NBA: Big payoff for a little patch
The NBA’s jersey patch program is more than halfway through its three-season test and the results are clear: It’s a slam dunk.
As the league continues to search for new revenue, the patch program has delivered, generating more than $150 million. And 20 of the 29 team patch sponsors, including Harley-Davidson and Rakuten, are doing business with NBA teams for the first time.
Now the task ahead will be how to improve and expand the patch program, including where teams are allowed to sell jerseys containing the patches.
Team, league and brand executives all feel the program has been an overwhelming success, with exposure numbers easily exceeding projections. Clubs expect new deals and renewals will be for more money and longer terms. One top team executive predicts a 20 percent to 30 percent price increase for Patch 2.0.
“Like most teams, we’re heading towards renewal thinking these are worth substantially more, because the impression numbers have been so good,” said Milwaukee Bucks President Peter Feigin, who would not disclose specific patch values.
The league would not discuss any specific increases in value, but expects new or renewed patch deals to be more lucrative. The current deals reportedly range between $5 million and $20 million annually. At press time, every NBA team but the Oklahoma City Thunder had a patch deal.
“The revenue has exceeded expectations and we think the success of the program to date will help drive value in the future,” said Amy Brooks, president of the league’s team marketing and business operations division and chief innovation officer for the NBA. “It has proven to be a unique asset that draws brands for different reasons.”
According to Navigate Research, which has valued select jersey patch deals for NBA teams, the average exposure value has been 25 percent to 50 percent higher than the sponsor fees, with the average patch exposure at 10 to 15 minutes of highly legible visibility during game broadcasts.
“The next phase of the deals is to maximize the marketplace,” said Emilio Collins, chief business officer for Excel Sports Management, which represents a handful of teams in their patch deals. “The data supports substantial increases in value. There has been phenomenal reach.”
The patch program was created in 2017 after more than a year of consideration as owners debated how the deals would be structured and how revenue would be shared. Any changes to the current three-year pilot patch program, which ends in April 2020, must be approved by league owners.
As the NBA looks to extend the program, league and team officials say there is no demand to increase the size of the 2.5-by-2.5-inch patches. “There has been zero negative reaction to the size of the patch,” said Alex Martins, CEO of the Orlando Magic. “Consumers have become accustomed to it.”
Active discussions are focused on making NBA jerseys with ad patches the league’s “authentic” on-court wear — and thus the only jerseys available at retail. Currently, NBA jerseys with patches are only sold at team-controlled stores and websites.
More preliminary and more complicated are talks between the league and its teams on whether to expand territorial rights for patches and other marketing inventory. The league emphasized the early nature of those talks and would not comment on any specific changes.
“We are discussing retail distribution first and foremost,” Brooks said. “Our data has shown that fans want what the players wear on the court. Also, more flexibility in creative for a patch partner especially as we have flexibility in creative in our uniforms.”
Team executives are clear in their push for expanding the patch at retail.
“You can’t even buy a European soccer jersey without the sponsor on it,” said Golden State Warriors President Rick Welts, who in 2009 sold the WNBA’s first uniform ad, when Arizona-based LifeLock bought space on the Phoenix Mercury’s jerseys.
“Fans want whatever’s authentic,” Welts continued. “So inevitably, that [all jerseys at retail having ad patches] is going to happen.”
Predictably, Nike is far less sanguine about having an advertising patch be part of every NBA jersey at retail, preferring that decision be made by consumers. Because of the long lead times required by jersey manufacturers (six to nine months), it’s already growing late for the 2019-20 season should the league want to revamp the program early.
For the first iteration of jersey advertising, the NBA prohibited categories including spirits, gambling, tobacco, media concerns, political ads, and competitors of Nike, which holds on-court uniform rights.
Said Cleveland Cavaliers CEO Len Komoroski, “There were stops and starts on the way in, but clearly it has worked even better than we hoped. As we move forward, it will be helpful to have it at a vantage point as a long-term proposition, rather than just a test.”
PATCHING THINGS UP
The 29 brands whose logos have been visible on NBA jerseys this season have combined to generate nearly $54 million in media value since Oct. 1, according to Sport24 and Social24 data provided to Sports Business Journal by Nielsen Sports. Games that aired on national and regional networks combined to drive 70 percent of that value, with social bringing in the remainder. Shopping app Wish, whose logo adorns the Los Angeles Lakers’ jerseys, has generated the most exposure. Nielsen did not provide actual values. Large number is media value rank; small number in parentheses is media market rank.
Los Angeles Lakers
Golden State Warriors
San Antonio Spurs
New York Knicks
Los Angeles Clippers
Note: Via game telecasts Oct. 1, 2018-Feb. 6, 2019, and social media exposure generated Oct. 1, 2018-Feb. 13, 2019.
Source: Nielsen Sports Sport24 and Social24.