Like most people, I was shocked by the news of Under Armour ending its relationship with Steph Curry. The two had really become synonymous.
But, after some reflection, I should not have been surprised at all.
UA is still in full turnaround mode. This split can be seen strictly as a cost saving measure. The $20 endorsement contract plus all the resources needed for product development and marketing with only a $100 million dollar yield made this necessary.
We can expect other contract terminations from UA, as they need further cost savings.
The Curry deal was always a vanity project for UA. Curry never produced significant sales. I would argue that Curry, while a great athlete, was never really marketable to the key demographic for basketball shoe sales: teen males.
Couple that with UA’s failure to capture teen males for its other products and you have a recipe for disaster. UA will always be a non-factor in footwear until they admit they don’t appeal to teen males and take the corrective steps to address that fatal deficiency.
Taking a larger view, NBA endorsement contacts are a waste of money, especially in terms of merchandise sales. I would argue that no NBA player earns out their endorsement contract in terms of merchandise sales. Yes—these athletes sometimes bring much more than merchandise sales, but financially these deals are a huge loss. Markelle Fultz, anyone? Zion Willimason? James Harden?
The performance basketball shoe business remains marginal in US (not so in China). The fashion spinner is on Performance running right now and likely will be for some time. Making big marketing investments in a category that is sideways in not a smart move.
I would love to see UA exit basketball altogether, as well as no-profit, opening price point categories like cleated footwear. UA would well served to focus on running and training as they try to find their way as a footwear brand.
What’s next for Curry? Some have speculated he’ll go it alone. Running a shoe brand, particularly one that only generates $100 million is very challenging and unprofitable. I doubt if the brand can ever be of scale.
Could another brand pick up this deal? Maybe, but as indicated above, there is really no profit or significant revenue in NBA endorsement deals. This especially applies to a player near the end of his career. I expect the Chinese brands will be the most likely candidates. UA never really marketed Curry effectively in China.
The split of Curry and UA is an important lesson for the industry. Just signing a great player is not a recipe for success. There are many other options for leveraging marketing investments than signing NBA athletes.
Matt Powell & Walt Shepard
