Rider University Lebron James Successful Media Business Analysis Paper How does an individual superstar can build a successful media business, cutting acro

Rider University Lebron James Successful Media Business Analysis Paper How does an individual superstar can build a successful media business, cutting across film, television, and digital platforms?I am attaching the case. Just briefly answer the question using Lebron case. For the exclusive use of A. Chowdhury, 2020.
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OCTOBER 24, 2017
ANITA ELBERSE
LeBron James: Building a Hollywood Empire
The moment the buzzer rang at the end of Game 7 of the 2016 National Basketball Association
(NBA) Finals, Maverick Carter raced onto the floor of the Oracle Arena, the home court of the Golden
State Warriors in Oakland, California, where he clutched his childhood friend and business partner,
basketball superstar LeBron James, who was kneeled down onto the floor, overcome with emotion. It
was June 19, 2016. James’ team, the Cleveland Cavaliers, had just defeated the Warriors to capture the
league’s championship. With this long-awaited victory, an overjoyed James and his teammates finally
brought a title to the Cavaliers—his main reason for returning to the team after famously leaving in
2010—and ended his hometown’s 52-year sports championship drought.
Now a three-time NBA champion, James was one of the greatest players the sport of basketball had
ever seen (see Exhibit 1 for his career highlights). But he was just as impactful off the court, as a
businessman. In 2005, James broke with the conventions in sports business by establishing his own
boutique marketing agency, LRMR, and placing Carter in charge, along with friends Randy Mims and
Richard Paul (the acronym was an amalgamation of the first letters of their first names). Through
LRMR, James engaged in various innovative—and highly lucrative—brand partnerships that often
involved a transfer of equity, including with Beats Electronics, Blaze Pizza, and Samsung (also see
Exhibit 2, 3 and 4). In December 2015, James signed a lifetime endorsement deal with Nike, worth over
$1 billion, putting him well on his way toward becoming the first billionaire playing in the NBA.
In recent years, James and Carter had started to explore new opportunities in the media and
entertainment business. In fact, running the partners’ media businesses—their film and television
production company SpringHill Entertainment as well as their digital sports platform Uninterrupted—
now had become Carter’s primary focus. ”LeBron is much more than a basketball player—he stands
shoulder to shoulder with people like Oprah Winfrey and Jay Z,” said Carter. “We are working on
businesses off the court that build on that.”
In 2015, Carter and James negotiated a first-of-its-kind, three-year agreement with major Hollywood
studio Warner Bros. Entertainment that gave SpringHill Entertainment a first-look movie deal, an
exclusive television deal, significant development resources that also could be used for the creation of
digital content, and space on the studio lot. Later that year, Warner Bros. signed on as a lead investor
in Uninterrupted. Having already produced several successes on their own, including the Starz sitcom
Survivor’s Remorse, the duo hoped that the two deals would position them well for future successes in
the media business. Were Carter and James right to partner with Warner Bros. in this manner? And
with renewal negotiations just around the corner, how could they make the most of the opportunity,
further growing both SpringHill and Uninterrupted?
________________________________________________________________________________________________________________
Professor Anita Elberse prepared this case. Connie Yan and Oliver Band provided valuable research assistance. The case was reviewed and
approved before publication by a company designate. Funding for the development of this case was provided by Harvard Business School, and
not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of
primary data, or illustrations of effective or ineffective management.
Copyright © 2017 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized,
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518-042
LeBron James: Building a Hollywood Empire
The Business of Basketball
The National Basketball Association (NBA) was the world’s premiere professional basketball
league. A total of 30 North American teams were split into a Western and Eastern conference. Each
team played 82 games in the regular season, which ran from late October to mid April. The eight teams
with the best records in each conference subsequently competed in the playoffs, which culminated in
the NBA Finals, a best-of-seven series between the conference champions.
At the start of the 2015-2016 NBA season, 13 teams had yet to win a championship. The Boston
Celtics were the most successful franchise in league history, having won 17 championships. The New
York Knicks were the most valuable franchise with an estimated $3-billion value; the New Orleans
Pelicans were the least at $650 million. The Cleveland Cavaliers, valued at $1.1 billion, ranked 12th. 1
Each NBA team had 15 players on its roster. New players typically entered the league through the
annual draft, in which each team was awarded two selections (or ‘picks’) over two rounds based on
where in the standings they had finished in the previous season. Player ages varied from 19 to 40 years,
with the average age being 27 years. 2 NBA careers lasted an average of four to five years. 3 Salaries were
controlled by a salary cap, set at $70 million for each team during the 2015-2016 season. 4 Rookies
selected in the draft’s first round were paid according to a wage scale. Non-rookie contracts were less
structured—and often much more lucrative. While average player salaries were $4 million during the
2015-2016 season, James made $23 million (see Exhibit 3a).
