The Pomp Podcast - #953 Joe Pompliano On How Michael Jordan Made $2.5 BILLION

Episode Date: May 9, 2022

In today's episode, I talk to my brother Joe Pompliano about Michael Jordan's massive empire fueled by the multi-decade cultural success of his Jordan sneaker line. Joe will be providing deep dives on the business of professional sport leagues and athletes weekdays on "The Best Business Show". To see the video of the segment, go to "The Best Business Show: LIVE" YouTube Channel ======================= Choice is a new self-directed IRA product that I'm really excited about. If you are listening to this, you are likely part of the 7.1 million bitcoin owners who have retirement accounts with dollars in them, but not bitcoin. I was in that situation too. Now you can actually buy real Bitcoin in your retirement account. I'm talking about owning your private keys and using tax-advantaged dollars to do it too. Absolute game changer. https://www.retirewithchoice.com/pomp ======================= Imagine coinmarketcap - decentralized. 3X in valuation is 15 billion dollars from the current price. Cryptotoday.com starts at zero, at fair launch on 7th of March. No VC. No pre-sale. Team tokens locked.  For the people, by the people. For decentralized crypto. Visit http://cryptotoday.com and read the whitepaper for the details.

what's up everyone this is anthony pompliano most of you know me as pomp you're listening to the pomp podcast simply the best podcast out there now let's kick this thing off in this episode i talked to my brother joe pompliano all about michael jordan and how he made 2.5 billion dollars we talk about how much money michael jordan earned during his playing career a number of the great business deals that he did and then we also go ahead and talk through exactly what he's probably worth today and where all of his annual income comes from. I really enjoyed this conversation with my brother, and I hope that you enjoy it as well. Before we get into this episode, though, I first want to talk about our sponsors.

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Again, go to CryptoToday.com to learn more. All right, let's get in this episode. I hope you guys enjoyed this one. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

Joe, what's up? What's going on? How are you? Good. Yeah? Yeah. Are you ready to do this? let's do it all right what are you going to teach us today we're going to talk about michael jordan

all right goat goat yeah is he the greatest of all time uh probably i don't you know there's an argument but uh probably yes and uh but he's also an incredible businessman all right he turned 94 million dollars in salary into two and a half billion dollars net worth today so he got paid 94 million throughout his entire playing career salary so we'll run through it but he he is the richest athlete of all time. It's got the highest net worth of any athlete in history. Uh, and most people don't know this, but it's really been through two business deals, two business deals in particular. He's done a bunch of them, but two of them have really, uh, made up probably 95% of that net worth. So the story is that Michael Jordan was an incredible college basketball player,

right? He went to UNC. Uh, he won a national championship there. He was the national player of the year. He was drafted third overall, I believe in 1984, uh, that draft pick. And he he went to the Chicago Bulls. So he was paid well. Players weren't paid though, what they are today back then. So throughout his entire career, we have a chart here that pulls up his estimated earnings. And he made between 550K to $4 million for 13 years out of the 15 years he played. So if you look at the chart between 1996 and 1998, there was two outliers there, right? He made $30 million and then $33 million. Everything else is between 500K and $4 million. So there was a loophole that the chicago bulls were able to exploit there that allowed them to pay him uh more and probably

closer to his fair market value but relatively speaking 94 million dollars is a lot of money of course uh but but relatively speaking he was underpaid compared to other players so for example scotty pippen uh played a few years less than michael jordan was his teammate and ended up making more than him during his career scotty pippen got paid more money than michael jordan as a salary yeah that's a wild stat throughout his entire career i mean he's not the only one there's like 100 i mean salaries have changed of course now but there's probably 150 200 nba players that have now made more than michael jordan yeah but his own teammate that played in the same era is yeah i mean he switched teams and whatever but yes during his same era he played less years than

michael jordan actually did and he made more money so he was relatively underpaid just kind of how the contracts worked out and whatever made 93 million dollars a lot of money of course but but underpaid and the reason why he's been able to turn that into 2.5 billion when people who haven't made or who have made much more than him weren't able to do that is through two deals so i think most people know about nike by now the main kind of summary of it yeah and well the main summary of the story with his with him and nike is that uh he wanted to wear converse or adidas out of college so he wore converse in college dean smith was the coach at unc at the time he was getting paid about ten thousand dollars a year by converse to have his players wear converse okay there was

