9 - 5 0 9- 0 5 0

REV: M ARCH 9, 2010

A N I TA E L B E R S E

JEFF MCCALL

LeBron James
Picture it. Michael Jordan (his hero) and Penny Hardaway (his full-court predecessor) made love and sprouted
this beatific embryo, then gave it to Kobe [Bryant], who tucked it in his Armani pocket, nestled and incubated it,
and when it hatched, the progeny was longer and stronger, and it had more tattoos than its parents, a bigger
smile. Love me, market me. You will do both. Love and marketing will, through me, become inextricable.

— Esquire describing LeBron James, one of the magazine’s

“75 Most Influential People of the 21st Century”1

In late 2008, Maverick Carter, the chief executive officer of LRMR, was preparing for a meeting with
his childhood friend and business partner, the superstar basketball player LeBron James, to discuss
three videogame endorsement opportunities.

A so-called “small forward” for the Cleveland Cavaliers, James was one of the biggest superstars in
the history of the National Basketball Association (NBA). He had been among the world’s most
watched athletes since his high-school days in nearby Akron, Ohio, and famously appeared on the
cover of the magazine Sports Illustrated before he had even graduated. Since then, James had set
numerous basketball records, had been named Rookie of the Year, had led his team to the playoffs
three times and to the NBA Finals in 2007, and had won a gold medal at the 2008 Summer Olympics.

Increasingly, James’ moves off the basketball court also captured attention. In May 2005, toward the
end of his second year in the NBA, the then 20-year-old James fired his agent Aaron Goodwin, who
represented various professional basketball players. Among other contracts, Goodwin had helped
negotiate a $90 million endorsement partnership with Nike, believed to be the richest initial shoe
contract ever offered to an athlete, which instantly turned James into one of the country’s highest-paid
sportspeople (see Exhibit 1). To the astonishment of many sports-industry insiders, James did not
switch to another agent; instead, he established his own firm to handle all aspects of his business
ventures and marketing activities – and he put Carter, then 23, in charge, along with fellow friends
Randy Mims and Richard Paul. They called their firm LRMR, “L” for LeBron, “R” for Randy, “M” for
Maverick, and “R” for Richard.

“I first met LeBron at my eighth birthday party,” said Carter. “He was five, and his stepfather was
friends with my mother.” Carter and James had been friends ever since. Carter later coached James’
Amateur Athletic Union (AAU) summer league team. After graduating from Western Michigan
University, Carter worked for sports apparel firm Nike when James’ superstardom started to take
shape – when “LeBron turned into LeBron,” as Carter put it. “I was sitting at LeBron’s kitchen table

1 “LeBron James’s Magnum-Sized, Ultrashiny, Nike-powered Lawn Mower to the Next Century,” Esquire, October 2008, 165-176.
________________________________________________________________________________________________________________

Professor Anita Elberse and Jeff McCall (MBA 2008) prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are
not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.

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This document is authorized for use by Tony Li, from 08/14/2023 to 12/05/2023
in the course: BBA MKT 340: Marketing Management - Andrews (Fall 2023), Emory University.
Any unauthorized use or reproduction of this document is strictly prohibited.
509-050 LeBron James

when he told me he was firing his agent,” Carter said. “I saw it as a situation in which a friend needed
help. I said yes immediately.” He added: “I always felt he should take more control. Things needed to
be done the right way. And LeBron is a true entrepreneur – this is the right fit.”

It took the four friends one-and-a-half years to establish LRMR, and assemble a team of experts
around them – a publicist, an accountant, an agent for contract negotiations, a PR person, and a lawyer.
Their vision for LRMR was to pursue a new model of sports marketing, as Carter explained:

We have an office here in Cleveland in a big building owned by IMG which pioneered the current
sports marketing model. But the old model is a salesman’s approach. They would sell LeBron like they
would sell mattresses! They go like ‘We have six slots for endorsement deals – hurry up before we run
out.’ Consumers figure this out. They know it isn’t real. It should be about the person behind the brand.
Selling something is just a transaction. We want partnerships.

Carter saw great potential in the person LeBron James, and felt confident in LRMR’s ability to
achieve the company’s stated objective of turning him into a global icon as well as helping James
become basketball’s first billionaire:

LeBron is the third biggest athlete in the world, after Tiger Woods and David Beckham. They are
bigger than what they actually do on the field. [Rap mogul] Jay-Z is bigger than [pop singer] Rihanna
because of what he does, even though Rihanna’s latest album sold many more copies. When Anna
Wintour, the editor of [fashion magazine] Vogue, called to say that they wanted LeBron on the cover,
I knew he had reached that stage, too. He is bigger than what he does.

Opportunities in Videogames
As Carter walked past a bigger-than-life portrait of James in LRMR’s hallway on his way to his
business partner’s office, he contemplated the most immediate decision that lay ahead.

