May 14 (Bloomberg) -- The Knicks need LeBron James. He may not need New York.
James, the two-time defending National Basketball Association Most Valuable Player, is set to be an unrestricted free agent on July 1, when teams such as the Knicks can try to sign the Cleveland Cavaliers’ All-Star.
Yet the lure of the nation’s biggest media and business hub might not be enough to land James, who has said he aspires to join friend Warren Buffett as a billionaire. The Knicks, unlike baseball’s New York Yankees, can’t lure him by paying more than other teams because of the NBA salary cap. He may not need the glitz that New York affords: James is already the league’s top endorser while playing in Cleveland.
“He’s only going to get bigger and better, whether he stays in Cleveland or goes to a different city,” said Doug Shabelman, president of Evanston, Illinois-based Burns Entertainment & Sports Marketing. “With the global economy and the global reach of the Internet and television, the difference isn’t as pronounced as it used to be.”
James is living a hometown dream. He went to St. Vincent-St. Mary High School in Akron, Ohio, about a 40-mile drive from Cleveland, and was drafted by the Cavaliers as the first pick in 2003.
He won the NBA’s Rookie of the Year award, then the MVP the last two seasons. He’s averaged more than 27 points a game, becoming the youngest player to reach 12,000 points, and boosted his global popularity when he co-captained the U.S. men’s team that won a gold medal at the 2008 Olympics in Beijing.
“I’m just a kid from Akron,” James said May 2 at a news conference in his hometown after winning his second MVP award. “This is home for me. I love this place to death. I’m not just carrying myself, but I’m also carrying this city to bigger and better heights.”
With James, the Cavaliers went from a moribund franchise that hadn’t won a playoff series in 1993-2005 to one that’s won at least one postseason series every year since.
The Knicks have been heading in a different direction. The team hasn’t won a postseason series since 2000 and hasn’t even reached the playoffs since 2004. The Knicks have cleared room under the salary cap in preparation for this offseason, when James, six-time All-Star Dwyane Wade and five-time All-Star Chris Bosh head a list of players who may become free agents in July. NBA rules prohibit Donnie Walsh, the Knicks’ president of basketball operations, from commenting on players under contract with other teams.
The NBA announced in April that it projects next season’s salary cap to be about $56.1 million. If that becomes official in July, the Knicks would have about $34 million available to sign not only James, but Wade or Bosh as well. An NBA-maximum contract for those All-Stars would be worth about $16.5 million next season.
Meanwhile, James has been burnishing his own reputation.
At age 25, he was named the world’s second most powerful athlete, trailing only golfer Tiger Woods, in a ranking by Bloomberg BusinessWeek earlier this year.
James landed a $90 million endorsement deal from Nike Inc., the world’s largest maker of athletic shoes, before he even entered the NBA. He also endorses McDonald’s Corp., the world’s biggest restaurant company; Coca-Cola Co., the world’s biggest soft-drink maker, and State Farm Mutual Automobile Insurance Co., the largest U.S. home and auto insurer.
He was listed as making $42.4 million a year by Sports Illustrated in its rundown of highest-paid athletes in July.
James also has moved beyond endorsements. He formed LRMR Marketing with the help of three childhood friends, and bought an ownership stake in bicycle maker Bethel, Connecticut-based Cannondale Corp. He’s sought investment advice from Buffett, the chairman of Berkshire Hathaway Inc., at the lunches they’ve shared the last few years.
He needs to continue to focus on opportunities to make money outside of endorsements to build billionaire-level wealth, and he can do that from Cleveland, said George Belch, a professor of sports marketing and advertising at San Diego State University.
“He doesn’t need to be in New York,” Belch said. “The players who have really made a ton of money have it outside their sports.”
He cited golfer Greg Norman, who moved beyond endorsements into wine, beef and real estate. Woods, the only athlete ever to make $1 billion, according to Forbes magazine, expanded his investments into real estate.
Buffett, whose Berkshire Hathaway posted its highest quarterly revenue in three years on May 10, said in 2009 that James impressed him.
“He talks smarter about business deals than plenty of MBAs I’ve met,” Buffett told NBA-TV, the league’s network. “LeBron always knows that if he wants to pick up the phone and talk to me about anything, I’ll be at the other end.”
On the court, James has been unable to win an NBA championship yet. Michael Jordan, to whom James has drawn comparisons for his play and endorsement potential, won six with the Chicago Bulls. The Cavaliers were eliminated from the playoffs last night with a loss to the Boston Celtics in the Eastern Conference semifinals. James had 27 points, 19 rebounds and 10 assists in the 94-85 loss to Boston, which won the best-of-seven series 4-2.
Leaving the Cavaliers for the Knicks would mean going from the ninth team in NBA history to post consecutive 60-win seasons to a club that has more losses during his seven-year professional career than any other in the league. Even if the Knicks sign another top-level free agent, they might not be as good as the Cavaliers are now, said former NBA player Troy Hudson, the founder of CM2 Sports Management. The Cavaliers went an NBA-best 61-21 this regular season.
Title in Cleveland
“A championship is attainable in Cleveland,” Hudson, whose company helps athletes transition into business, said in a telephone interview. “Going to New York, I think that puts him a little behind in his quest to win a title.”
James thus far has been coy about his future. Earlier this year, he said “winning is more important to me than money at the end of the day.”
Should he sign a new four-year deal with the Cavaliers that’s similar to the one he has, it would be worth about $76 million, including $55 million the first three years. Joining a team other than Cleveland would mean he’d get about $1.2 million less over those three years.
Chances are James will remain in Cleveland, at least according to offshore gambling sites such as Antigua-based Bodog.com, which gives the Cavaliers 2-5 odds of bringing James back. The Knicks are listed at 9-2, second on Bodog’s list of potential destinations, with the Chicago Bulls at 5-1.
“It’s going to be the story of the summer,” Hudson said. “Probably one of the biggest stories in NBA history.”
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