NBA Cuts Michael Jordan’s Shoe-Deal Signing Power; How Will It Affect Nike?

The NBA is putting its foot down.

The shoe industry has been buzzing since news broke, courtesy of ESPN’s Darren Rovell, that the NBA will hinder Charlotte Hornets owner and former Chicago Bulls star player Michael Jordan from choosing which players get Brand Jordan shoe deals.

The news followed the NBA’s decision, announced yesterday, to fine the Los Angeles Clippers $250,000 for violating NBA rules prohibiting teams from offering players unauthorized business or investment opportunities.

“The violation involved a presentation made by the Clippers to free agent DeAndre Jordan on July 2 that improperly included a potential third-party endorsement opportunity for the player,” the NBA said in a release. “While the NBA’s investigation ultimately concluded that the presentation of this opportunity had no impact on Jordan’s decision to re-sign with the Clippers, the team’s conduct nevertheless violated the league’s anti-circumvention rules.”

But the real buzz came when reports added another element to the mix. Not only has the NBA reiterated its anti-circumvention rules, but Rovell tweeted that the NBA said Brand Jordan shoe deals must be decided by an executive other than Michael Jordan.

In the last seven years, six Charlotte Hornets players have received Brand Jordan shoe deals, leading to speculation that Jordan may be supplementing players’ salaries with Brand Jordan endorsements. (The team was formerly known as the Charlotte Bobcats.)

The NBA has clarified, in a statement, that its anti-circumvention rules prohibit teams from, among other things, “providing or arranging for others to provide any form of compensation to a player unless such compensation is included in a player contract or otherwise expressly permitted under the CBA.”

How will the restrictions affect the companies — in this case, Nike and Brand Jordan — that seek to benefit from NBA athlete endorsements?

“This could have an impact [on Nike and Brand Jordan] if key/emerging star players sign deals with other brands,” said B. Riley & Co LLC analyst Jeff Van Sinderen. “Brands worn by star players and favorite athletes sell shoes.”

Brand Jordan controlled more than half of the U.S. basketball shoe market last year. In the first half of 2015, the label continued to dominate athletic shoe sales. Citi Research analyst Kate McShane said Brand Jordan had about 14 percent share of the athletic-footwear market, per data for the most recent week in August — second only to its parent company, Nike, whose share was 48 percent.

It’s hard to say how much of those sales come from athlete endorsements, but NBA stars Carmelo Anthony, Russell Westbrook and Chris Paul are among Brand Jordan’s key endorsers.

While Nike and Brand Jordan aren’t exactly hurting for more star power to add to their rosters, Van Sinderen said the NBA’s reported decision to stop Michael Jordan’s ability to decide shoe deals might help rising athletic-shoe and apparel powerhouses.

“This could help Under Armour to the extent that they are able to sign some of the players prevented from signing with Nike/Jordan,” Van Sinderen said.

For now, fairness issues around product endorsements can be a slippery slope, Van Sinderen noted.

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