The NBA’s central sponsorship portfolio is worth approximately $600m (€533m) in 2019-20, SportBusiness Sponsorship has found, of which about 60 per cent is marketing fees and the remainder is licensing royalties.
Licensing deals typically include a minimum royalty guarantee, and a further split of royalties, but also some degree of sponsorship commitment, particularly in high-profile deals like uniform or ball supplier deals. According to licensing experts, in such deals the marketing fee may sometimes equal or exceed the royalty commitment.
For the more standard licensing deals, where authentic in-game exposure is not part of the equation, the marketing rights commitment is typically about 15-to-25 per cent of the value of the royalty commitment.
Our sponsorship valuations do not include contractually ‘baked-in’ advertising commitments with external broadcasters like TNT and ESPN. These spending commitments are usually, but not always, smaller than the sponsorship commitment.
They do, however, account for advertising on NBA-controlled channels, including NBA TV, NBA.com, the NBA App and NBA League Pass.
The NBA’s biggest marketing partnership is Nike’s $125m-per-year deal as official uniform and apparel supplier for eight years, from 2017-18 to 2024-25. The commitment from Nike to the NBA, is an all-in number, inclusive of royalty guarantees to both the NBA and the National Basketball Players Association, as well as marketing and sponsorship commitments.
Under the deal, Nike gets rights to brand the playing uniform of every NBA team – a new asset that was denied all previous incumbents. Nike is reportedly paying more than double the fee of previous supplier adidas, which made the team uniforms but only held branding rights to team track suits and warm-up gear.
While the league earns more from video game maker 2K Sport – about $157m per year over seven years from 2019 to 2025 – this is largely based on royalty payments of between 10 and 15 per cent of annual game revenue. The marketing component of this deal is thought to be marginal – in the single millions of dollars per year – compared to the overall licensing costs.
Beyond the two major licensing deals, video sharing platform YouTube TV is the highest-spending sponsor, paying between $30m and $35m per season for presenting partner rights to the NBA finals – a new designation – in a multiyear deal from the 2018-19 season.
This season, the NBA added LVMH and New Balance to its roster, as well as a swathe of betting partners, some of which have rights outside the US (see below). A deal with Wilson will see the brand replace Spalding as the NBA’s official ball supplier from the 2021-2022 season. Microsoft will become the NBA’s official AI, cloud and laptop provider starting in 2020-21.
Sports brand Puma and telco AT&T started their first full years as official partners after signing multi-year deals in February. AT&T replaced rival Verizon, which remains an NBA content partner but no longer has sponsorship rights. Brands leaving the NBA roster ahead of the 2019-20 included spirits brand Jack Daniel’s, which came to the end of a two-season deal.
Trouble in China
The fallout of Daryl Morey’s tweets in support of the Hong Kong protests has all but wiped out the NBA’s sponsorship revenue in China, its most important international market.
In the aftermath, 11 Chinese sponsors of NBA China – including Alibaba, Mengniu Dairy and Vivo – suspended ties. At the time of writing, there has been no sponsor re-engagement with the NBA.
Commissioner Adam Silver said in February that losses in China resulting from the dispute would probably amount to “less than $400m”. The relationship crisis will also have affected the NBA’s ability to upsell global rights to existing domestic sponsors in the US. SportBusiness Sponsorship understands the NBA places a similar value on the aggregate Chinese audience as the aggregate US one.
The NBA has sought to restore good relations in China with the appointment of Michael Ma, who replaced Derek Chang as NBA China chief executive in May. Ma, the former chief executive of the Endeavor China agency, is the first chief executive from mainland China to take the top job and will aim to build bridges from the NBA’s Beijing office.
Managing the Covid-19 crisis
Support for the NBA from its sponsors has held up during the Covid-19 pandemic. The NBA suspended the league in mid-March and is preparing for a late-July resumption at one or more central venues later this year, with the Walt Disney World Resort in Orlando, Florida, the most likely location.
SportBusiness Sponsorship understands the NBA is monitoring the resumption of football’s Bundesliga behind closed doors and noting what ‘bumps in the road’, if any, the German league experiences along the way.
For some marketers, spectator-less games on neutral grounds – disrupting the NBA’s home and away model – could actually add value to the NBA’s tech-focused sponsorships.
“Brands we work with like Microsoft, Verizon and SAP are well-positioned to play an enabling role with the NBA as it redefines how the league delivers its viewing experience,” said Kevin McNulty, president and chief marketing officer of Momentum Worldwide. “For example, does it accelerate the application of AI in the viewing experience and with Microsoft Azure as the enabler of that fan-enhanced experience? What a great way for that sponsor to demystify its technology to the masses.”
It’s the teams, rather than the league, that are likely to experience more push back from sponsors. Most of the NBA’s TV-visible inventory is controlled by the league, with local partnerships more reliant on local activations, says Sam Yardley, senior vice-president, consulting, at Two Circles in the US. He added: “Without fans present that value goes away, which is a significant portion of teams’ pitches to potential partners. The ticketing and premium seating rights those clients get are also worthless in a behind-closed-doors scenario.”
The NBA sells a raft of central sponsorship rights on a domestic, region-by-region or global basis, as well as sponsorships connected to its international games via international subsidiaries like NBA China, which are not listed here.
Sponsors are offered a range of assets to associate with, including the NBA, WNBA, NBA G League, NBA Cares – the league’s charity arm – the All-Star Game, the NBA Draft, as well as the NBA’s controlled media channels.
