Michael Jordan needs no introduction. While we could sit here and debate his greatness all day, today I want to focus on the business side of Jordan's career. Specifically, when Jordan was coming out of college at North Carolina, there was 3-headed race to sign him to a shoe contract. Ultimately, one company scored a major coup, and they did it by offering a deal that was unprecedented at the time.
The Birth of a Legend: The Jordan Brand Emerges
Jordan was selected 3rd in the 1984 NBA draft behind Akeem Olajuwon (later changed his name to Hakeem) and Sam Bowie. At the time, most NBA brass felt that the most dominant players were (and would be) big men. Players like Magic Johnson (6'9") and Larry Bird (6'10") played on the perimeter but had tremendous size. The game at the time wasn't dominated by guys that were 6'6."
But, back to the shoes. Converse was the dominant basketball shoe company in 1984. Both Magic and Bird endorsed the brand, and while they were clearly #1, their pitch to Jordan was "come join the family."
Adidas was going through a leadership shakeup. While Jordan actually preferred the brand, it was hard to trust the plans they were putting in front of Michael because it was unclear who was in charge.
Last, Nike was an upstart company that had specialized in running. While Nike's Sonny Vaccaro was working round the clock to both identify talent and grow Nike's basketball business, basketball wasn't a focus at that time.
Vaccaro had a $500k budget to recruit athletes for the 1984-1985 NBA season. In prior seasons, Nike would split up the money between multiple athletes. While this inherently lessened their risk, it didn't bode well for their basketball shoe sales.
To Vacarro's credit, he pushed Nike ceo, Phil Knight, to put all the money on one player. He watched film, attended games, talked to scouts, gm's, parents, etc. Ultimately, his vote was to go after Jordan with everything Nike had. While it took a lot of convincing, eventually Knight gave him the green light, despite still being skeptical.
Nike's pitch was simple: "We want to build a brand around Michael Jordan." Instead of grouping him with other athletes, Nike presented a signature shoe prototype when they met with Jordan. While other companies had shoes ready for him to wear, Nike presented a vision for Michael's own shoe. The shoe was red, black, and white. At the time, the NBA rules stated that a player's shoe must be 50% or more white. The prototype was not, by which Nike said that they would pay the league fine.
On October 26, 1984, Nike signed Michael Jordan to a 5 year deal worth $500k per season. They included a red Mercedes Benz in the deal as well. The kicker, however, was that Jordan would receive 5% in royalties on all Jordan shoes sold. Given previous Nike basketball shoe sales, the company figured this would be a maximum of $3 million/year in shoe sales (and $150,000 back to Jordan).
In April of 1985, Nike released the "Air Jordan" to the public. In the year following, Nike sold $126 million of Air Jordans, which earned Jordan $6.3 million.
The Jordan Brand Today
Today, the Jordan Brand is global and worn by consumers around the world. In fiscal 2022, the Jordan Brand brought in $5.1 billion in sales! Assuming the 5% royalty, MJ made $255 million! The Jordan Brand has become one of the most iconic brands in the world and makes up roughly 11% of all Nike sales.
Rewind back to 1984. Had Jordan not negotiated a royalty, he would've been paid handsomely at the time but nowhere near what he's been able to make. Jordan's decision to go against the grain and bet himself may have been the best decision that he ever made.
John Willkom is the author of Amazon best-selling basketball books: Walk-On Warrior and No Fear In The Arena. John is an avid reader, sports fan, and father to two incredible little girls.
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