Berkshire Hathaway Chairman Warren Buffett and LeBron James seem like an odd couple.
But James’ friendship with the second richest man in the United States tells the story of another side of the Miami Heat superstar. As focused as James has been on his goal of winning NBA championships, he’s just as driven off the court about building a business empire and breaking the billion-dollar mark, an accomplishment golfer Tiger Woods was the first athlete to achieve.
“You have to get to know him,” Buffett said. “LeBron’s not initially really talkative. He’s savvy. He’s smart about financial matters. It’s amazing to me the maturity he exhibits. I know that if I had been famous at that age, I would have had trouble keeping my feet on the ground.”
Those are pretty big compliments coming from Buffett, the world’s leading investment guru, who at 82 could easily be the grandfather of James, 27. Yet the age difference and James’ lack of a college degree haven’t been a barrier to a friendship that includes Buffett providing occasional business advice.
Buffett isn’t the only high-profile executive James counts as a friend. You’ll find him in the company of people as diverse as Microsoft Chief Executive Steve Ballmer, Hollywood producer Tom Werner, Dallas Cowboys owner Jerry Jones and music mogul Jay-Z. It was actually James who introduced Heat owner and Carnival Chief Executive Micky Arison to Ballmer.
At an investment conference a few years ago attended by chief executives from some of the largest Fortune 500 companies, Buffett says his friend James could more than hold his own.
“People were more interested in meeting him than in meeting me,” Buffett said. “He doesn’t need me to introduce him, that’s for sure.”
Coming off the best season of his career, James needs no introduction to corporate America. The NBA’s most valuable player had his pick of endorsement offers and business opportunities as the Heat sets out to defend its championship. The first new deal puts James as a brand ambassador for Samsung’s new cellphone, the Galaxy Note II. Ads featuring James launched during the Heat’s opener this week.
“It’s really LeBron’s world right now,” said Bob Dorfman, executive creative director of Baker Street Advertising in San Francisco and the author of the Sports Marketing Report, who estimates any deals James signs will be a minimum of $1 million a year with a five-year term.
James was the fourth-highest paid athlete in the world last year with an annual income of $53 million — a number that would have been 20 percent higher without the salary cut for the strike-shortened season, according to Forbes. The majority of Lebron’s earnings — $40 million — comes from endorsements and business contracts with a high-profile roster that includes Nike, Coca-Cola and McDonald’s.
The only athletes ranked higher than James on the Forbes list are boxers Floyd Mayweather and Manny Pacquiao, followed by Woods. James edged tennis player Roger Federer and Lakers star Kobe Bryant — previously the NBA’s top earner.
James’ income is clearly on the upswing. Brands like winners, and it doesn’t hurt that James resides in a top media market like Miami. The Samsung deal is the first of what is expected to be a series of new endorsements and business deals.
“I picked Samsung because it’s all about innovating,” James said in a promotional video for the product launch. “That’s what I’ve always been about — doing something that’s different.”
Industry experts see potential opportunities for rounding out James’ endorsement profile in the areas of automobiles, financial services, retail and consumer products or packaged goods.
“He’s arguably the most marketable athlete currently in the U.S. because he brings the most long-term value,” said Robert Tuchman, president of Goviva, a sports and entertainment company. “I don’t think there’s anyone you can compare him to right now … he’s perceived as a really good guy and a winner.”
Before the Samsung deal was finalized, James downplayed any speculation about what he might have in the works.
“I’ve got a lot going on right now,” James said. “I’m not looking for too many new opportunities — unless it’s a good one.”
When it comes to making those decisions, any potential opportunities will be closely scrutinized by James and his team.
“They’ve got to be right for me, my brand and who I am,” James said during training camp.
Crafting the image for his brand is an area where James has taken a personal — and sometimes non-traditional — approach. Toward the end of his second year in the NBA he fired his agent and in 2006 established his own marketing firm. In charge of his business ventures since then has been LRMR Marketing, a moniker drawn from the initials of LeBron James and his three childhood buddies, Randy Mims, Maverick Carter and Richard Paul. At the helm has been Carter, a former Nike employee, in charge of building James’ burgeoning business.
“LeBron has always paid attention to how wealth is created,” said Steve Stoute, a friend of James as well as CEO and co-founder of Translation Advertising, which specializes in the multicultural market. “He understands that it’s not enough to be good on the court and put your money in the hands of somebody. You actively need to participate in the vision of your wealth and what you want to be after basketball.”
Unlike many athletes, James made it clear early on that he prefers equity deals, not just endorsements. One of James’ most heralded deals: the 2011 partnership with Fenway Sports Group that gave him a minority ownership stake in the British soccer club Liverpool.
