Cavaliers

Dissecting the Knicks’ Presentation to LeBron

Yesterday, the New York Knicks spent a long time with LeBron James in downtown Cleveland making their case for LeBron to come to New York.  Later in the day, Forbes had some of the slides that the Knicks purportedly used in that presentation.  The quick summary is that the Knicks talked to the mogul in LeBron James.  They talked about international exposure provided in New York.  They talked about some mythical “up to” 15% market premium for playing in New York.  Anyway, without any more intro, here are some of the more interesting nuggets. The slides that Forbes had were created by a bigtime company called InterBrand.  Others (Matt Moore) have discussed this more concisely (and maybe more comically) than I have, but read them later.

InterBrand isn’t an advertising company really.  They work on projects dealing with a company’s brand.  In the case of LeBron James, they spoke almost exclusively of LeBron in terms of the business entity he has created.  In InterBrand’s eyes, LeBron James is a corporation.  InterBrand has a gaudy client list from Applebee’s, Dunkin Donuts, BMW, Holiday Inn, ConAgra, Prozac Eli Lilly, and Stolichnaya.  According to their website, they even helped Microsoft develop the impossibly obnoxious BING name for their re-branded web browser.

The most applicable example is work they did with Juventus football club. And by football, yes, I do mean soccer.

The challenge for Juventus was to make the big shift from a winning club to a true global brand.  Any football club has a clear and obvious mission – to win. So the difference between brands comes from those core values, which bond people around the same flag. Following an all-round audit and research, we focused on the three core values that would distinguish Juventus as a brand – excellence, legacy, and passion.

This kind of language will start to sound familiar.  In one of the first InterBrand slides, they say of LeBron:

LeBron James’ success is eclipsed only by his potential.  Now he has the opportunity to make a move that will help him realize it. We analyzed the drivers of brand value and their impact on LeBron James’ earnings within the four franchises likely to create the most brand value – Miami Heat, Cleveland Cavaliers, Chicago Bulls and New York Knicks.

Interesting things abound.  First of all, I used to make fun of some professors in college who used to read giant overriding themes into extremely subtle details in literature.  Some times college professors try to make things more meaningful and important than they truly are to justify their existence. But, when looking at a presentation put together by a company like this, you can assume they did everything for a reason.  Like the order of the teams.  Their order goes Heat, Cavs, Bulls and Knicks.  Obviously they “saved the best for last.”  On the right of the slide, they have all the team logos and the order is Knicks on top, then Cavs, Bulls and Heat.  In the written form the Heat are again listed furthest away from the Knicks.  Does that mean that the Knicks consider the Heat the leaders in the clubhouse right now?  Also, there is one team missing.  Cross-town rivals New Jersey Nets were not even worth mentioning mostly because many of the same “market” details that are true for the Knicks are also true for the Nets.   Or maybe I am acting too much like my college professors.  Let’s move on.

InterBrand discusses their methodology.  They used 50,000 lifetime scenarios, 200+ variables including championships, all-star appearances, MVPs and more.  They used 20+ historical players’ careers and assumed earnings over 13 years from 2011-2023.  Finally they used four factors driving earnings including player image, market, performance and franchise. These factors were discussed at length.

Player image, while important, can’t put LeBron over the top.  Basketball performance is the single most important factor.  According to InterBrand, “the first championship won can bump immediate non-salary earnings an average of 40%.”  Also, they say “but its power varies by the market he plays in and the franchise he represents.”  In this case, the fact that of all the teams on the list, the Knicks are decidedly in the worst shape roster-wise means that this is actually an argument against the Knicks and in favor of the Cavs, Bulls, and Heat.

But InterBrand’s retort is already in the slide. Under the “Franchise” section, InterBrand states that “aligning with a strong franchise would create a valuable co-branded partnership for James.”  Then they drop the laugher.  “The longer a franchise plays without winning a title, the more value is created for the star player when the win occurs.”

Let that sit for a second.

