How sneaker free agency works: An inside look at negotiations

This is part two of a four-part series that gives readers a behind-the-scenes look at shoe deals and the sneaker free agency process, with insight from various NBA agents, sneaker executives and industry experts. You can read part one here.

When an NBA executive and an agent are negotiating an NBA contract, they are restricted by the salary cap and they must follow all of the rules outlined in the Collective Bargaining Agreement. When a sneaker-company executive and an agent are negotiating a shoe deal, there are no such restrictions, which allows both sides to be very creative during the talks.

Nowhere is this creativity more evident than in the incentives that are included in shoe deals. When sneaker deals leak, we often hear that the player will earn “up to” a certain amount. That’s because there are a ton of performance-based bonuses included in most deals, so it’s difficult to project exactly how much money the player will actually take home. 

There are individual incentives for averaging certain stats, leading the NBA in scoring, playing a certain number of games, winning an end-of-season award (such as MVP), making an All-Star team, All-NBA team or All-Rookie team and so on. There are also team-based bonuses for winning a certain number of games, making the playoffs, advancing in the postseason, making it to the NBA Finals, winning a championship (and playing a certain number of minutes), etc. 

According to ESPN’s Nick DePaula, players sometimes earn $300,000 for being selected as an All-Star, $250,000 for winning the dunk contest and $25,000-to-$50,000 for participating in an All-Star Saturday contest. When players are snubbed from the All-Star Game and other honors, part of the reason why they’re often upset is because they are missing out on a lucrative bonus. 

There are also reductions that are negotiated into these deals. For example, it’s common for contracts to have a games-played threshold where the player will actually lose money if they don’t play in a certain number of contests (and 60 games is commonly used). Also, one brand does a threshold bonus where a player can earn a $250,000 bonus if their points per game and rebounds per game add up to 26 or higher, according to DePaula. But if their point average and rebound average add up to fewer than 16, there’s a $250,000 reduction.

Shaquille O’Neal (Photo by Lisa Lake/Getty Images for Reebok)

Interestingly, some companies include a small-market reduction as well. Just as brands give players a bonus for being in a large market (such as Los Angeles or New York), they’ll significantly dock their pay if they land in certain small markets. Players are essentially being fined for ending up in a small-market city, even if it’s not the player’s choice.

“I’ve seen some brands include a 20-percent reduction for landing in certain small markets,” DePaula said. “I know for a fact that one brand had Sacramento and Orlando among others on that list of markets.”

“Yes, that’s definitely a clause that exists in contracts,” one shoe-company executive confirmed on the condition of anonymity. “There are bonuses or reductions based on the player’s market. If the player goes to a major market like New York, Los Angeles, Chicago or Miami, the brand is going to get more exposure. They’ll be playing in more nationally televised games and get more media coverage.”

Keep in mind, this is all up for negotiation, so an agent can push back against a small-market reduction if they don’t want it in the contract.

“It’s a give-and-take,” one NBA agent said. “If you’re going to allow a reduction like that to be put in place, what are you getting in return that makes it worth it to include that? The main reduction incentives that you see in sneaker contracts (and all endorsement contracts) are related to injuries. If a guy isn’t playing, there are opportunities for brands to roll back their pay. There are also moral clauses, where the player’s contract could be affected if the player does something of moral turpitude.”

Sneaker companies often prefer giving a player an incentive-laden deal rather than a large guaranteed salary. 

“Now, a lot of brands don’t want to pay big base salaries,” said AND1’s head of sports marketing Dexter Gordon. “If you sign a guy to a deal with a big base salary and he has a bad season, you’re locked into paying that base salary and you’re like, ‘Ugh.’ If it’s an incentive-laden deal, it’s safer. If the player does well, they’ll make more money and everyone from the brand is happy too.”

Even if a player signs an incentive-laden deal, they’ll still have a base salary of some sort and that must be negotiated as well. While NBA salaries are available to the public, it’s tougher to find out contract details when it comes to endorsement deals. So, how do agents come up with an asking price and ensure that their client is getting a fair deal?

“You try to find what the market is and while it’s not definitive like it is when you’re negotiating an NBA contract, you hear rumors and dig for information to find out what other players were paid,” said a top NBA agent. “You also have to talk to every company. By having conversations with every company as opposed to just one or two, you get a valuation and understand what the market will bear for that particular client.”

“Larger agencies have a clear-cut advantage when determining market values for players,” former NBA agent Matt Babcock said. “They will naturally have a better grip on the marketplace, as they engage in more negotiations with each shoe company due to representing more clients.”

Sometimes, an agent has to think outside the box when trying to sell a brand on their client. 

“If your guy isn’t a star, it’s your job to drum up interest by finding your player’s niche and focusing on that,” one NBA agent said. “Maybe your player is in a market that Nike wants to be in because they don’t have any players on that team. There are also certain guys who fall into a streetwear or cultural-ambassador category, where it’s more about off-court appeal than anything. With those kinds of guys – like PJ Tucker and Nick Young – you approach the negotiations differently. You need to figure out an angle or niche to be able to sell your guy to brands.” 

PJ Tucker of the Houston Rockets (Photo by Bob Levey/Getty Images

In addition to incentives and base salary, agents also negotiate what the player’s product allowance will be, whether they’ll have a signature shoe (and, if so, the royalties associated with that), the company’s charitable support (as some players seek support for their AAU team or camps) and so on. There are other details that need to be ironed out too. Will the player be making any appearances? Will he be in any commercials or activations? Will the player go on an offseason tour to promote the brand (and, if so, will he be going overseas)?

Every agent mentioned that their client’s position and style of play have a significant impact on negotiations and how the player is perceived by the shoe companies. Many big men around the NBA are on merch deals. By now, you’ve probably heard the adage: “Big men can’t sell shoes.”

“I think that’s how a lot of companies think,” AND1’s Gordon said. “When you’re trying to sell to consumers, especially kids, they identify more with guards. Not many kids are going to grow up to be Shaquille O’Neal. But if you have a guy like Stephen Curry or, our guy, Fred VanVleet, a kid can say, ‘Hey, if I work hard, I can become that.’ I mean, Steph Curry looks like a high school kid! (laughs) The consumers we’re targeting can identify more with guards. Also, guards are exciting! A lot of kids don’t see back-to-the-basket bigs as exciting.”

For many years, sneaker companies primarily went after guards. In recent years, unicorns like Giannis Antetokounmpo and Kevin Durant have emerged, so now brands target “perimeter players.” However, with Joel Embiid getting his first signature shoe later this year and Zion Williamson just signing the richest rookie deal since LeBron James, could this be the year that big men prove that they can sell shoes and force companies to update their approach?

“Joel Embiid’s signature sneaker is going to be a really interesting case study because there’s no current center that has a signature shoe, so we’ll see how that does,” DePaula added. “What Joel brings is his ability to go viral on social media whenever he wants. I think there’s some validity to the phrase, ‘Big men can’t sell shoes.’ It is fairly true. We’ll see if Joel can break the mold because, historically, it’s been challenging for them.”

Check out part three of this series, which looks at what happens during the sneaker-free-agency-process, how brands recruit players and more.

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