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Maybe it's just a coincidence that the week after basketball player Derrick Rose agreed to re-sign with the Timberwolves, all the D Rose products by Adidas seemed to be marked down at Foot Locker's e-commerce site.
Co-branding with a bench player in an NBA backwater obviously isn't what anyone at Adidas had in mind when locking up the endorsement rights to Rose back in 2012 — a contract that has been regularly reported as worth about $190 million.
That deal now looks just plain foolish.
It still works for Rose, though. To keep millions of dollars in Adidas payments coming for one more year, it seems all he had to do was sign on with an NBA team at the league's minimum salary.
Rose's confidential endorsement deal with Adidas leaked to Sports Illustrated a while ago, so we know Adidas will pay Rose a retainer of $8.5 million this season plus his minimum annual royalty of an additional $6 million. Together that's about six times what the Wolves will be paying him.
Establishing what an athlete's endorsement is worth seems like an art, and in looking back at that contract to see how it went so wrong for Adidas, it could be that the company got it right. The company just had bad luck.
The Adidas 2017 annual report discussed some of the athletes and teams it has signed as part of its global-marketing strategy, including Wolves player Andrew Wiggins. It's an everyday occurrence in Adidas' industry to hire athletes to promote sports shoes and apparel. And the strategy works, at least according to a study some years ago co-authored by a Harvard Business School professor.
Interestingly, both the company and the athlete seemed to enhance their brands by being associated with each other, as winning a championship seems to have a far bigger positive impact on sales of a top-ranked consumer brand than it would on sales of a second-tier brand. And while sales gains decline with each successive championship or All-Star appearance, the endorsement can remain valuable over a long period of time.
For companies like Adidas, how much to pay and for how long aren't easy decisions. Signing up a promising player for a short-term deal is unwise if the athlete goes on to win enough awards and games to become very valuable just as the first contract ends.
Perhaps it's a little like a venture capitalist invests, knowing up front that an athlete could turn out to be a bust while another becomes a spectacular success.
You can see how this worked out in one groundbreaking deal from 2003, as Nike was eager to find more success like it had with basketball star Michael Jordan. In May of that year, reports surfaced that Nike had signed a long-term contract worth about $90 million with a gifted high school kid from Ohio named LeBron James.
Nike wasn't the only bidder, it later turned out. One story that emerged was that Adidas had determined to offer young James the moon and then lost its nerve, allowing Nike to make the deal.
James went on to become King James, both a dominant athlete and a peerless ambassador for the sport of basketball and the Nike brand. A few years ago the company and James entered into what's been called a lifetime deal.
There aren't that many people with the star power of James, of course, but Derrick Rose certainly looked like a solid investment in early 2012. He had already been named the NBA's Most Valuable Player, at age 22. He played in his hometown of Chicago, a big media market.
If his rights were available, Adidas could have tough competition from the likes of Nike.
The contract Rose signed with Adidas covered 14 seasons, expiring when he would be 36 years old. That's getting up there in years for an elite athlete, yet James is now 33 and just agreed to play for the Los Angeles Lakers on a four-year contract.
Adidas' minimum payment to Rose for a season would peak at $17 million, about when he should have been at the top of his game. There were bonuses to be earned as well for things like playing in the All-Star Game and winning an NBA championship.
It's an eye-opening contract, as analyzed by Sports Illustrated. Rose wasn't just obligated to wear Adidas shoes when playing, he had to wear Adidas products when going out in public. That included when he might pop over to a friend's house for a party, and that friend happened to be another celebrity that could attract the attention of the media.
It wasn't long after signing the deal that trouble began, with a knee injury that cost Rose a year of playing time. He suffered another knee injury shortly after his return to regular league play.
Adidas had the right to cut his payments based on his missing so many games, yet according to Sports Illustrated, it seems to have made every payment. It also stuck with him when Rose was sued (unsuccessfully) in civil court for an alleged sexual assault.
No longer a star, Rose later played with other teams before the last one traded for him and then promptly released him. That's how he ended up available for work in Minnesota, first signed by our local team in March.
Last November, while a member of the Cleveland Cavaliers, Rose briefly left the team. A "team source" explained to ESPN that Rose had been emotionally worn down by repeated injuries and was thinking about retiring from the sport.
That would have terminated his Adidas contract.
It's impossible to say whether Rose can survive in the league until 2025 and the scheduled end of his Adidas deal. Playing in the NBA looks like an extremely well-paid grind, with 82 games not counting the playoffs.
His smart financial play is to fulfill every obligation under the shoe contract. If his Adidas shoes don't sell, that's not his problem.
lee.schafer@startribune.com 612-673-4302