As of late 2008, James had entered various lucrative endorsement deals, but had not made any
agreements in the videogame market. Videogame consoles had gained a foothold in the U.S.: over 13
million units had been sold of Nintendo’s Wii system, Microsoft’s Xbox 360 had an installed base of
just under 12 million units, and Sony’s PlayStation 3 had distributed just under 6 million units, not to
mention the millions of PlayStation 2 consoles that were still being used. Moreover, software sales
were strong: the Xbox 360 had sold about 94 million units of software, compared to 73 million units for
the Wii and another 31 million units for the PlayStation 3.2 Sports games were often among the
bestselling titles.

Three Options
LRMR had received three unsolicited, exclusive videogame endorsement offers.

Electronic Arts The first offer came from Electronic Arts (EA), a powerhouse in the world of
videogame development, publishing, and distribution. The company was on course to generate
revenues of $4.7 billion in 2008. It had several videogame titles that revolved around basketball,
particularly the popular NBA Live, NCAA Basketball, and NBA Street series, which were available for
each of the popular game-console platforms. Individual games typically sold for around $50.

The company’s flagship basketball series, NBA Live, reflected the teams and players competing in
the NBA League in a given year. EA was seeking to sign James to be the cover athlete for the upcoming

2 Gamedaily.com, “Wii U.S. Installed Base Now Leads Xbox 360 by Almost 2 Million,” November 14 2008.

This document is authorized for use by Tony Li, from 08/14/2023 to 12/05/2023
in the course: BBA MKT 340: Marketing Management - Andrews (Fall 2023), Emory University.
Any unauthorized use or reproduction of this document is strictly prohibited.
LeBron James 509-050

installment. The game itself would not be altered. EA’s other sports games featured stars such as Brett
Favre (the Madden American Football series),3 Tiger Woods (Tiger Woods PGA Tour), and Ronaldinho
(FIFA soccer). EA was prepared to offer James a two-year contract, and pay him $400,000 for the first
year and $300,000 for the second year. LRMR had good reason to believe that this was a substantially
higher offer than EA had made to cover athletes of past games. In return, EA expected James to make
himself available for two days to shoot commercials and other kinds of promotional materials, as well
as to participate in two media appearances designed to promote the game.

“Being on the cover of an Electronic Arts game is great exposure,” said Carter. “LeBron’s face will
be in millions of homes around the country. EA is the biggest videogame developer in the world, and
being selected as the cover athlete is an honor. But do we want his face on the cover of a game we don’t
own or get a portion of?”

2K Games 2K Games was a videogame publishing subsidiary of Take-Two Interactive (which

also owned Rockstar Games that was known for its bestselling Grand Theft Auto series). Take-Two
generated close to $100 million in 2007; EA had attempted but failed to acquire the company for $2
billion in early 2008. Created in 2005, 2K Games had released several sports games under its 2K Sports
label, including All-Pro Football 2K, Major League Baseball 2K, NHL 2K – and the basketball series NBA
2K, the most highly acclaimed basketball videogame and 2K Games’ anchor sports title. It also retailed
for around $50 and was available for all major console platforms.

2K Games was asking James to become its signature athlete for the NBA 2K game. It had offered a
two-year contract that stipulated an up-front payment of $300,000 for year one and $350,000 for year
two. If the game sold more than 4 million units in its first two years, it agreed to extend its deal with a
third year for another $400,000. In addition, 2K Games had offered to pay bonuses at various sales
targets:

• In year one, if the game sold more than 2 million units, James would receive a payment of
$500,000; if the game sold more than 2.5 million units, he would get an additional $250,000;
and if the game sold more than 3 million units, he would gain an extra $750,000, leading to a
total bonus payment of $1.5 million if sales exceeded 3 million units.
• In year two, the same amounts were paid at slightly higher thresholds: James would receive
$500,000 at 2.25 million units, another $250,000 at 2.75 million units, and another $750,000 at
3.25 million units.
• If one of James’ sponsors incorporated the game in a national marketing campaign (if, for
instance, LeBron could be seen playing the game in a commercial for Nike), he received a one-
time payment of $50,000.
• For each in-game advertiser that James brought in that paid more than $400,000 to 2K Games
for an affiliation with the game, he received another $50,000.

In return, 2K Games asked James to participate in a one-day “motion capture” session used to collect
material (such as dialogue, movements, and expressions) for use in the production of the game, a one-
day shoot for a television commercial, a day of PR and media commitments, and several shorter
brainstorming sessions, interviews, PR sessions, and appearances at marketing events.

