300,000,000 Hoopahs or Cha-Ching!
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Some times board rats wonder how Andrew Wiggins can be rumored to be awaiting some kind of mega endorsement deal.
Think about this number: 300,000,000.
That is the estimated number of human beings that play basketball on planet earth presently, according to the ever suspect Wikipedia.
Let’s do the numbers, as market researchers like to say.
Primary Market: 300,000,000 hoopahs
Secondary Market: 900,000,000 (Ex Hoopahs and Hoopah wannabes = 3 x hoopahs)
Tertiary Market: 100,000,000 (wild guess)
Total Market 1, 300,000,000 potential buyers
1 pair tennies $100 1 clothes ensemble $100 Total sales/buyer/yr $200
Potential Sales/yr $260,000,000,000
adidas market penetration 10%
Effective revenues/yr $26,000,000,000
Now realize that the above sum estimates only the hoopah, ex hoopah, hoopah wannabe and related tertirary miscellaneous hoopah markets and does so with a very conservative 10% market penetration.
Realize also that there is a rather large, perhaps quite a bit larger non-hoopah market of persons that just buy tennis shoes because they feel better than other shoes. But let’s leave these aside for the pros to worry about.
Now, consider if Adidas were to double its market penetration because they signed a phenom product endorser, say, oh, I dunno, say like, Andrew Wiggins. I know, doubling is a reach, but just to keep the calculations simple, let’s say he could grow effective revenues that amount in part because of his charisma and in part because every year another couple hundred millions of persons reach the standard of living that allows them to buy shoes and a sports apparel ensemble.
Effective revenues/yr: $52,000,000,000
Investment bankers like to take a 2% fee for putting large deals together. $52B still qualifies as a large deal, I reckon, so let’s say a product endorser that can deliver the goods and isn’t any more risky than an investment banker and so “only” deserves a paltry 2% fee also, but since the shoe endorser makes it rain every year, let’s say he gets it every year.
At that rate, the endorser could cut out about $1B/yr and still leave plenty of fat on the hog.
But of course, with endorsers, we are talking ‘bout money, not talkin’ 'bout wealth, as Chris Rock used to say.
Well, do you think Andrew would be worth the chump change of $100,000,000, or so, to up that market penetration for Adidas to 20%?
Andrew would be a bloody steal at that price, even just considering the hoopah market, even every flipping year!
And don’t even get me going on the non-hoopah market he might be able to cross over into with the right kind of marketing.
Still, talkin’ ‘bout money, not talkin’ 'bout wealth.
(Note: just haven’ some fun here on a kitchen napkin. Nothing binding here. My numbers could be way off both in the estimates and the calculations. God only knows what real numbers might approximate. But there are some big numbers floating around with an installed user base of hoopahs at anywhere near 300M I reckon.)
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@jaybate 1.0
Adidas total sales for 2013 were under $22B worldwide. Of that total the lion’s share was soccer related gear and again, the majority of those sales were outside the US. The North American Market (includes Canada and Mexico) accounts for about 18% of sales.
When you look at the market, you have to take into consideration that nowadays, half of the potential market is in China, where basketball is now very popular, but 95% percent of that market (or Asia or Latin America) will not sniff Adidas or any other brand name gear and will buy the pirated local brand instead. Latin America accounts for about 8% of Adidas sales and is still larger than China which brings about 6%, Europe brings the bulk of the revenue.
You also have to keep in mind that when it comes to sports worldwide, soccer is king. An endorsement contract with a soccer superstar will be considerably more lucrative for Adidas (worldwide) than one with an unproven ( marketing-wise), fresh out of college American basketball player.
But more importantly, you continue to write about Wiggins and Adidas as it was a done deal. There is nothing that indicates that Adidas has the inside track. Rumors that Adidas made and offer to Wiggins were proven to be patently false and grossly exaggerated, and if he ever had talked to them, he would not be playing at KU. Wiggins will sign with whoever gives him the best deal and it may or may not be Adidas. An up-coming, more US oriented brand such as Under Armor might end up signing Wiggins.