no nil back then dean smith is getting paid 10k to tell his players to wear converse okay so as the coach unc converse is paying him to tell the players so he wore converse in college all the UNC players did when he graduated he wanted to go to Adidas he's like I love the three stripes supposedly and Adidas didn't want him though they had just done a change of ownership one of the previous owners had passed away and they were kind of going through some things uh and they didn't want to do any of the business deals so Adidas said no so they went to Converse Converse offered them essentially what amounted to like a hundred thousand dollars per year which was on par with all the other players were making Michael uh uh Magic Johnson Magic Johnson sorry yeah and all

other guys converse had all of them and they were paying them roughly all the same they offered the same exact deal to michael jordan michael jordan asked them reportedly uh what are you going to do with me that's different and then i know we're going to treat you just like everyone else and they thought that was a compliment right for a rookie coming in the league yeah we're going to treat you just like magic johnson everyone else he didn't like that of course being michael jordan uh and told the agent no go back to adidas like let's find a way to make that work agent told them dude adidas is not happening not going to happen whatever nike uh nike was becoming popular around this time period in the 1980s, but they were actually going through some

financial trouble. They had just reported their first quarterly loss ever, and they were losing market share to some of the other companies. So they were kind of hitting this growth plateau at the time, and they were looking for big name athletes. The way Nike made its brand where they were basically just going out and throwing piles of money at all these athletes to sponsor their products. So they were looking to do that with Michael Jordan too. Jordan wasn't interested essentially at first. His agent told him, dude, get on the plane, go visit the campus. He said, no his mom supposedly said get on the plane go he went they offered him five times as much money so 500k a year uh over five years so two and a half million dollars which was roughly equivalent

to his nba contract at the time and much more than any other nba player was making to be the face of nike basketball essentially and now nike basketball is non-existent at the time so uh it was kind of like an outlier today offering a big contract to someone and you just don't really know but they gave him the ability to um to build his own brand they were like hey we're going to build clothing. We're going to build all this other merchandise and you're really going to have the Jordan brand. It wasn't that at first, but that's what they detailed they would get to eventually. So he ends up accepting the deal, which was an outlier given everyone else's contract. And I think the story is that Nike, so they did the Air Jordan 1, which was the first version of

his shoe. And I think they believed that it would sell. He had to sell, I think it was a million dollars. Yeah, they estimated that it would bring in $3 million in sales over the first three years. So a million dollars a year for the first three years they wanted it to sell. And there was clauses in the contract where if he didn't get it, maybe they broke the deal. If they did get it, maybe they increased the money. And instead of $3 million over three years, he did $125 million in year one. Wait, what? Yeah, literally $125 million in the first year.

The shoe just blew up. I mean, he was very, very good, obviously. But there's a story that the shoe was banned by the NBA. Nike said wear it anyways because of the colors, and they paid the fine for every game. So it became kind of like this cultural thing. but then he just became a star right so he blew up and he ends up renegotiating that deal with nike eventually where today he gets five percent royalty on all jordan brand sales so right off the top of revenue he gets five percent of every single dollar spent plus or minus yeah on everything

for the jordan brand itself yeah that is a wild number yeah and you're ready for this yeah they did 4.7 billion dollars of sales last year he got 150 million dollars of money from nike last year holy shit he hasn't played in decades and he's still the most the highest paid player in basketball literally jordan durant all these guys he makes way more than them and we have a chart here actually the signature shoes where it shows how much he made this is a few years old at this point i think it's it's 2020 but so jordan from nike from the jordan brand made 130 million dollars that year the next closest was lebron who made 32 million then 26 2016 etc so he makes you know a multiple five times or so more than lebron or duran or anyone else even though he hasn't played

