Michael Jordan and CMRR, Committed Monthly Recurring Revenues

AIR JORDAN BREAKS THROUGH TO THE OTHER SIDE

Bruce M Firestone, PhD

I learned recently (mind you from watching an Amazon Prime film, Air, courting a legend starring Matt Damon as Nike sports marketing executive, Sonny Vaccaro, and Viola Davis as Michael Jordan’s mom, Deloris Jordan, a brainiac sports representative) that it was Michael and Deloris who understood what comedian Chris Rock has been saying for a long time, “LeBron James is rich but the MAN who signs his check is wealthy.”

What Chris means is that if you own a franchise of any sort (a fast-food restaurant, a sports team, an apartment building, Microsoft 365, a patent, whatever), you own a factor of production and can (hopefully for you) make money while lying on a beach. This is the Holy Grail of business, all business—developing CMRR, committed monthly recurring revenues.

Deloris got it… big time. She negotiated hard with Sonny and Nike on behalf of her son that, in return for coming over to the Swoosh from rival shoe company Adidas, Mike would get a) a $250,000 per year salary for five years for Michael plus b) a piece of the action… a percentage (I believe around 10%) of gross sales of not only the launch shoe in the Air Jordan line but all shoes ever to be made under this brand.

Deloris was, I believe, the first ever to propose such a contract, which in essence, by providing Michael with a royalty on sales, gave him a return (via direct remuneration) on his intellectual property (his likeness, his incredible feats on the court, his championship rings and so forth). It gave him equity in the business even if he never owned a single share in Nike. Indeed, a royalty on sales (which is simple to calculate and monitor) would be a huge improvement in my view over share ownership. Returns from the latter are often opaque, hard to determine/pin down, and impacted by factors outside Micheal’s control such as exorbitant pay packages for executives of US publicly traded companies.

How do I know it’s 10%? Well, in the above image shot from my TV screening of the film, the Air Jordan line sells around $4 billion for Nike today and in the next image (see below), the movie quotes reports that Michael (21-years after he retired from the NBA) is making $400 million a year from this deal.

Now that’s 1) CMRR, 2) making money while lying on a beach (or golfing, which Michael seems to enjoy more) and c) control over a factor of production for a long time.

I think more people should be looking for more ways to exploit this sort of royalty paradigm (not just sports greats and Hollywood actors) so they can benefit more from their work and their creativity. 

Prof Bruce

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#michael jordan #nba basketball #business models

Feature image source, DOD photo by D. Myles Cullen – http://www.defense.gov/dodcmsshare/newsphoto/2014-04/hires_140417-D-VO565-002c.jpg, Public Domain, https://commons.wikimedia.org/w/index.php?curid=39252469.