The purported 10-year, $265-285 million deal Under Armour offered Kevin Durant was supposed to scare Nike or any other shoe brand away. But, at the last moment, Nike reportedly told Roc Nation, which represents KD, they’ll match the mega-deal, thereby keeping the 2014 NBA MVP in their stable of signature basketball players.
ESPN’s Marc Stein and Darren Rovell with the latest in this summer’s shoe wars:
With Durant on the verge of a move to Under Armour, sources told ESPN on Sunday that Nike has exercised its right to match any rival shoe company’s offer to the Oklahoma City Thunder star.
Nike has countered Under Armour’s offer of between $265 million and $285 million and believes it will keep Kevin Durant for the next 10 years, sources told ESPN. Nike, whose seven-year deal that guaranteed Durant $60 million is expiring, made an initial offer of about $20 million a year that was far from what Durant was looking for. Under Armour’s huge play for Durant had many believing that Nike would even let him go at that price.
But on Saturday, Nike officials told Durant and his team at Jay Z’s Roc Nation Sports that it would indeed step up enough to allow the world’s largest shoe and apparel company to keep him in its robust stable of basketball endorsers that includes LeBron James and Kobe Bryant.
While the specifics of the deal aren’t known, it’s believed to be more than Nike’s initial offer of $20 million a year, and if KD stays with them, he’s believed to be making more in base and royalties than the $41.2 million he’ll make with the Thunder over the next two seasons.
The senior managing director of ISI’s luxury, apparel and footwear team, analyst Omar Saad, who covers all the major brands for Wall Street, always believed Durant would stay with Nike.
“For Nike, this was nothing to them,” Saad tells ESPN. “They could easily build Durant’s business enough, assuming normal margins, where they could generate a cash flow of $60 million a year. And Nike is really good at monetizing its marketing assets, way better than anyone else.”
Durant holds a niche market for Nike that separates him from LeBron James, Kobe Bryant and Jordan Brand. His signature line, the “KD,” grossed $175 million at retail last year according to market retail tracking firm, SportsOneSource.
A retail source also tells ESPN that Nike could have made significantly more than that $175 million figure even as KD’s popularity expands. They could have priced it higher than $125 and there was limited distribution to stores. Opening up more venues to sell the KD line and increasing the price could make the huge deal well worth it to Nike.
Despite Nike offering enough to keep Durant, Under Armour also included 10 percent stock, which could make their deal more lucrative moving forward. Still, Nike will match the deal, and keep their 25-year-old star in the retail space and on the court.
While Under Armour was willing to bet eight percent of its entire marketing budget on Durant, the decision was weighing on him, and many felt the announcement he was withdrawing from USA Basketball this summer, was tied to the shoe negotiations.
Sources tell ESPN going back to Nike is a relief for KD, since he can still make a considerable amount of money without being associated with Under Armour’s relatively minuscule shoe business, which — if he’d gone with Under Armour — he would have been relied upon to carry.
What do you think?
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