Superstar Players
The league’s best players could have a decisive impact on their team’s fortunes. Take the Cleveland
Cavaliers: Founded in 1970, the team had never won an NBA championship before the 2015-2016 NBA
season. After drafting James with the first overall pick in the 2003 draft, the Cavaliers made the playoffs
in five successive seasons starting in 2005-2006, and the NBA Finals once. However, the season after
James left in the summer of 2010, the Cavaliers finished with the second-worst record in the NBA. They
also struggled in subsequent seasons, failing to make the playoffs even once. When James returned in
the 2014-2015 season, the Cavaliers promptly reached the NBA Finals again, which they lost to the
Golden State Warriors in six games. In 2016, with James as his team’s undisputed star player, Cleveland
finally managed to win its first NBA title.
Many players were A-list celebrities off the court, attracting brand partners and fans alike. In the
2015-2016 season, James led the league in endorsement deals, making a projected $48 million (see
Exhibit 3b). The Oklahoma City Thunder’s Kevin Durant ranked second, with $36 million; the Los
Angeles Lakers’ Kobe Bryant, the Houston Rockets’ James Harden, and the Chicago Bulls’ Derrick Rose
rounded out the top five. James’ jersey sales were the second highest in the league, behind only the
Golden State Warriors’ Stephen Curry, for the 2015-2016 season. 5 James reigned supreme on social
media: he topped all NBA players on Facebook, Twitter, and Instagram, with a total of 66 million
followers and likes in early 2016; also in the top five were Bryant (with 34 million), Durant (with 29
million), the Miami Heat’s Dwyane Wade (with 22 million), and the New York Knicks’ Carmelo
Anthony (with 16 million). 6
The NBA and the Media
American fans could view regular-season basketball games across two cable television networks:
Turner’s TNT, which had covered the NBA since 1988, and The Walt Disney Company’s ESPN. In
October 2014, both networks had signed on to a new nine-year, $2.6-billion-a-year deal, beginning with
the 2016-2017 season, which saw national regular season games televised on Wednesdays, Thursdays,
Fridays, and Sundays. The annual fee paid by Turner and ESPN was nearly three times as high as the
deal in place at the time. NBA TV, the league’s own network, filled out the remaining schedule with its
2
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LeBron James: Building a Hollywood Empire
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own telecast. Disney’s broadcast television network ABC remained the exclusive network for the NBA
Finals, and shared up to 44 postseason games with ESPN. 7 Game 7 of the 2016 NBA Finals drew nearly
31 million total viewers, ABC’s biggest audience ever for an NBA game. 8
The NBA’s content was also available through a number of digital platforms. ESPN had secured the
rights to live streaming video of regular-season games online. Turner managed the NBA’s digital
assets, including NBA.com (which housed up-to-date information on all player and team profiles, as
well as news, statistics, and video recaps of games) and the NBA mobile app, on behalf of the league. 9
The Business of Hollywood Film and Television
The Hollywood film and television business was dominated by a small number of entertainment
conglomerates, such as 21st Century Fox (with their 20th Century Fox film and television studio),
NBCUniversal (in film with Universal Pictures, and in television with NBCUniversal Television), and
The Walt Disney Company (in film with their The Walt Disney Studios, and in television with ABC
Studios) – and Time Warner.
Time Warner
Time Warner, one of the world’s leading entertainment businesses, made $28 billion in revenues in
2015 (see Exhibit 4 for the company’s financials). Time Warner operated as three separate divisions:
Home Box Office (HBO), Turner, and Warner Bros. Entertainment (Warner Bros.).
Home Box Office. A leading premium pay-television and subscription-video-on-demand
(SVOD) service, HBO and its sister channel Cinemax had over 134 million subscribers worldwide. It
was the most-watched pay service in the U.S., offering original productions including series, films and
miniseries, documentaries, and sports content, as well as Hollywood feature films.
Turner. Turner managed and operated a portfolio of advertising-supported cable networks and
related brands, including CNN, TNT, TBS, Cartoon Network, Turner Sports, and Bleacher Report.
TNT, a basic cable channel, aired films and television series as well as NBA basketball games and PGA
golf games. Acquired in 2012 for $170 million, Bleacher Report was a sports news website that
presented trending topics in sports, including the NBA.
Warner Bros. Entertainment. Warner Bros. was a leading producer of television programming
and filmed entertainment. In an average year, the studio produced and distributed around twenty
films, including several films that were made by its New Line Cinema unit. On the film side, Warner
Bros. had a 14% share of the domestic box office, trailing only Disney and Universal, in 2015. In 2016,
the studio was on track to cross the $3-billion mark at the global box office for the 10th consecutive year.
