SBD/August 22, 2014/Marketing and Sponsorship

Under Armour Looks To Tap Into Nike's Basketball Marketplace With Proposed KD Deal

Durant's deal with UA would represent 10% of the company's yearly marketing budget
Thunder F Kevin Durant's proposed 10-year, $265-285M offer from Under Armour would give the company a "major inroad into the lucrative basketball marketplace," according to a front-page piece by Barker & Mirabella of the Baltimore SUN. The deal would be a "coup for Under Armour as it tries to build its shoe business and boost its stature internationally." Nike controls 96% of the "U.S. basketball market," while UA's share is "estimated at less than" 1%. Sports One Source analyst Matt Powell said UA is "trying to establish a beachhead in basketball." Powell: "They're looking to try to gain share by signing an important athlete like this. He's one of the premier basketball players in the country. Having him on board would give them additional credibility in their basketball category." Barker & Mirabella note UA "already has signed" Warriors G Stephen Curry, who was a former Nike endorser. The reported amount of the Durant deal would represent about 10% of the company's "annual marketing budget" (Baltimore SUN, 8/22). ESPN's Jackie MacMullan said UA has "made a really great play here" going after Durant. They already have "big names in football," and they now are "going to make a play for basketball." What UA should "say to Durant is, 'Look, we're going to carve you out your own niche. You are THE guy at Under Armour." MacMullan: "If you're Durant, this is a chance to again separate yourself. You were the MVP this last year, not LeBron. It's a great play by Under Armour and it makes a lot of sense for Durant." ESPN's Bomani Jones said Durant is "absolutely" worth that type of contract because he is the "biggest star that Under Armour could have a chance of getting," as well as the fact that he is "local and from Maryland, like Under Armour." Jones: "It's a great play for them ... and they're doing everything they can to get the biggest stars they have access to. Nike, if they're smart, is going to have to wind up matching that" ("Around The Horn," ESPN, 8/21).

WORTH THE MONEY: ESPN's Tony Kornheiser said it is "hard to say that somebody is worth $285 million over 10 years," but Durant "can be not only worth the money, he could be worth more than that." Kornheiser: "Under Armour is not in the shoe business right now. They've got nothing. Nike wasn't in the shoe business really until Michael Jordan came in. He's worth $5 billion. They weren't in the golf business at all until Tiger Woods became their golf guy and every club they sold, every shirt they sold, everything they sold was Tiger Woods. Kevin Durant (can do) that for Under Armour, kids like him" ("PTI," ESPN, 8/21). ESPN's Michael Smith said UA needs Durant, as it "becomes a credibility issue" with consumers. Nike is known for its "basketball shoe and Under Armour mostly known for the football stuff" ("Numbers Never Lie," ESPN2, 8/21). FS1's Mike Hill said UA is a "big time endorser, but Nike is always right now going to be the king” (“America’s Pregame,” FS1, 8/21).

CONFLICTING INTERESTS? ESPN's J.A. Adande said one interesting aspect of the proposed UA-Durant deal is what it means "in terms of who is the primary employer of these people." Adande: "If the shoe companies are going to pay more than the league will allow the teams to pay, that brings a lot of things into question, including international competition. Do you worry about your asset? Is it really right for a team to say, 'We don't want our assets being put at risk in an international competition,' when they're now no longer the primary employer. Maybe the shoe company wants its guy out there promoting the brand internationally. So there's a whole range of ramifications that we can see when this type of money is being discussed" ("Around The Horn," ESPN, 8/21).
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