in in years yeah it's all because of the revenue and the deal he was able to negotiate off of that well it also became a cultural thing right so they have the retro ones it's a whole brand now they do golf they do everything now and that's actually what's really exploded it so if you uh we have another chart here that shows his his annual income over time from forbes it's kind of this uh uh it shows like this peak in a valley right so the first bump is when he retired and then it goes up because basically what nike did is they started accelerating the jordan brand and now they're doing at first they did this whole thing where they were limiting the quantity of goods out there through a scarcity model and now they're allowing all of it out there and you can

see it's just blown up he went from making about 40 million dollars or 35 million dollars a year after retirement now he's making close to 150 or 160 million dollars a year absolutely insane and the majority of that income is now coming through his nike deal right he he doesn't necessarily earn cash flow from a bunch of other things it's really just the nike deal but that has awarded him hundreds of millions of dollars in cash and probably billions of dollars of cash at this point. But the second best business deal he probably did was the NBA team, right? So he acquired the, uh, what were the Charlotte Bobcats at the time and now the Charlotte Hornets in 2010, he paid Bob Johnson who previously on the team, $180 million for 97% of the franchise,

2010, 180, 180 in 2010, uh, for, for 97% of the franchise. And anyone who ever has ever seen a chart and i think we have it also but franchise valuations blew up yeah and the media and the media rights were the main reason for that the nba negotiated these media rights over the last decade that have really tremendously increased the value of these franchises so if you look at 2010 he paid like 100 it was 180 at the time so well below what they actually had had evaluated at he comes in and now the franchise is worth 1.6 billion dollars wow 10 almost 10 times his money in the span of a decade essentially so that that compromises the most of his of the other amount of income on his net worth he sold a part of it at a at a slightly lower valuation probably 1.4

1.5 a few years ago he still is the majority owner of the team though and the the the team's valuation has increased dramatically yeah and the idea here is that they're only going to continue to increase over time because the media rights will continue to get larger and larger uh the sport becomes more global in nature and uh there's this like weird synergy uh between as the nba becomes more popular michael jordan becomes more popular michael jordan becomes more popular the shoes become more popular and he just keeps just baking yeah well nike too if you look at so yes i agree with that there's a few different things i think when it comes to nike like that amount of money is only going to get bigger they've really just now started to press the gas a little bit on

actually expanding that product line so they used to literally just do shoes then maybe they were doing a little bit of clothing now they're expanding to ancillary categories right now they're making women's clothing now they're making golf clothing they're starting to sponsor college football teams they're starting to sponsor pro golfers etc so i think uh his percentage is fixed So as that business continues to grow, his annual income is going to continue to grow. And then I think the other thing to look at is, yeah, the NBA team. The NBA team I don't think has hit anywhere near its ceiling when it comes to evaluation perspective. There's a bunch of things in my mind, and I've talked about this plenty, of things that I think are going to propel evaluation higher.

And a lot of that revolves around a few things in particular. One is streaming rights. So I think that the NBA has drastically increased. I know they've drastically increased their media rights over the last decade or two. but ultimately linear television the only thing holding it together is sports is live sports if you look at the broadcast ratings last year 95 out of the top 100 most viewed broadcasts of last year on cable tv were live sports so sports are the only thing holding this up and maybe some news along with it but ultimately what we're going to see is as that starts to decline and

less people have cable and more streaming services come up they're going to start paying a lot more money so if the if the supply is fixed and the demand increases the price of these assets are going to continue to rise. I think that's important. And then I think sports betting is another massive, uh, massive tailwind that, that are going to propel these valuations higher. We haven't even hit, I don't even know if 10%, 15% of what we'll see from like a total dollar amount. And these leagues and these individual teams are going to benefit tremendously from that. Yeah. Uh, and Jordan just continues to pull in 5% of all Jordan brand sales as income. And then he's got the team, which really is equity value more so

than anything else. Just a little bit of financial performance. Uh, has he done anything else that you're just like wow this is like bonkers uh that he's bought or owns so he he's got a lot of other stuff going on he has uh equity and a bunch of tech companies he owns a part of an esports team he owns a liquor company a tequila company um he owns a couple auto dealerships uh he had a small stake in the miami marlins i don't know if he he bought it with derrick jeter when when derrick jeter bought in derrick jeter sold his so i don't know if that included his um but he had some exposure to major league baseball and then he actually joined draft king's board of directors oh really so i don't know if he uh because of his basketball prowess

