#953 Joe Pompliano On How Michael Jordan Made $2.5 BILLION

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.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  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 talk to my brother, Joe Pompliano, all about Michael Jordan and how he made $2.5 billion. 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. This episode is brought to you by BlockFi. BlockFi provides financial advice for crypto

• 0:47Anthony Pompliano?

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• 1:29Anthony Pompliano?

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• 2:12Anthony Pompliano?

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• 2:55Anthony Pompliano?

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• 3:37Anthony Pompliano?

  Cryptotoday.com started out at $0 as the first decentralized token information site. You can read the white paper at cryptotoday.com. Again, go to cryptotoday.com to learn more. All right, let's get in this episode. I hope you guys enjoy this one.

• 3:52Speaker 01

  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.

• 4:15Anthony Pompliano?

  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 gonna teach us today? We're gonna talk about Michael Jordan. All right, GOAT. Yeah. Is he the greatest of all time? Probably, you know, there's an argument, but probably yes. And but he's also an incredible businessman. All right. He turned $94 million in salary into $2.5 billion net worth today. So he got paid 94 million throughout his entire playing career salary? So we'll run through it, but he is the richest athlete of all time. He's got the highest net worth of any athlete in history. 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 made up probably 95% of that net worth.

• 5:01Anthony Pompliano?

  So the story is that Michael Jordan was an incredible college basketball player, right? He went to UNC, he won a national championship there. He was the national player of the year. He was drafted third overall, I believe in 1984, that draft pick. And 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.

• 5:43Anthony Pompliano?

  So there was a loophole that the Chicago Bulls were able to exploit there that allowed them to pay him more and probably closer to his fair market value. But relatively speaking, $94 million is a lot of money, of course. But but relatively speaking, he was underpaid compared to other players. So for example, Scottie Pippen played a few years less than Michael Jordan, was his teammate, and ended up making more than him during his career. Scottie 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 a crazy. 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.

• 6:27Anthony Pompliano?

  So he was relatively underpaid, just kind of how the contracts worked out and whatever. Made $93 million, 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. Heard of it. Yeah, and well, the 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 $10,000 a year by Converse to have his players wear Converse. Okay. There was no NIL back then. Yeah, 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.

• 7:12Anthony Pompliano?

  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. 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 $100,000 per year, which was on par with all the other players were making. Michael uh uh. Magic Johnson. Magic Johnson, sorry, yeah, and all the 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.

• 7:56Anthony Pompliano?

  And told the agent, no, go back to Adidas, like, let's find a way to make that work. Agent told him, 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.

• 8:41Anthony Pompliano?

  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 beat. Face of Nike basketball essentially and Nike basketball was non-existent at the time. So 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 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 one, 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.

• 9:23Anthony Pompliano?

  Yeah, they estimated that 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, there's a story that this 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 5% royalty on all Jordan brand sales.

• 10:04Anthony Pompliano?

  So right off the top of revenue, he gets 5% of every single dollar spent. Plus or minus, yeah. Yeah, on everything for the Jordan brand itself. Yeah. That is a wild number. Yeah, and you ready for this? Yeah. They did $4.7 billion of sales last year. He got $150 million of money from Nike last year.

• 10:27Anthony Pompliano?

  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 that year. The next closest was LeBron, who made 32 million, then 26, 20, 16, etc. So he makes, you know, a multiple, five times or so more than LeBron or Durant or anyone else, even though he hasn't played in years. 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. 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, we have another chart here that shows his, his annual income over time from Forbes.

• 11:12Anthony Pompliano?

  It's kind of this, 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 or $35 million 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, 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?

• 11:56Anthony Pompliano?

  So he acquired the, uh, what were the Charlotte Bobcats at the time, now the Charlotte Hornets. In 2010, he paid Bob Johnson, who previously owned the team, $180 million for 97% of the franchise. 2010, 180? Yep. 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. And the media, and the media rights were the main reason for that. The, 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 a valued 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.

• 12:41Anthony Pompliano?

  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. The sport becomes more global in nature and, uh, there's this like weird synergy. 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.

• 13:24Anthony Pompliano?

  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 his percentage is fixed, right? So that 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 the valuation 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

• 14:08Anthony Pompliano?

  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, massive tailwind 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.

• 14:51Anthony Pompliano?

  Yeah. 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. Has he done anything else that you're just like, wow, this is like bonkers that he's bought or owns? So he's got a lot of other stuff going on. He has equity in a bunch of tech companies. He owns a part of an esports team. He owns a liquor company, a tequila company. He owns a couple of auto dealers. He had a small stake in the Miami Marlins. I don't know if he, he, he bought it with Derek Jeter. When, when Derek Jeter bought in, Derek Jeter sold his, so I don't know if that included his. But he had some exposure to the major league baseball and then he actually joined DraftKings Board of Directors. Oh, really? So I don't know if he. Because of his basketball prowess or his gambling experience?

• 15:36Anthony Pompliano?

  Probably a little bit of both. Like this guy is a perfect marketing 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 5% 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.

• 16:18Anthony Pompliano?

  Own either revenue streams off of the businesses or own the equity of the businesses. And then when you're done playing, you use your, your playing career really is just like a launchpad for your businesses. And he, you know, probably more so than anyone else, 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. Cause if you think about back in the day too, this was, this didn't happen, right?

• 17:01Anthony Pompliano?

  They were all doing essentially cash endorsement deals. You would go sponsor, Gatorade would pay you some cash. 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 of them tremendously, right? Nike blew up in, in 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.

• 17:46Anthony Pompliano?

  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 and it's really different from anything else out there today. All right. I got two questions that we've got to go. First is, Yo Mars, was it the shoes?

• 18:11Anthony Pompliano?

  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 phenomenon 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 go to the newsletter, readhuddleup.com every morning, Monday through Friday. Newsletter goes out on a sports business topic, readhuddleup.com and then the podcast, The Joe Pomp Show on Apple, Spotify, YouTube, et cetera. Go check it out. All right. And then before we have John come in here, what is going to be your criteria for finding topics? Cause I just learned a lot of stuff. Like the wildest thing you just told us was that Scottie Pippen played less seasons,

• 18:52Anthony Pompliano?

  but made more in lifetime earnings than Jordan. What is going to be the criteria for the topics you pick to come in and 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 yourself. 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. Thing about that, that tells you all you need to do. Hey, it's all right. It's fine. All right. Thanks for coming to do this. We'll see you tomorrow. Sounds good.

• 19:38Anthony Pompliano?

  Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe 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 time period. Go to pompscryptocourse.com to learn more and I'll meet you guys for the next episode.