Michael Jordan’s $1 Billion Nike Endorsement Deal Is The Biggest Bargain In Sports

The Last Dance documentary tracking Michael Jordan’s final season with the Chicago Bulls has captivated the American viewing public at a time when sports are on lockdown. The first two nights of the 10-part series delved into Jordan’s running mates with the late 1990s Bulls in Scottie Pippen, Dennis Rodman and coach Phil Jackson. This Sunday explores MJ the global endorsement phenomenon, which triggered ad slogans like “It’s Gotta Be The Shoes” and “Be Like Mike.”

Nike
NKE
has always been Jordan’s biggest backer, both financially and marketing-wise. The sportswear giant paid him an estimated $1.3 billion by Forbes’ count, since it signed its first deal with Jordan in 1984, and helped make him a cultural icon. It is the richest athlete endorsement deal ever but also the biggest bargain arguably, as Jordan helped transform Nike from a scrappy underdog into one of the largest, most valuable consumer brands in the world.

The Nike Swoosh is ubiquitous today, yet that was hardly the case in the mid 1980s. Adidas was 50% larger by revenue; Reebok had just burst on the scene and would surpass Nike in revenue by 1987; Converse was the brand of choice for NBA stars Magic Johnson, Larry Bird and Julius Erving.

Jordan wore Converse sneakers at the University of North Carolina, and his first choice was to join Adidas after the Bulls drafted him. Jordan’s agent David Falk, who coined the phrase Air Jordan, had other ideas. He had a close relationship with Nike and encouraged Jordan to hear their pitch. Nike eventually offered a five-year deal with a base pay of $500,000 per year, triple any other NBA sneaker deal.

MJ’s first shoe with Nike was banned by the NBA because it did meet the NBA’s color standards. Nike paid the fine and seized the moment with an iconic 1984 commercial. “On October 15th, Nike created a revolutionary new basketball shoe,” a voice read as Jordan dribbled a basketball. “On October 18th, the NBA threw them out of the game. Fortunately, the NBA can’t keep you from wearing them.”

Nike had a hit on his hands. The first Air Jordan sneaker hit stores the following year and racked up more than $100 million in sales its first 12 months. MJ’s paychecks climbed as the Jordan Brand got bigger. He earned an estimated $130 million from Nike last year, four times more than LeBron James, who has the biggest shoe deal among active NBA players.

Nike now has a monopoly in the once-competitive basketball sneaker market. Nike’s share of the basketball market, including the Jordan Brand, was 86% last year, according to market research firm NPD. The Swoosh was even more dominant in the lifestyle basketball category with a 96% share. Seventy-seven percent of NBA players wore Nike or Jordan shoes during the 2019-20 season, according to shoe database site Baller Shoes DB. The top nine models were all made by Nike.

While Nike helped make Jordan a billionaire, with a current net worth of $2.1 billion, he paved the way for Nike to leave Adidas and other competitors in the dust. Nike’s $40 billion in revenue over the last 12 months was 60% more than Adidas, which bought Reebok in 2005 (Reebok’s revenues are lower than they were in 1990). Nike’s market cap of $136 billion is three times the size of the German sports brand.

The Jordan Brand had revenue of $3.1 billion in the fiscal year ending May 2019, but its 10% growth was faster than the company overall. Jordan represents 8% of company revenue, but likely a larger chunk of the market value due to the faster growth rate. The brand is easily worth north of $10 billion, in addition to the billions of dollars in profits it has generated over 35 years and halo impact on sales of other Nike-branded products.

MJ’s brand shows no signs of slowing down. “What’s most exciting is we’re still in the early stages of diversifying the Jordan portfolio,” former CEO Mark Parker said when announcing Nike’s second-quarter results, which included the first billion-dollar quarter for the Jordan Brand. “And we’ve continued the momentum into Q3 with a significant holiday launch of the Jordan 11 ‘Bred,’ meeting demand for one of sneaker culture’s all-time favorites at an incredible scale.”