Inside the sneaker industry: How NBA shoe deals work

There are 448 players on NBA rosters, and each has his own guaranteed team contract, with varying clauses, incentives and lengths. This of course includes everyone from max stars such as LeBron James to little-known training camp invitees who work their way onto a team's final squad.

In the footwear world, the contracts, terms and clauses are structured by agents in a similar fashion, as players will sign endorsement deals with sneaker brands that tie them together for years at a time. But what are the different types of deals a player can sign, and how much money are we really talking for a typical lottery pick or a regular rotation player?

While team deals with players have been expertly covered through the years, the brand side has been far less public.

To start, there's a common misconception among casual fans that only star players have shoe deals. When I tweeted out last month that Nick Young was signing a new shoe deal with adidas, the first response was, “Why is adidas giving Nick Young his own shoe?”

The truth is, only 10 players currently have their own signature shoe with a U.S.-based brand, but literally every player in the league has some level of relationship with a footwear brand.

From the brands’ perspective, they have an infrastructure in place to begin scouting and interacting with those players early on, and by the time known prospects turn pro after a year or two of college, they've already been scouted for as much as five years. Brands are spending increasingly more money at the high school level, sponsoring schools and AAU teams alike, to get their products worn by the top players, and in turn get access to a relationship with phenoms who’ll soon be pros.

At the Under Armour Elite 24 All-Star Game in 2013, where 24 of the top high school players faced off before their school seasons started, it wasn't hard to see the brands had access to players such as Emmanuel Mudiay and Stanley Johnson, among others. Two summers later, nine players from that game were selected in the first round of the 2015 NBA draft.

While dominant big men can always provide great visibility and brand awareness for a footwear company, it's the perimeter players who'll always matter most. “There's always a focus on the guards and wings that are most exciting,” said Chris Grancio, general manager for adidas basketball, who spearheaded the recent $200 million incentive-laden endorsement for James Harden. “From a focus and mindset standpoint, for sure, we want to be the house of guards.”

That's a sentiment and strategy shared across the industry, as brands, much like teams, are going smaller and looking for the fastest and most electric players who often have the ball in their hands at the game's biggest moments.

Kris Stone, Under Armour's director of pro basketball and the executive who signed league MVP Stephen Curry to the brand, puts it even more bluntly. “We’re not building an NBA starting five,” Stone said. “We’re trying to build excitement around our footwear business as a company.”

With that in mind, it should come as no surprise that the strongest endorsers in the footwear world through the years have consistently been the top guards and wing forwards. Brands have spent their sports marketing dollars accordingly, with some opting for a smaller roster of more strategic and narrow spending, while others look to give out more product-based deals for more overall visibility.

As the longtime dominant brand in the sport over the last two decades, Nike is currently being worn by 68 percent of the league, or 305 players. Adidas has been ramping up its efforts to sign even more players, as its roster currently sits at 70 players, or 15.6 percent. Nike's own Jordan Brand subsidiary has a 6.5 percent representation, while emerging Under Armour has just 3.8 percent. Curry, though, has single-handedly changed the trajectory of Under Armour’s hoops category. Another 5 percent of players are split between China-based brands Anta, Peak and Li-Ning.

What are endorsement contracts like for players of all levels around the league? Here’s a breakdown of the different tiers and details on how NBA shoe deals work.

The “merch” deal
Even players stuck at the end of a team's bench are viewed as worthwhile brand partners who can contribute to a company's overall visibility across the league. These deals are typically done on a year-to-year basis because they depend on the player remaining in the league.

Players looking to make a training camp roster after going undrafted, or players with a less exciting game who find themselves on small-market teams will often take a “merch” – short for merchandise – deal. In turn, a brand will agree to send an allotment of current sneakers to the player for practices and games. At Nike, those shoes began to be known as “Team Bank” sneakers because they're typically a white or black based sneaker with a team's color added in to match. In some cases, a merch deal might call for a set number of total pairs provided to the player for the year, or a product value of anywhere from $5,000 to $10,000 in sneakers.

Just as young players are looking to work their way into a team's rotation and earn more playing time, they're also looking to justify a bump from merch deals to earning some real cash from a brand.

The cash deal
This is where the majority of the league falls. As you can imagine, there's a wide variety in the range of cash given to players. Typically, a rookie will sign a shoe deal with a brand that'll last three or four years. When that rookie shoe deal is up, the brands will most often hold a “match clause.” Much like the NBA's restricted free agency, brands can match any new offer sheet a player agrees to.

While NBA contracts normally run through July 1, the shoe deal end date is often Sept. 30, just before the start of preseason. As a protective measure, brands will often wait until after the draft to sign a player, allowing them to see if a player is landing in a small or large market and get a glimpse at how a player performs in the NBA's summer league. They'll then make an offer accordingly.

