LeBron Inc. (page 2)
The building of a billion-dollar athlete.
Aside from working with his friends, there is additional upside to how James has structured his business. To reduce his tax liability, he formed King James Inc., a holding company, to contract with endorsement partners.
"Some agents I talk with are oblivious to the tax disadvantages of having the player personally contract for the endorsement," says Fred Nance, James's longtime attorney. King James Inc. also pays for much of LeBron's personal expenses, such as security.
A multimillion-dollar star jet-setting with three of his buddies conjures up the hit HBO series Entourage, a comparison the foursome often hears but one they believe undercuts what they are trying to accomplish (although it's hard not to think of Entourage one evening in September when the four of them tumble from a black SUV near Nike's headquarters and amble across the tarmac onto the sneaker giant's Gulfstream V jet for a quick trip to an L.A. magazine photo shoot). And initially the decision to turn the running of his career over to his posse was met with concern by the NBA.
"I first met Maverick after I read that LeBron had fired his agent," says Adam Silver, the deputy commissioner of the NBA. "I was nervous that LeBron was going to be represented by a group of his childhood friends. But before I had a chance to call Maverick, he called me. Shortly into our first meeting I had a sense of relief that LeBron was in good hands."
The arrangement has worked, not least because LRMR has associated itself with top-shelf accountants and lawyers, not to mention Warren Buffett, who dispenses financial advice when asked. "If LeBron were an IPO, I'd buy it," he says.
"I bought them some milk shakes and hamburgers, and we had a good time," Buffett says. "I was amazed at how mature he was, not just physically but in financial matters. At 21, I wasn't remotely as mature as LeBron. Maybe at 51 I wasn't as mature as him."
He says he's advised James and Carter on "personal financial matters" and speaks to them occasionally on the phone. "Neither of them needs my help, but I'm available if they need me," he says.
LeBron Inc. also has on its side Allen & Co., the New York boutique investment bank known for its discreet advice to top media and entertainment moguls. Steve Greenberg, an Allen & Co. partner, first met Carter on Cavaliers owner Dan Gilbert's jet two years ago while flying from New York to Cleveland for the Cavs' season opener.
"He's an exceptional young man," says Greenberg, a former minor league baseball player and son of the Hall of Fame outfielder Hank Greenberg, in a recent interview in an oak-paneled conference room at Allen & Co.'s headquarters in New York. "He was this 23-year-old from Akron, and he said, 'Allen & Co.? Isn't that the firm that has the big conference in Sun Valley every year? How can I get invited to that?' That just blew me away."
In late June this year, 13 days after the Cavaliers were swept by the San Antonio Spurs in the NBA Finals, a time when other athletes might be on a tropical beach decompressing from a long season, James and Carter convened a two-day summit at the University of Akron for executives from the various companies aligned with James - in addition to Nike, they include Coca-Cola, Bubblicious, trading-card company Upper Deck, Microsoft's (Charts, Fortune 500) MSN, and lawn mower maker Cub Cadet.
The night before the powwow, James and his inner circle held a private dinner at the Akron Hilton for a handful of the summit attendees. Mike Krzyzewski, the iconic Duke University hoops coach who worked with the U.S. basketball team over the summer in preparation for next year's Beijing Olympics, was a surprise guest and gave a toast before the steaks arrived: "Over the next two days the focus needs to be on LeBron, not your individual companies."
The next morning Carter addresses about 65 executives in a large seminar room at the university's student center by saying, "With LeBron playing that way, it makes our job easier. Everyone in this room is in it for the long haul with LeBron. It's a ten- to 15- to 20-year thing. He's part of all our legacies in business."
The gathering has the feel of a quarterly corporate brainstorming meeting, with each division - in this case the companies that are endorsement partners with James - giving presentations, followed by breakout sessions on topics with a tilt toward the Beijing Olympics as a platform for expanding the LeBron brand globally. The sessions carry titles such as "China 101: Pop Culture, Media, and Sports," "Brand Globalization," and "LeBron Brand in China."
In fact, China is central to growing the business, as it is for any multinational corporation today. In October the Cavaliers held a portion of the team's training camp in China. Last year 17 of the team's games were broadcast there, and more than 100 million Chinese viewers tuned in for each of the four NBA Finals games in 2007. One Nike executive in attendance summed up the Olympic Games and the company's own efforts in China: "It's really about introducing LeBron to China. He's not Mike, he's not Kobe - this is a new generation." Nike recently introduced a new LeBron sneaker there.
At 22, the age at which most NBA players are just entering the league, James has a four-year headstart when it comes to generating revenue. He's already the NBA's endorsement king, bringing in an estimated $25 million from his various deals this year. That's in addition to his nearly $13 million salary from the Cavaliers.