So, RATHER than use the prime of your career competing every single year for a championship, LeBron.  Why don’t you come to the New York Knicks and build it?  The time wasted in the prime of your career isn’t actually time wasted.  By spending more years in chasing down the championship in New York, the championship will be worth far more!  Forget the risk of injury or the risk that the Knicks won’t be able to put the team together from the ground up around you.  Come to New York and bet on the team that hasn’t really been interesting since John Starks was still in the league.

Of course, I know what you Cavs fans are thinking.  This bullet point actually should work to the Cavs’ favor.  If LeBron already has seven championship-less years built up in Cleveland then the value of a championship for the Cavaliers should be worth decidedly more than a championship in New York.  LeBron has non-championship years stored in the bank in Cleveland.  If he leaves, those “assets” are left here in Cleveland and wasted.

Finally, InterBrand takes all their research and puts it into vague numbers with the New York Knicks representing an impossibly high value proposition.  LeBron’s personal brand value was estimated at maximum and minimum.  Before I spout off these garbage numbers that mean basically nothing at all, let’s finish attacking the prospect of valuing a brand value for a business that creates nothing tangible.  LeBron is a skill set and a personality.  He is a brilliant skill set and some people think a brilliant personality.  But really, that skill set drives the entire bus.

Let’s look at Apple because that is an example of a company that is inextricably tied to one personality, Steve Jobs.  He is the oracle that drives that company.  The company is decidedly better when he is around.  At the same time, even if he got hit by a bus tomorrow and died, the stock wouldn’t drop to zero.  A more applicable example.  Michael Jackson died a year ago and it has been said that he is more valuable dead because he was good at outspending his income when he was alive.  The key here is that there are residual incomes because Michael Jackson produced songs that continue to drive revenue to his estate.  If LeBron got in a car wreck tomorrow and died, his brand value wouldn’t drop to zero, but it would be really close.  The point being that InterBrand and the Knicks are making points based on pie in the sky values of a brand that mean nothing because even if LeBron wanted to, he couldn’t actually sell it.

YouTube was a brand name that had brand value.  That’s why YouTube sold to Google for $1.65 billion.  The Knicks and InterBrand say that LeBron’s brand value as a member of the Knicks could be worth anywhere between $460 million and $1,940 million.  In a maxed out situation, they think LeBron’s brand value can be bigger than YouTube’s actual value, including their brand value at the time that Google acquired it.  Which would you rather purchase with your $2 billion?

Then the whole presentation turns into a bigger mess.  On the next slide, InterBrand refers to the range above as potential earnings, when on a slide previous they called it value.  So, which is it?  There is a difference between earnings and value.  No matter.  Ultimately, InterBrand’s numbers are largely made up estimates used to predict something that is so wholly unpredictable that it doesn’t even matter. The bottom line is this.  The InterBrand presentation pumped up the Knicks, ignored the Nets, and actually probably helped the Cavs.

How? In all their propaganda, InterBrand and the Knicks ended up doing their best to bury the Heat and Bulls.  By attempting to make it a two market race between Cleveland and New York, I think it actually helps the case that LeBron should stay in Cleveland.  The Knicks team has money.  That’s it.  The Knicks almost haven’t been a topic of conversation lately because money became available in Chicago and Miami where those teams have decidedly better rosters.  In fact, I might even argue that if the Knicks did the best they absolutely could have done that they still might have only reinforced LeBron’s desire to go work for the Nets if he is intent on making the move to the New York market.

As Cavs fans we just need to hope that LeBron saw right through this propaganda and is thinking about the things that weren’t in the presentation.  Most notably, LeBron relies on his image for marketability, but how will his image suffer with the likes of Page 6 hounding him all over the various boroughs of NYC?  How will he feel when the media is reporting incessantly on his business partners, girlfriend, mother and kids? What will it do to his marketability to be under a microscope like that?  We have all heard the un-reportable whispers of stories that are only whispers because they happened in Cleveland.  You can argue that the sports media here in Cleveland aren’t doing their jobs, but I look at it as a positive.  Hopefully LeBron does too.