or his uh gambling uh experience probably a little bit of both like this guy is a perfect marketing uh tool for us but yeah i mean he's got connections in the nba right he's obviously a big brand he can help from like a strategic standpoint also so i think when it comes down to that like he'll make plenty of money on other stuff too just because of who he is and the brand that he's built but ultimately like to have two deals alone that make you billions of dollars from your career now when you look back on it they say his net worth is two and a half billion dollars it's probably ultimately more than that given what he's done with nike and what the team has done also in his equity ownership in there but he made 94 million dollars that's less than five percent

of his total net worth now came from nba earnings that's crazy well he also pioneered this whole idea of while you're playing build the brand get the brand to then set up the businesses own either uh revenue streams off of the businesses or own the equity of the businesses and then uh when you're done playing you used your your playing career really is just like a launch pad for your businesses and he you know probably more so than anyone else uh did that to perfection there's you know Shaq and some and Magic Johnson etc they own a lot of like franchises and other things and maybe their star power in the leagues helped them get access to that or or strike special deals but nobody I don't think did it like he did maybe like Greg Norman right in golf or something but

nowhere near the scale at which jordan has done yeah i think he's probably the blueprint for from a licensing perspective for sure because if you think about back in the day too this was this didn't happen right they were all doing essentially cash endorsement deals you would go sponsor gatorade would pay you some cash uh you know any of these brands coca-cola whatever they would pay you money to basically go advertise and let them use your name image and likeness in commercials and that's really what it was and that's what he did a lot at first too but then he got this deal with nike and nike really it benefited both them tremendously right nike blew up in and kind of brand value and attention from when they first signed the deal with Jordan. And it's propelled

their basketball division. Now it's the most important basketball division in the world for any company. So you see plenty of players wearing Nike shoes, sure, but Jordan shoes in particular during the NBA season, it's obviously a big youth movement. But the other thing to think about too, is like, this isn't even necessarily just about basketball performance anymore, right? To your point, he's built an incredible brand because the actual basketball shoes are a very small percentage of Nike's overall sales, right? It's the clothing, it's the ancillary businesses that they've been able to build off of the Jordan brand that aren't necessarily performance related right there's only so many basketball shoes you can sell it's really everything that comes off of

that and they've turned his line into this kind of cultural movement where everyone wants the retro shoes everyone wants all the older stuff uh and it's really different from anything else out there today all right I got two questions that we got to go first is uh yo Mars was it the shoes right I mean that's iconic commercial not only were the shoes a huge part of this but also just the way that they marketed the way that they built him into a cultural uh phenomena was was a huge piece of why he's so successful yeah for sure all right second thing is where can we send people to find you on the internet you can uh go to the newsletter read huddle up.com every morning monday through friday newsletter goes out on a sports business topic read huddle up.com and then

uh the podcast the joe pomp show on apple spotify youtube etc go check it out all right and then uh before uh we have john come in here uh what what is going to be your criteria for finding topics because i just learned a lot of stuff like the wildest thing you just told us was that scotty pippen played less seasons but made more in lifetime earnings than jordan what is going to be the criteria for the topics you pick to come in and uh teach us if i think it's interesting i'll share it all right i like that i feel like a lot of people are interested in things i'm interested in too you know sports is that because they're interested in things you're interested in or is it because you're interested in things they're interested in both oh so you're calling

I feel like there's a lot of similar interests, you know? Like, people want to hear about exactly the stat you just mentioned. They want to hear about how he gets a 5% royalty. I'm sure a lot of people don't know that. Yeah, I didn't know that. Exactly. So if I find it interesting, I'll share it. All right, that's fine.

That's, oh, John wants you to talk about Jordan's baseball career. We don't need to say anything about that. That tells you all you need to know. Hey, it's all right. It's fine. All right, thanks for coming to do this. We'll see you tomorrow. Sounds good.

Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you're subscribed on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to pompscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week

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