James’ business ventures include a partnership with American Signature furniture and Beats by Dr. Dre, plus an ownership stake in Cannondale bikes. He’s an investor in two local start-ups: PureBrands, the Boca Raton company that launched Sheets energy strips, and UNKNWN, a lifestyle store in Aventura Mall launched by some of his old Cleveland buddies.
It’s not unusual to see James investing in products he uses himself or views as a void in the market. The Powerbeats earphones grew out of James’ need for a product to withstand his workouts. Sheets offers the natural pick me up James and other athletes seek during games. UNKNWN features a collection of the brands the fashion-conscious James wears himself, plus limited-edition collections of his Nike shoes.
If you happen to luck out, you might find James ringing up customers behind the cash register in Aventura or moving boxes in the store room.
“He’s very hands-on and part of all of our creative decisions,” said Chris Julian, one of the partners in UNKNWN. “That’s what makes him a modern business man.”
As a leader in social media and an icon to fans, all it takes is a tweet from James to send an item flying off the shelves at UNKNWN. With more than six million followers on Twitter and more than 12 million likes on Facebook, James has an impressive reach. That’s why Carmex lip balm signed a partnership deal with James’ personal website.
Industry experts agree that James and others are leading the way in these new business paradigms, much the same way Michael Jordan created the roadmap for athletes in business.
“LeBron knows he’s got the potential to move product, so why not be able to benefit from that in every way you can,” said Scott Becher, managing director of the sports and entertainment practice at Zimmerman Advertising in Fort Lauderdale. “Your upside is dramatically higher when you’ve got skin in the game.”
James’ biggest endorsement deal is with Nike, which signed him to a $90 million contract initially when he entered the NBA, with an extension in 2010 that now pays him more than $10 million a year.
Industry reports estimate James’ McDonald’s deals ring up $4 million a year, while Coca-Cola pays him $16 million over six years to represent Sprite and Powerade. Add to that $6 million from Upper Deck over a five-year span. That doesn’t include deals with State Farm, Dunkin’ Brands in Asia, luxury watch brand Audemars Piguet or the newest deal with Samsung.
James has the top selling shoe and jersey this year. Nike sold $90 million in LeBron shoes wholesale last year, which translates into about $175 million in retail sales, said Matt Powell, an analyst with SportsOneSource. While LeBron’s sales are about double what Bryant sold, they’re still a fraction of the $1 billion Jordan sold last year.
But James is breaking other records with Nike’s launch of the LeBron X this fall, with prices ranging from $180 to $270. At the top range, the LeBron X+ is the most expensive shoe on the market with technology to measure an athlete’s performance.
Brands like Nike are attracted to James because of his global star power.
“We know LeBron is a special talent,” said Brian Strong, a Nike spokesman. “He connects with the consumer.”
Nowhere is that more evident than on the Miami Heat’s recent trip to China. James was mobbed by adoring fans chanting his name like a rock star. This was James’ ninth visit to the country and his second in the last month.
In-between two exhibition games, James crammed in a busy schedule of promotional appearances. On his last day in Shanghai, James posed for pictures with Sprite’s newly designed aluminum can featuring his image. Then he was quickly shuttled across town for an event with Dunkin’ Brands, where he answered questions from kids, engaged in a chopsticks contest and sunk a few baskets.
James’ Dunkin’ deal, which was announced in March, involves his role as a brand ambassador for Dunkin’ Donuts and Baskin-Robbins in China, Taiwan, South Korea and India.
James’ ability to connect with consumers is often most evident when he is interacting with kids like at the Dunkin’ event where 9- and 10-year-olds got to interview their idol. One asked James how he came to be so tall.
“I ate my vegetables when I was a kid,” said James, who is 6-8, 250 pounds.
James, a famously health-conscious eater, now must try to convince kids to eat doughnuts and ice cream. “It’s very exciting for me,” James said. “I have two young boys that love ice cream and doughnuts.”
The success James enjoyed on the court last season has gone a long way toward repairing his marketability, which was damaged in the summer of 2010 after the hyped, televised announcement of his decision to leave Cleveland for Miami as a free agent. Overnight he went from beloved to vilified. Some of that baggage lingers.
James’ Q scores, considered one of the most widely used measures of the consumer appeal of a brand or celebrity, have still not returned to the levels they were before “The Decision.” James’ positive Q score today is 17 — smack in the middle of the pack of sports personalities. That’s down from his peak of 24 in early 2010 but up from 14 after James’ popularity tanked in August 2010. Athletes with the highest Q scores currently are Michael Jordan and NFL quarterbacks Aaron Rodgers and Drew Brees.
“Maybe winning another championship and some positive PR will help,” said Henry Schafer, executive vice president of Q Scores. “Winning isn’t everything when it comes to your public image. A lot has to do with the way you connect to the public. It can take a long time to get back to the lofty heights when you fall.”