It is thought the league tries to increase the value of each sponsorship deal by five per cent per year.
Its key sponsorship growth strategies in 2020 include capitalising on sports betting and esports, monetising customer data and – for its franchises – maximising revenue from the next round of jersey sponsorships and new international team deals.
New asset expansions
In recent years, the NBA has driven sponsorship revenues through the development of new media or event assets.
At league level this is exemplified by the sale of jersey patch rights for the All-Star game to the official car partner Kia, presenting partner rights to the NBA Final to YouTube TV and title sponsorship of the team-affiliated minor league the NBA G League to sports drink Gatorade.
At club level, the decision to allow franchises to sell jersey patch positions has been a success, generating about $150m per season by 2019-20.
Of the NBA’s 30 teams, only the Oklahoma City Thunder failed to sell the jersey patch property in the first cycle. Twenty out of the 29 team patch sponsors were new to NBA team deals. Franchises are now focused on striking deals in a second round of jersey patch sales.
Capitalizing on sports betting and esports
One of the fastest of the major leagues to respond to federal legalization of sports betting, the NBA opened the category for sponsors on a non-exclusive basis and has since added 17 betting partners around the globe, adding about $48m in seasonal revenue.
Experts say it is important for the NBA to have a proposition in the marketplace to authenticate and authorise sports betting operators, which also act as marketers for the league.
The sports betting operators benefit from a differentiated position relative to their rivals as an official sports betting partner and official data partner of the league.
The league’s first and biggest betting operator deal, struck with casino and resort brand MGM Resorts International in July 2018, was for the US market only and was worth about $24m (€22.1m) over three years, or $8m per year.
The league has also struck authorised NBA betting operator deals for the US market with daily fantasy league brands DraftKings and FanDuel, digital sportsbook operators William Hill and Unibet, online and mobile betting provider Stars Group and mobile sports betting app theScore Bet.
Outside North America, the NBA has made deals with betting operators Tabcorp and BetEasy in Australia, Codere in Mexico and Supermatch in Latin America. Experts value deals in this group in the low-to-mid seven-figure dollars per year.
Profiting from data
SportBusiness Sponsorship understands the NBA has ramped up the size of its Customer Data Strategy group, launched in 2016, to about 30 people over the past 12 months, with the league taking an increasing interest in targeted digital sponsorship activations that require detailed customer data.
The group supports the NBA’s Global Partnerships division, which manages marketing and merchandising partnerships. It also supports the league’s digital content operations and will work with NBA teams as a short-term resource to help with ticket marketing and fan engagement.
In February 2020, the NBA added New Balance to a footwear roster that already included Puma, adidas and Under Armour.
The NBA offers this this category non-exclusively because it allows brands to showcase their shoe endorsers in their playing uniforms on a global scale, thereby promoting NBA players and driving fan engagement with the NBA. Nike, as the league’s official uniform and apparel partner, automatically holds these rights.
League deals in the shoe category tend to follow major player endorsement deals: Puma became an NBA official marketing and footwear partner in February 2019, having re-entered the sport after a 20-year gap via player deals with the Phoenix Suns’ Deandre Ayton and Zhaire Smith, as well as the Sacramento Kings’ Marvin Bagley III. Under Armour signed with the NBA in August 2015 in a deal to promote its NBA athletes, led by Golden State Warriors star Stephen Curry.
The multi-year sponsorship deal with Microsoft, signed in April, will place the technology giant among the biggest-spending brands on the NBA’s roster.
SportBusiness Sponsorship understands from industry sources the deal is worth about $25m per season, starting from 2020-21, and puts Microsoft in the top five NBA sponsors by pure marketing rights spend.
Under the deal, Microsoft takes up a completely new category – as the official artificial intelligence partner – for the NBA, Women’s National Basketball Association (WNBA), NBA G League, and USA Basketball, as well as roles as official cloud and laptop partner.
In terms of Microsoft’s cloud capability, the league will use the Microsoft Azure cloud computing service, having previously used multiple providers, including Azure rival AWS, for various projects across the league.
Sporting goods brand Wilson met a list of requirements that went “beyond the transactional” in its bid to replace rival brand Spalding as the NBA’s ball supplier from July 2021.
According to industry experts, the long-term deal to replace Spalding, the NBA’s ball supplier since 1983, is believed to be worth between $25m (€22.2m) and $35m per year.
Kevin Murphy, general manager of basketball at Wilson Sporting Goods, said Wilson had had to show the NBA how the brand could help grow the sport of basketball for the rights-holder to “make a change of this magnitude”.
He told SportBusiness Sponsorship that the deal emerged from conversations the brand and the NBA had held intermittently over the last 10 years, which accelerated “organically” in the last two years.
About Data Snapshots
Each month, SportBusiness Sponsorship publishes a data snapshot of a key sponsorship market: sharing market intelligence, showing the complete portfolios of the major rights-holders and giving vital context to recent deals.
Over the course of the next six months we will looking in-depth at: MLS, MLB, Tennis, Golf, European football associations and European football leagues.
Check out our archive of past data snapshots.
All the deals included in these snapshots also flow into our global deals database, which has over 28,000 entries across 200+ sports.
How we collect our data
SportBusiness Sponsorship analysts uncover deal data through conversations with rights-holders, brands and agencies. Sponsorship deals carry multiple clauses, bonuses, penalties and non-cash elements. As such our values are necessarily benchmarks that aim to represent VIK as well as cash value.
Exchange Rates used in this snapshot:
$1 = €0.88810