All the big endorsers (Jordan, LeBron, Kobe, Shaq) are extroverted, marketing aware individual that thrive outside the court. Wiggins on the other hand is a very introverted individual, at least at the present time, and does most of his talking on the court. This does not necessarily translate to marketing and sales. Maybe in time he will become more media savvy and his stock will go up. I will guess his endorsement contract will be heavily back loaded with future money based on marketing performance.
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@JayHawkFanToo, nice argument, but it has some basic problems with it.
First, I am not assuming anything about Wiggins relationship with Adidas. I am simply using them as an example, so you were imputing that, not me. Wigs was reputedly once a Nike lean, who then chose to play D1 for a coach and school contracted with Nike. I can certainly see why one might suspect that signals some shift in his leanings, but it doesn’t signal anything definite and I don’t know why anyone would say for certain that it does. Maybe other’s have you thinking about certainties, but not me.
Next, your analysis seems too static. It assumes that there will be no shift away from knock offs in foreign markets and that kind of static assumption has historically tended to be a mistake. As developing societies and markets integrate into the global trading system and become more and more indoctrinated to branding through media, and as contract law slowly, inexorably makes itself increasingly felt in these regions, originals slowly make inroads into the knock off business. So that static assumption will probably not hold water over the next 10-20 years of Andrew’s endorsing life, if he infact becomes a charismatic star capable of pitching products successfully.
Next, you remark on Andrew being introverted, as if that were a done deal. Again, you are looking at things from a static point of view. Michael Jordan was reputedly very introverted and almost monomaniacally focused on basketball in college and very early in his career. It was apparently not until Jordan and his brain trust began to realize there was much more money in branding Michael Jordan the endorser than in playing basketball, that Jordan began to recast himself and devote a lot of hard work to becoming not just Michael Jordan the basketball player, but Michael Jordan, the brand. Andrew Wiggins appears to me to have every bit as much personality as Michael Jordan had at a similar stage. Probably more than some and less than other recent great athletes at the same age. But almost every great athlete I can think of that reaches a level at which becoming a mega endorser becomes a feasible career path to pursue does a ton of work and developing his skills at acting in an endorsement capacity, so, here again, I find your take a victim of its own static assumptions.
Next, you look at the pie chart of where the sales come from and again make a static assumption of percentages by region not changing (or at least not discussing that change) that I think completely mistakes the future trends of sports shoes and apparel sales and market shares and penetrations. Each of the areas that you site as small pie slices-Latin America and Asia–are forecasted to explode the next 10-20 years of Andrew’s potential endorsement career and IMHO potentially exceed Europe and USA combined. So: here again you are thinking statically and in a Western-centric way that appears to prevent you from seeing the drivers that are going to make regional and global market endorsers such incredibly valuable (and rich) individuals down the road. And contracts tend to be a reconciliation of both signatories expectations of the present worth of future net benefits, modified for competitive pressures altering those expectations down stream.
Next, IMHO you completely ignore one of Andrew’s potentially biggest advantages as an endorser. Unlike American athletes, Andrew is a Canadian citizen and so a citizen of the Common Weath of Great Britain, which is a preferred trading block of states with a population of around 1.5 billion persons, if I recall correctly. To my knowledge, Andrew is the first such citizen of that trading block to emerge as a potential basketball superstar capable of being a indigenous conduit to market directly to that trading block. And in an era of regional and global trade being decisive to creating desired economies of scale, being able to appeal to the first or second or third largest economic entity in the world with an endorser that can look in the camera and smile and say, "For the good of the Commonwealth chaps, I think you could do worse than lacing up a pair of these “FILL IN THE BRAND YOU THINK ANDREW WILL SIGN WITH.” [Cut to him slamming on baskets in front of land marks representing as many common wealth members as possible followed by, oh, I dunno, you pick someone, like the Queen, or Prince Harry, or some other legendary athletes from the Common Wealth saying…] “Good show, Andrew, way to posterize it, sir.”
