of professionalism and business minded approaches. Enter LaVar Ball, the new poster boy of crazy sport parents, whose 3 sons are about to take the basketball world by storm, or so he thinks.

Ball is so confident in his sons’ future success and brand that he’s already established their own family clothing line. The Big Baller Brand offers your basic shirts, sweatshirts, and hats for the excessive price of about $50-$60 for each. And while most crazy sports parents believe in their children (frequently to a fault), I’d be hard pressed to find another who’s gone to the length of actually creating a clothing line for his sons.

LaVar Ball’s three children are exceptional basketball players. His eldest, Lonzo, just led UCLA to the Elite Eight in the NCAA tournament and is a sure fire top 3 pick in June’s NBA draft. LiAngelo, the middle son, is a highly rated recruit and will play at UCLA next season. The youngest, LaMelo, made national headlines for scoring 92 points during a game in February, and will follow in his brothers’ footsteps at UCLA 3 years later. The trio led Chino Hills High School to the California Interscholastic Federation championship last year and a #1 national high school ranking.

His kids’ talents on the basketball court isn’t what’s made LaVar Ball famous, however. He has made ridiculous claims, like when he said he’d beat Michael Jordan one on one, or that Lonzo was better than reigning NBA MVP Steph Curry, or when he called out LeBron James’ kid, or when he blamed UCLA’s ‘slow white guys’ for their tournament loss to Kentucky. But perhaps where he’s drawn most criticism is in stating that he expects $1 billion over the next 10 years for the rights to sign his 3 son’s to a shoe deal.

Sneakers sell for a variety of reasons. It could be the design, color, and brand but as basketball becomes more popular we find it may be the player representing it that makes fans flock for a pair. After all, it’s no coincidence that the game’s greatest player, Michael Jordan, still holds down one of the top selling sneakers, despite having been retired for 15 years.

Basketball is the flashiest sport in America and possibly the world. The players are up-close and personal with the fans, you can see their faces and reactions unimpeded by helmets or hats, and on top of that there are only 10 players on the court at a given time. You feel the emotion and the personalities and flare of players on the court, making the ones who are marketable much more valuable. Because of this, and the increasing globalization of the game, players are receiving extremely lucrative deals. For example, LeBron James just signed a lifetime deal with Nike that will reportedly pay him $1 billion over the span of his lifetime.

Let me point out that LaVar’s demands for a $1 billion contract are ridiculous on a few different levels. First off, none of his sons have played professionally yet, and while Lonzo is a surefire top prospect, the verdict is still out on his 18 and 15-year-old brothers. LiAngelo is rated as the 40th best prospect in his class by ESPN, and while that may sound pretty good, consider that there’s only about 450 NBA players on active rosters, making his spot on a team far from guaranteed. Second, LeBron James, the most hyped prospect of the modern era, only received $90 million with incentives from his rookie deal with Nike. And while Lonzo may be a tremendous player, odds are he’ll never reach LeBron status. But to be fair-James received similar skepticism on his initial deal.

Finally, 10 years is an incredibly short amount of time to pay these three $1 billion! As previously mentioned, LeBron James resigned with Nike for a lifetime deal, which is a much larger commitment than a decade.

We’ve established 1 billion over 10 years as an outlandish request, but what do these brothers deserve to be compensated should they all make it to the NBA? These three brothers have played on the same high school team and all intend to make UCLA their school of choice, so odds are that they’ll all end up signing with the same shoe company should the opportunity arise. But even then, we’re dealing with hypotheticals because the younger two brothers won’t be able to sign a shoe deal until they’re done at UCLA, per NCAA rules.

Since the leagues founding in 1946, there have only been a little over 60 brother combinations who have made it to the NBA.  Some individual brothers have signed to shoe deals, but there has never been a tandem that did. Of those 60, only three have included 3+ brothers who played in the NBA.  Again, with none of these sets of brothers signed to shoe deals, the Ball’s request is even more challenging to gauge.

Before we go into that, we must first look into what’s in it for the shoe companies  themselves. In 2014 Nike made $340 million in revenue off of James’ sneaker sales alone. That same year, Nike generated $175 million off of Kevin Durant’s signature shoe after paying him $30 million annually in his 10-year deal. And months after Houston Rockets guard James Harden signed a 13 year $200 million deal with Adidas, their stock had grown a tremendous 44.5%.

As you can see, there is a clear benefit to signing the right athlete at the right time. But the right brothers? That might be trickier because of the inherent liabilities associated with sports. To simplify this, say a shoe company gives them a $500 million deal contingent on the brothers all having their own set of signature shoes. If one, or two of the brothers doesn’t perform at a star (marketable) level, then the investment, $500,000,000 deal/3 brothers=$166,666,667 or $16,666,667 annually (per LaVar’s 10-year deal request), is spent on someone who won’t be able to give them the return on investment that James, Durant, and Harden can.

The Curry brothers are a prime example. Imagine they decided to sign a package deal that paid them $300 million between the two and gave each their own shoe. Steph, the four-time all-star and two time MVP, would be shouldering the shoe company’s investment. Meanwhile his brother, Seth, a two-time Developmental League All Star wouldn’t be carrying the same kind of mainstream appeal that sells sneakers.

My point is that the Ball brothers are a risk for a shoe company because history tells us that they’re facing small odds to make it to the NBA, and even smaller odds of being talented and marketable enough to warrant the kind of money LaVar requests. Phil Knight, founder of Nike, says they have "an interest," in signing Lonzo Ball and added he's "an awfully great player." But of course, one billion dollars "is a little steep."

The Economics of Formula 1

Even Your Money Can Make a Difference