LeBron Inc.
The building of a billion-dollar athlete.
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| Maverick Carter (left), a childhood friend of James's (right), oversees the business empire. |
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| James' endorsements have included (clockwise from top) the LeBrons, a series of action figures; sneakers; and riding mowers. |
(Fortune Magazine) -- It's May 31, 2007, in Auburn Hills, Mich., and the Cleveland Cavaliers, a Cinderella team no one expected to get this far, are down 107 to 104 in the crucial game five of the Eastern Conference finals against the Detroit Pistons when LeBron James launches a fadeaway three-pointer to tie with 1:14 to go in the second overtime. One minute and 12 seconds later he seals the game with a vicious drive down the lane to put his team up 109 to 107.
Those were the two finishing flourishes of a feat that NBC anchor Marv Albert crowed would "go down as one of the all-time performances in NBA history." James's play was stunning and described by another announcer as "Jordanesque": He scored 29 of his team's final 30 points, including the last 25.
Watching the 22-year-old's performance closer than the bookies in Vegas were the executives at Nike, who had shelled out $90 million to James as soon as he'd graduated from high school in hopes of latching onto the NBA's next great superstar, the one who would carry the mantle of Michael Jordan.
"We measure everyone against Michael Jordan at Nike," says Lynn Merritt, the company's senior director of basketball development and the executive who crafted James's sneaker deal - the size of which irked some within Nike (Charts, Fortune 500).
That is, until James's performance against the Pistons. "Game five set me free from any criticism at Nike," Merritt says.
Within the halls of Nike's basketball division at its headquarters in Beaverton, Ore., executives began referring to a whole new era for James and Nike. "AGF" is what they called it: "after game five."
Also watching game five intently, as if it were an IPO for a company they had nurtured from the startup phase, were investment bankers at Allen & Co. and executives at Microsoft.
And here lies the difference between James and nearly every other professional athlete. Together with Maverick Carter, a childhood chum and the de facto CEO of LeBron Inc., James is trying to create a new financial model for the 21st-century athlete.
Instead of just lining up endorsements and cashing checks, James is seeking equity in the companies he works with; and he is using his on-court prowess to build a corporation that deals with entities as disparate as Bubblicious and Warren Buffett.
"What I do on the court will drive revenue," says James. He's also picky about his partners, always asking himself, "Is it authentic? I know I can go out and sign a lot of endorsements and get checks. Money is not the issue."
Little is left to chance: While Jordan serendipitously possessed both the on-court talent and the star power to become a pop culture phenomenon, James currently lacks Jordan's ability to hold his own in a scene with Bugs Bunny (as Jordan did in the movie Space Jam).
Nor does he have the political power or poetic ability of Cassius Clay. He is also playing in the Cleve, no Chicago, and far from the bright lights of big-city media. So Carter and his colleagues are in the brand-building business too.
Beyond these challenges, the risk for LeBron Inc. compared with a traditional company is that it is built on one asset - an asset that could suffer a career-ending injury and one that has yet to make the Air Jordan-type leap from hoops star to global celebrity.
Most superstar athletes conduct their off-the-court business like this: They hire an agent who secures endorsement deals. The athlete shows up at the appointed time and collects checks and usually agrees to a number of "service days," occasions when he will be present for various PR and marketing events.
James began his pro career this way, but in May 2005 - toward the end of his second year in the NBA - he decided to make a change. He fired his agent, Aaron Goodwin, and established his own firm to handle all aspects of his business ventures. He put Carter, 25 - another Akron native, who had worked for Nike - in charge.
"It was my idea. I wanted to own my own business," he says in the first of two exclusive interviews with Fortune. He also wanted to give his friends a chance to create a professional legacy beyond being flunkies and hangers-on: "How do my guys want to be remembered when LeBron James is finished playing basketball?"
As Carter recalls it, he was home in Ohio in May 2005 and visiting LeBron at his house. "He said, 'Mav, you know, my agent and I are just not seeing eye to eye right now. It's not what I want to do. I'm older now, I'm 20 years old, I'll be 21 in December, and I want to kind of do things differently than anyone has ever done them before. Of course, I grew up watching Michael and the way he did it, and he set the roadmap. I want to run my own business. I want to be my own business.'"
So in 2006, James founded LRMR Marketing, so named for the initials of the four buddies: Lebron, Randy Mims, Maverick Carter, and Richard Paul. The only real core competency James's brain trust possessed was loyalty. (In fact, it was James's former agent, Goodwin, who brokered some of James's bigger paydays to date - like his first Cavalier contract, a three-year, $14.5 million deal. He also negotiated the Nike and Coke (Charts, Fortune 500) endorsement contracts.)
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