Now, I’m being heavy handed here to make the point. Highly skilled PR and ad agencies would probably do it with way more sophistication and it would be done with a systematic, 10-20 marketing strategy in mind.
The one point I do utterly agree with you on is that the firm/firms that contract with Andrew and hire those that craft this global marketing campaign are NOT going to give him one red cent sooner than they have to. But that is typical of all business dealings. And here is the thing about even that. The global market over the next 10-20 years is going to be so incomprehensibly vast, probably exceeding my POV by an order of magnitude, that individual shoeco brands we recognize are really just small fry front men in the biz now that could be gobbled up, plus other players will likely enter, as global capital investment competes to dress the planet in petroleum.
Now, it would follow that were you to dress the planet in petroleum, then the energy companies would probably become key players sooner or later. Who knows? The energy companies might get into the retail end of it the same way they decide to be in the retail gasoline business through franchises using a shared brand. It is not utterly beyond possibility that you could one day buy a pair of Shell Wiggins shoes, or BP sports apparel. Nothing is written on this. It all depends on many things we cannot now forecast including the extent to which the auto industry shifts to electricity and the heating industry turns to LNG. If both of these industries go that way, then the sunk costs in retailing petroleum could easily dictate using petroleum in ways that largely take over other producer markets (e.g., natural fiber clothing and natural skin shoes could completely be replaced by petroleum shoes and apparel, not just sports shoes and apparel.) In such a world, a product endorser would no longer just be promoting sports shoes and sports apparel, but the really huge global markets of all shoes and clothing for all kinds of wear.
Really, I have no idea if Andrew will probably be the guy that hits the jackpot in this global shoe and apparel endorsement game that is unfolding as surely as you and I are tickling pixels on machines made of materials that largely didn’t even exist 20 years ago (nano particles in our keyboards and screen cases that our nose hairs can’t even filter, you know).
The world is a very, very, VERY big place that is very, very, VERY dynamic and suddenly nonlinear at times when technology is moving rapidly and institutions of international trade have been rewritten extensively of late to “get on with it, chaps.”
Regardless, I am grateful that you took the time to read, and then write about this topic. The game is caught up in this globalization in myriad ways most don’t begin to grasp yet. I know I’ve only thought about this one tiny part of basketball’s globalization, and at that only briefly without analytic resources. It is flipping awesome what could be happening to the game 20 years from now.
But to even begin to get a handle on it one has to begin to think in terms of changing trends and changing underlying relationships that will drive the change.
Andrew might be just a hair too soon.
Or he might never become quite good enough as a player to capture the imagination of the globe.
But someone will.
And it might be him.
Or Joel.
Or someone we don’t know of yet.
Rock Chalk!
(Note: I apologize if I sounded harsh. I did not mean to be harsh and I do not feel anything but gratitude to you for taking the time to think and write about this issue. It is going to take a lot of aliases thinking and writing a lot even to begin to understand it in a meaningful way. I probably made a mistake discussing it in terms of Andrew. Perhaps it would help you and others to think and write about this issue with a hypothetical potential great player named “John Doe.” Either way, the numbers involved are apparently vast and apparently about to expand by orders of magnitude. )
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@jaybate 1.0
I believe the basic difference is that i base my comment on actual numbers, while yours are more wishful thinking, perfect storm, all planets perfectly align type of numbers.
You wrote:
" am not assuming anything about Wiggins relationship with Adidas. I am simply using them as an example, so you were imputing that. Wigs was reputedly once a Nike lean, who then chose to play D1 for a coach and school contracted with Nike. "
Come on Jaybate, as we all know, KU is associated with Adidas not Nike…wasn’t this the whole jest of your write up? And can you provide any factual evidence that players sign with a school based on brand association?