D'Angelo Russell and Justise Winslow benefited from being selected by the Los Angeles Lakers and Miami Heat, respectively, in the most recent draft. “Their price went up at that exact second, too,” a source told The Vertical.

The current shoe deal range for a marketable lottery pick can be anywhere from $200,000 to $700,000, with exceptions every so often for what brands consider to be “can't-miss” endorsement stars. The most recent star rookie to enter the league, Andrew Wiggins, agreed to a five-year, $11 million deal with adidas, with a commitment to be one of the key headliners of the Crazy Light franchise right from the jump.

Within those deals, you'll find an array of clauses and performance bonuses that reward a player's on-court contributions. A player might get a simple $25,000 bonus for making the All-Star Weekend's Rising Stars game, and then another bonus of the same amount for making the All-Rookie team.

It's also commonplace for all footwear deals to offer bonuses for honors such as Rookie of the Year, making an All-Star team or reaching the playoffs. A wrinkle starting to become more popular lately are combined stat thresholds, which actually can work against players sometimes. A player might have “18” in mind each night out on the floor, meaning he's hoping for a combined point and rebound total of 18 for the game. Not hitting that mark over the course of a season might cost him a percentage of his overall endorsement cash.

Among the cash deal ranks, a rotation player with little true marketing potential who plays in a “priority market” like LA, Houston, New York or Chicago could look to earn around $150,000 on a shoe deal. A player might be looking at a third of that with a team such as Orlando or Utah. A more impactful starter could earn between $400,000 and $1 million.

For all cash-deal players, they're often offered a combination of pure cash and comped product value. Some players might get $50,000 in cash and another $30,000 in credit to spend at a brand's retail store or online. Star-level players might get a $500,000 offer and $100,000 in product. As you can imagine, there are always horror stories of a fledgling player's cousin or friend logging onto his online account and ordering thousands of dollars in gear.

On top of the cash that's paid out quarterly by sneaker brands to the majority of the league, more than 50 players also receive their own custom “color ways” of a brand's current model, featuring a unique phrase or personal logo on the shoe. Known as “player exclusives,” these PEs can be negotiated into a player’s deal and are awarded to All-Stars like Blake Griffin, DeMarcus Cousins, Jimmy Butler and Kyle Lowry to players such as Randy Foye and O.J. Mayo.

At most brands, there's also a trigger clause that'll reward players with PEs should they make an All-Star team. This allows for awesome situations like Chris Kaman requesting “Air Sasquatch” to be added to his sneakers for several seasons after his lone All-Star appearance in 2010.

While custom PEs, decent cash and a few print ads here and there are all fine, there's one tier reserved for only the game's brightest stars.

The signature sneaker
The signature sneaker deal will forever be the most sought after deal in basketball. It's the signature shoes that are remembered from childhood, and the personalized storytelling and details in the product connect consumers with their favorite player.

Signature shoes are so limited that rarely will a player have them for the first game of his rookie year. You'd have to go back to John Wall's Reebok Zig Slash in 2010 and LeBron's Nike Air Zoom Generation in 2003 for the last two occurrences, which have become even more of a rarity in today's landscape.

Amongst the U.S. brands, there are currently 10 signature athletes across the league: James, Kobe Bryant, Kevin Durant and Kyrie Irving at Nike; Chris Paul, Russell Westbrook and Carmelo Anthony at Jordan Brand; Derrick Rose and Damian Lillard at adidas (Harden’s shoe will launch in 2017); and Curry at Under Armour. Most of them started their careers in PE editions and worked their way into a signature shoe deal.

Other players like Klay Thompson, Dwyane Wade and Tony Parker have their own namesake sneakers with China-based brands, though their shoes are rarely available in stores stateside because brands like Anta, Li-Ning and Peak have struggled to break through domestically.

For all signature players, the deals are as complicated as it gets, with various clauses, incentives and guarantees that can also all be rolled back if certain sales or performance thresholds aren't met.

To start, there are basic rollback clauses for games played. Most guys are expected to play at least 60 of 82 games. Miss too many, and it might cost a couple million. Conversely, some players have MVP bonuses worth a couple million. Across the board, there's also a consistent 5 percent royalty structure for all signature product sold, meaning a player could earn an extra $5 million per year if his overall sales hit $100 million per year. Just last year, James’ overall sales did $340 million.

For all signature athletes, the brand's top designers make sure the shoe is made to the player’s exact specifications and with his own storytelling and detailing. He’s also guaranteed commitments for photo shoots and a marketing budget for campaigns. Some players even have guaranteed social media budgets, a set number of employees dedicated to their business, and, in the case of James, a post-career plan in place.

As players of all levels enter the league, their eventual shoe deal continues to be secondary to team deals, but sneaker contracts have become more lucrative and incentivized. For the top players, a strong shoe deal offers a chance to get more personalized attention, more detailed marketing and a connection to fans and consumers that'll ultimately drive their personal brands throughout their career.