“There is no question that 2K makes the best game for basketball fans, and getting a reward for
reaching certain sales targets certainly is attractive” said Carter, who also liked the fact that the

3 The Madden series consistently ranked among the top-selling games each year, and was estimated to have sold 1.87 million units on the
Xbox 360 platform alone in 2008 (NPD Group, Press Release, January 15, 2009).

This document is authorized for use by Tony Li, from 08/14/2023 to 12/05/2023
in the course: BBA MKT 340: Marketing Management - Andrews (Fall 2023), Emory University.
Any unauthorized use or reproduction of this document is strictly prohibited.
509-050 LeBron James

publisher sought to work with the athlete and his sponsors. “But we need to consider LeBron’s time
commitment.”

Microsoft Xbox Live Microsoft played a significant role in the gaming industry through its
Xbox gaming platform. It marketed its own Xbox 360 gaming consoles and had created and operated
Xbox Live, an online multiplayer gaming and digital media delivery service introduced in 2002. The
service had an estimated 15 million users. Customers were required to pay a yearly fee of around $50
for full access. Individual downloadable games sold via its Xbox Live Arcade marketplace were
technologically less complex than those developed for consoles and usually varied in price from $5 to
$15; some original titles had several hundred thousand downloads.

Microsoft was keen to develop and market a downloadable Xbox Live game that revolved around
LeBron James. It had offered him a guaranteed $250,000 advance to a revenue-sharing deal in which
James could earn up to 20% of the game’s revenues: if the game generated less than $1.5 million in
revenues, James would earn 10% of sales; if it made between $1.5 million and $3 million in revenues,
he would get 12.5% of sales, and if the game racked up more than $3 million in revenues, James would
collect 20% of sales.

James’ team could be heavily involved in the development of the game, which did not necessarily
have to be a basketball game. “It can be any kind of game ‘produced by LeBron James,’” clarified Carter.
James and LRMR would have control over when the game would be released and how it would be
promoted. “This deal allows for a lot of flexibility. We can make it into whatever we want it to be, but
it will take a longer time and more work to put together,” said Carter.

What Was The Right Decision?

As he made his way to James’ corner office, Carter wondered what the best option was. “The LeBron
brand is all about having fun,” he said, “so there is a great fit with the videogame category, but that
also makes the decision all the more important.” What was the best option?

Exhibit 1 The 20 Highest-Paid American Athletes in 2008

2008 2007
Rank Rank Athlete Sport Salary/Winnings Endorsements Total

1 1 Tiger Woods Golf $22,902,706 $105,000,000 $127,902,706

2 3 Phil Mickelson Golf $ 9,372,685 $ 53,000,000 $ 62,372,685
3 6 LeBron James Basketball $12,455,000 $ 28,000,000 $ 40,455,000
4 21 Floyd Mayweather Jr. Boxing $20,000,000 $ 20,250,000 $ 40,250,000
5 5 Kobe Bryant Basketball $19,490,625 $ 16,000,000 $ 35,490,625
6 4 Shaquille O’Neal Basketball $20,000,000 $ 15,000,000 $ 35,000,000
7 11 Alex Rodriguez Baseball $29,000,000 $ 6,000,000 $ 35,000,000
8 7 Kevin Garnett Basketball $22,000,000 $ 9,000,000 $ 31,000,000
9 12 Peyton Manning Football $17,500,000 $ 13,000,000 $ 30,500,000
10 8 Derek Jeter Baseball $22,000,000 $ 8,000,000 $ 30,000,000
11 10 Dale Earnhardt Jr. Auto Racing $ 5,221,970 $ 22,000,000 $ 27,221,970
12 11 Allen Iverson Basketball $20,109,375 $ 7,000,000 $ 27,109,375
13 NR Kevin Durant Basketball $ 4,300,000 $ 21,650,000 $ 25,950,000
14 16 Jeff Gordon Auto Racing $10,926,687 $ 15,000,000 $ 25,926,687
15 NR Ben Roethlisberger Football $22,700,000 $ 2,500,000 $ 25,200,000
16 40 Dwyane Wade Basketball $13,041,250 $ 12,000,000 $ 25,041,250
17 13 Tracy McGrady Basketball $19,014,187 $ 6,000,000 $ 25,014,187
18 NR Carmelo Anthony Basketball $13,041,250 $ 9,500,000 $ 22,541,250
19 18 Tim Duncan Basketball $19,014,187 $ 3,500,000 $ 22,514,187
20 20 Manny Ramirez Baseball $20,000,000 $ 2,500,000 $ 22,500,000

Source: Excerpted from Sports Illustrated, “The Fortunate 50,” June 3, 2008.

This document is authorized for use by Tony Li, from 08/14/2023 to 12/05/2023
in the course: BBA MKT 340: Marketing Management - Andrews (Fall 2023), Emory University.
Any unauthorized use or reproduction of this document is strictly prohibited.