If you read my post, the sale figures I provided were for North America, I even wrote that they included Canada and Mexico, with Mexico quickly becoming a large market with a population over 3 times large than Canada. As far as Wiggins being Canadian and member of the Common Wealth of Great Britain, let me tell you that of all the European countries, Great Britain cares the least about basketball; Spain, Italy, Yugoslavia, Greece, Turkey are all bigger basketball powers and by extension markets. Soccer is king in the Common Wealth even track and field is more popular in England than Basketball. Steve Nash is a Canadian superstar and he has zero marketing value in the Common Wealth. The only member of the Common Wealth that has a healthy basketball following (other than Canada) is Australia and basketball runs way behind soccer and rugby. Even in Canada, the birthplace of Naismith (and Wiggins), basketball runs a distant second to ice hockey.
You also wrote:
" Perhaps it would help you and others to think and write about this issue with a hypothetical potential great player named “John Doe.” Either way, the numbers involved are apparently vast and apparently about to expand by orders of magnitude."
Orders of magnitude? Are you joking? ONE order of magnitude means that Adidas Sales go from $22B to $220B. Not even Pope Francis (most popular person in the world) can create that increase; you can bring Jordan, and LeBron and Tiger Wood and Shaq and even throw in George Foreman to Adidas (assuming they could afford it) and their sales will not increase from $22B to $220B, just cannot happen, There is one athlete that was able to capture the attention of the entire world and that was Mohamed Ali, a boxer and one in generation personality…and he was not much of a marketer/endorser either; although in all fairness, he lived in a different era.
I don’t mean to sound harsh but we are comparing reality with dreamland. Apparently planet Jaybate and planet JayHawkFanToo are light years apart. We will just have to agree to disagree
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I’m throwing in my 2 cents on this multi-billion dollar subject.
IMHO, I believe Adidas has the most-ambition to sign Wiggins. Adidas wants to take the fight, head-to-head, to Nike. The marketing model used to calculate the potential worth of signing Wiggins is being derived off the Air Jordan branch of Nike.
http://en.wikipedia.org/wiki/Air_Jordan
If Adidas can sign Wiggins, and if Wiggins can become the next Jordan, Adidas will brand something like “Fly Wiggins” and build it like Nike built Air Jordan. I couldn’t find a reliable source on sales within the Air Jordan branch, but those are the numbers you want to look at when estimating the worth of a contract with Wiggins.
I’m doubtful you’ll find real numbers out there, and then they won’t include gray and black market profits (which a % is captured by company interests).
Adidas could leapfrog over Nike if all these things fall into place. By then, people will be saying, “Michael who?” Kids buy the shoes and Jordan’s basketball days have long since passed. “Fly Wiggins” will crush “Air Jordan!”
It is time for the successor!
For Nike, they would like to expand sales and reduce their risk by acquiring Wiggins. Nike would use Wiggins to maintain market share, while Adidas would use Wiggins to WIN market share! Big difference. Advantage Adidas!
Dropping $100+ mil on Wiggins is not much of a risk for either of these giants. The risk comes later… if they drop the marketing ball!
Air Jordan is global. I have a worn out pair of Nike’s first use of Jordan on their shoes, preceeding “Air Jordan I”. They are white with black and red and “23” embroidered on them and I was told I could sell them for up to a $1000 to Japanese collectors. They are the real deal and what the “Air Jordan 5 Retro” copied. I don’t know about that price, but I do know all of the Air Jordan stuff is collectable.
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@JayHawkFanToo, sorry but you are sticking to static thinking all the way. Aliases that do this are endlessly surprised by the latest contract that reflects the latest negotiated agreement regarding the present worth of future net benefits, because they are assuming things stay the same, when they tend not to. Yours is a common mistake, but that does not mean you should try to make a virtue of it. The existing numbers, are the past numbers. They mean something only as a point of trending toward an estimate of the coming change. I don’t make the rules of buyer and seller bargaining behavior regarding the present worth of expected future net benefits, I just recognize and take a crack at forecasting them. You will be right only if nothing changes. If nothing were going to change, I would not have even commented and the next superstar would get exactly what Lebron got and that would be that. But it rarely goes that way.
