Michael Jordan‘s name is everywhere right now. And in particular his sneaker deal with Nike. Thanks to the movie AIR the story about MJ and Nike is getting the attention it deserves. But did you know that his agent David Falk was so eager for cash, it cost MJ a whopping $31.5 in royalties in just his rookie year? How so you ask? Well, Falk wanted more cash than a percentage cut. Costly decision.
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We all know how valuable MJ is to Nike. And the other way around two. The two shaped each other. Today, MJ is synonymous with the game of basketball and Nike is the world’s most prominent sports brand. But when Michael first signed for them, they were nowhere.
They didn’t have any footprint in the sportswear market whatsoever. Adidas and Converse ruled the basketball sneaker industry. Jordan’s signing was the sign that Nike is going all-in. They gave Jordan the largest deal in sports history at the time. A $2.5 million payout over 5 years. While it was significant then, in hindsight, Jordan would have wanted lesser in cash.
How David Falk’s eagerness and insistence might have cost Michael Jordan $31.5 million
In Michael Jordan: The Life, the book details how animated the discussions surrounding MJ’s deal were. He was guaranteed $500,000 per year and %25 in royalties. But it could have been much more,
Sonny Vaccaro told Roland Lazenby, the author of the book, the following:
“David wanted more cash upfront. In 1984, there was no guarantee any of these shoes were going to sell.”
The deal was that each time an Air Jordan shoe sold, Michael himself would get 25% of the sales. He helped a great deal with shoe sales. In fact, Nike’s modest targets were obliterated thoroughly. And the whole deal seemed bad when we look back at it.
Nike sold over $126 million in the first year alone. Jordan as a Rookie made $31.5 million. Of course, this is just our estimations based on the numbers that we have available in public records. It is also worth noting that thanks to David Falk’s instance for taking more cash, Jordan missed out on a whopping 50% of royalties from the sale of each shoe!
Yes, so MJ would have made $31.5 million more! Ahh, the cruel irony of hindsight. They say it is 20-20. We are sure Jordan might rue that decision. But he hasn’t done so bad for himself.
Michael Jordan’s deal still fetches him $230 million a year!
Thanks to various alterations in deals over the years, MJ no longer makes 25% in royalties over shoe sales. He makes roughly 5% each year now. But even that lowly number is enough to fetch him a cool $230 million a year.
Far more money than any deal in the history of sports. As an athlete, no one can even come close to his wealth. MJ is a billionaire, worth a cool $2 billion. For a kid from North Carolina to do that, is unprecedented.
But, of course, if we look at the hypotheticals it is worth noting that if the deal had the structure Sonny Vaccaro and Phil Knight were willing to give, Michael would have made far more. Perhaps even double the $230 million he made this year. David Falk himself must be cursing.
