Kevin Durant is about to get a few bank vaults full of cash to suit up in new shoes next season. According to Darren Rovell, Kevin Durant has informed Nike that he has been offered a deal from Baltimore based Under Armour that will pay him between $265 and $285 million over ten years. Per Rovell:
Kevin Durant’s representation Roc Nation Sports informed Nike on Wednesday that he has a deal on the table with Under Armour worth between $265 million and $285 million over 10 years, sources told ESPN.com.
The deal includes Under Armour stock and other incentives, such a community center built in his mother’s name, whose exact worth will not be known for some time.
Nike, which saw its signature business related to the Oklahoma City Thunder forward grow to roughly $175 million at retail last season, will have the right to match, which is a condition of Durant’s current contract with the brand. Durant can still choose Nike if it doesn’t match but can’t legally choose Under Armour if Nike does.
Couple of points here because the dollar amount is humongous but not the entire story.
1. Roc Nation are the fourth and fifth words in this story for a reason. They are taking the wheel here. Remember when Durant announced his to sign with the upstart agency he cited branding as a primary reason, and here they are working to brand him. A move to UA for Durant would make him the face of a company that is looking to jump into the Fortune 500 by the end of the decade and a partner as well. Making Durant the biggest fish in a smaller pond rather than one of the big fish in a huge ocean is exactly the type of service he commissioned Roc Nation for.
2. Do not undersell the stock options, Under Armour’s worth is surging upwards every year and it was a key point in UA’s pitch to Durant:
The pitch, at the time, didn’t include talk of specific numbers, sources said, but it impressed Durant with attention to detail about his life, the hometown flair and the return on investment of its stock, which makes up part of his compensation.
During the presentation, Under Armour executives showed the $4.5 million worth of stock it gave NFL owners in 2006 (as part of its deal with the league) and what it was worth today — north of $100 million.
Not only has the company shown long term growth, but it has also had massive short term growth as well, according to Rovell, shares in the company are up 96% over the past year. Nike isn’t in the business of giving equity in the company to its clients so this may be the deal-breaker.
3. Nike is still in play. They are by far the premier brand in Basketball footwear, and have Durant in a contract that basically makes him a restricted free agent. Things have looked peachy between KD and the Swoosh recently so it remains possible. If they aren’t too spurned by KD suddenly withdrawing from Team USA earlier this month the $175 million he brought in for the company might be enough to pay the hefty price tag for the reigning MVP. However, paying such a price tag is dicey as it raises the market value of its other stars on their roster. Nike may balk at the deal and continue printing money via the rest of its roster sans KD.
4. The DMV connection is not lost on observers, and many are speculating this could lead to a return to the area when Durant is a free agent in the summer of 2016. There have been rumors in the past that Nike has added incentives in its contracts for stars like LeBron and Carmelo Anthony should they choose to play in a major market, and Under Armour could work something similar into the Durant contract if it chooses.
Like Rovell notes, Durant’s yearly payout from the company would be more than his NBA contract, so in essence he would be more of an employee to UA than the Thunder, and have an incentive for loyalty. Coincidentally, the NBA salary cap is expected to sky upwards into the $85 million range in the summer of 2016 when its new TV deals would begin. With two young stars locked into long term deals, the Wizards may be a more enticing option than the Thunder in two years, especially if Russell Westbrook leaves for greener pastures after this summer.
Durant’s Nike deal reportedly ends next month, so nothing can be official until then. Still, Durant leaving Nike would be a massive paradigm shift in the world of basketball apparel. Nike will always be Nike, and it signed two of the top five picks in the 2014 NBA Draft to deals this year (technically, Jabari Parker signed with Jordan Brand, which is owned of course by Nike). Plus, they still employ the highest earner amongst current players in LeBron as well as Mr. Jordan.
But Under Armour is clearly making its mark in the sports world and signing the Slim Reaper might be enough to cause a couple of aftershocks to reverberate throughout the industry.