Until you are willing to anticipate the future effects of rising standards of living around the world, plus evolving regionalization and globalization markets plus changes in capital mArkets driving the regime change coming to the producer market of sports shoes and apparel, you are not even talking about even the most basic dynamics that will shape the future of the business that will determine negotiations over the present worth of future benefits. So: as usual, your assertion that I am living in a fantasy world is just the usual projection of one who really is living in a fantasy that the future will be like the past; that the basic dynamics of the past have not changed and that if one buries one’s head deeply enough, one can plow ahead without having to think at all. Sorry, but that doesn’t play with me. In the world I live in businessmen anticipate the present worth of future net benefits and they anticipate what they will be before they do, especially when their market sizes are likely to sky rocket. But if anticipating the past works for you, be my guest and no hard feelings.
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Fellas-would guys you mind if I entertain a tin cup for the needy & the impoverished while the all those B’s are flying about here?
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@jaybate 1.0
You also are clocked by the anonymity of an alias and certainly are not shy about writing at length on any and all subjects.
Look at the past growth and the future growth projections by Adidas own analysts; I challenge you to find one that will predict “one order of magnitude” growth, let alone “orders” of magnitude as you indicated, resulting form one endorser. I will give you the benefit of the doubt and assume that you know what one order of magnitude means. The “order of magnitude” growth model applies only to small business where a firm can grow from $200k to $2M to $20M, but as the size of the business gets larger, it no longer applies; at the level Adidas is, growth is measured in single digits and not orders of magnitude…that is plain crazy
What you are saying is that by signing Wigging Adidas can go from $22 Billion in sales to $220 Billion in sales worldwide. I am sorry but even in their wildest of wild dreams Adidas cannot even imagine that type of growth. It does not make any difference what you factor in, that level of growth due to one individual, or many for that matter, is wholly unrealistic and unprecedented at that level.
I fully understand that you have a propensity for conspiracies and grandiose schemes, but even you have to realize that your projection in this situation are way out of the realm of reality.
I am not saying that Wiggins would not increase sales; depending on how his professional career goes he might well do that, but his influence will be “primarily” in North America and will not be Orders of magnitude worldwide.
As I said, you and I live in different planets on this issue and as I also indicated and out or respect, I will agree to disagree and that is my last word on the subject.
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…I swear them damn shoe whores are getting to be like krap in the pasture…they’re just everywhere!
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…I swear them damn shoe whores are getting to be like krap in the pasture…they’re just everywhere!
I believe I just stepped on one
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There’s one other factor that makes Wiggins very attractive to shoe companies - he’s Canadian, from a family that is athletic royalty in his home country. There is a chance that whichever shoe company signs Wiggins will have every basketball player from Vancouver to Montreal wearing his signature shoe.
Canada has never been a basketball hotbed, but Wiggins could help to change that. His value as a brand in Canada could create huge worldwide revenues for whatever company he picks when the time comes. That’s where the real value comes and that’s why the bidding for Wiggins as a spokesman could get a little crazy.
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@JayHawkFanToo: Thanks for the last word.
I thought you were an authentic believer in static analysis for awhile.
But you lost my trust, when you resorted to the C-word.
JayHawkFanToo AND CONSPIRACY…
forever linked together in my mind.
Not only do I agree to disagree with you, how about we agree never to discuss things again, or refer to each other in our posts? How about it?
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jb and fellow poster/responders, you have set my imagination in motion regarding the huge cha-chings. Considering the current play of a proven NBA superstar, just try to fathom the commercial leverage of January 2014 Kevin Durant! If his business enterprise has operated wisely in the way of open opportunity for contractual commercial expansions, HOLY MOLY!!! (As a side note, when asked point blank which NBA player his future might be most closely akin to, did not Andrew Wiggins squeeze forth the name K D?)
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Did you steal my signature line?
