Established in 1911 at St. Lawrence University
Established in 1911 at St. Lawrence University

The Economics of Basketball Sneakers

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Photo via Forbes

In today’s NBA the Golden State Warriors are the face of the league, even though the Cleveland Cavaliers won the NBA title this past June.

This year’s championship matchup was supposed to be the changing of the guard. Despite all of the hype behind the Warriors, they managed to fall short to the Cavaliers in a thrilling seven game series. In the corporate battle, the face of Nike Basketball (Lebron James) defeated the face of Under Armour Basketball (Stephen Curry).

The contrasts between the two sports apparel companies were on display last year. Curry had defected from Nike after his contract had expired in 2013, and the now two-time MVP has become the face of Under Armour Basketball.

Since changing sides, sales of Curry’s signature shoe are up over 350 percent year to year, and Morgan Stanley analyst Jay Sole believes that Curry’s impact on Under Armour’s market cap could be worth over $14 billion. As of Sept. 2016, Nike has a market cap of $96 billion in comparison to Under Armour’s $38 billion market cap.

For now, it appears that Nike reigns supreme, and things are going to get interesting next season now that Nike superstar Kevin Durant has joined the Warriors. Durant signed a contract with Nike worth over $300 million in 2014, and is seen as the up-and-coming face of Nike Basketball as LeBron ages.

Now that Curry and Durant are going to share the limelight in Golden State, who knows what is going to happen in regards to shoe sales for both Under Armour and Nike.

Curry is viewed as the face of the league, but Durant is also very popular among young fans, a demographic that both Nike and Under Armour are targeting with their advertisements and signature shoe lines.Sharing the national spotlight may hurt the personae of both players next year but considering that the Warriors have more nationally televised games than any other team next year we can assume that both players will get ample time in the spotlight.

Curry, Durant, and James all have massive social media outreaches. They have 12.9, 8.6, and 24.7 million followers on Instagram, respectively.

All three athletes push their product lines on consumers on a weekly basis, and the number of individuals exposed to their products could generate billions of dollars annually for their respective companies. Curry’s shoes retail for $125, Durant’s for $150, and James’ for $200, to put things into perspective.

Forbes reported that sales of Curry’s shoes in 2015 were responsible for $243 million dollars in revenue. Forbes also reported that James’ shoe sales were responsible for $340 million dollars in 2015, and Durant’s sales amounted to $195 million dollars in sales. It appears that the larger the social media following, the greater the amount of shoe sales in 2015. For every one million followers on Instagram Curry sold $18 million in shoes, James sold $13.7 million in shoes, and Durant sold $22.6 million.

The lower entry price of Curry’s shoes could help Under Armour control the market for performance basketball shoes in the coming years, but when it comes to making money, Nike has the ace in the hole.

Jordan Brand, owned by Nike, had revenue of $2.8 billion dollars in 2015. It appears that number 23 remains on top, despite having retired over a decade ago. To me, it’s worth the extra price for the swoosh, but time will tell if others feel the same way.

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