On the television side, Warner Bros. was one of the industry’s leading suppliers of content for broadcast
and cable networks as well as on-demand platforms. Unlike most other entertainment conglomerates
(such as Disney with ABC, and Universal with NBC), Time Warner did not own a major broadcast
network in the US; the television studio therefore had a wider base of networks that licensed its
programming than most of its rivals.
Deals with Talent
Many of the biggest hits in film and television were created by a relatively small group of the top
actors, directors, producers, and writers. In order to secure their services and a steady stream of new
material, studios tended to sign so-called ‘first-look’ contracts with those stars (or the companies they
owned). These agreements typically provided the creative talent with office space on the studio lot as
well as lucrative overhead payments intended to cover salaries for production staff and other
3
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LeBron James: Building a Hollywood Empire
development expenses, all in exchange for the studio’s first right to produce or distribute any movies
or television series that they developed. In television, studios sometimes sought to sign top talent to
‘exclusive’ or ‘overall’ deals that went one step further: those contracts dictated that any ideas the
talent developed must stay within the studio (i.e., could not be taken to a rival if the studio passed on
the material). Once ideas were picked up by a network and taken into production, the studio funded
the ongoing production costs. All expenses were recoupable against any revenues generated by the
film or series, which the studio in turn shared with its production partner based on an agreed-upon
split.
In 2015, Warner Bros. housed more than three dozen first-look deals, more than any of the other
major studios. Its stable of talent included prominent actors and directors such as Ben Affleck, Matt
Damon, Robert Downey, Jr., and Clint Eastwood (see Exhibit 5 for an overview). In addition, the studio
had a few dozen overall television deals. Writer Chuck Lorre, known for the hit comedies Two and a
Half Men and The Big Bang Theory, was one of the most prominent creatives with an overall deal at the
studio. Producer and writer JJ Abrams, who had created television successes such as Alias and Lost as
well as theatrical blockbusters such as Star Wars: The Force Awakens, also had an overall television deal
at Warner Bros., along with a first-look film deal at Viacom’s Paramount Pictures.
LeBron James
On the Court: The Chosen One
From an early age, it was clear that LeBron Raymone James, born December 30, 1984 in Akron, Ohio,
was destined for athletic superstardom. A starter on the varsity basketball team from day one at St.
Vincent-St. Mary High School, he led the Fighting Irish to three state championship titles—one with
Maverick Carter as team captain. His feats on the court earned James an appearance on the cover of
Sports Illustrated magazine—the first underclass high school basketball player to have that honor.
During James’ four years at high school, many of his basketball games were nationally televised in
order to satisfy the demand of fans and NBA scouts who wanted to watch James play.
With the First Pick… After graduating from high school, James went straight to the NBA. He
was drafted first overall by the Cleveland Cavaliers in the 2003 draft. The first ever NBA Rookie of the
Year for the Cavaliers, James continued to make history for the team. One especially memorable
performance came in Game 5 of the 2007 Eastern Conference finals against the Detroit Pistons in which
he scored 29 of the Cavaliers’ final 30 points. With a little over a minute left in the game already in its
second overtime, James delivered a miraculous three-pointer and another basket seconds before the
clock ran out to seal the game, prompting NBC anchor Marv Albert to proclaim James’ game would
“go down as one of the all-time performances in NBA history.” 10 In 2009, James became the first
Cavalier to win the NBA MVP Award.
The Miami Years. When he became an unrestricted free agent in 2010, an intense competition
emerged among teams hoping to sign James. He eventually disclosed what his next team would be in
a 75-minute special called The Decision, which aired live on ESPN and was watched by 13 million
viewers. (The advertising proceeds were donated to a charity of James’ choice). “I’m going to take my
talents to South Beach and join the Miami Heat,” James declared. Within minutes, many fans viciously
chided James for his decision. Even Cavaliers majority owner Dan Gilbert published a letter to fans on
his team’s website denouncing James’ decision as “selfish” and a “cowardly betrayal.” “He chose the
Heat for all the right reasons,” countered Carter. “He didn’t follow the money. He wanted to chase
championships, and didn’t mind sharing the spotlight with others to do so.”
James’ move helped usher in a new era for the Heat, powered by a partnership with fellow star
players and friends Dwyane Wade and Chris Bosh.’ To unveil what the press came to call the ‘Big
4
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LeBron James: Building a Hollywood Empire
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Three,’ the Miami Heat threw them a welcome party at the Heat’s American Airlines arena where the
trio, introduced as “the three kings,” walked out on stage in a rock concert-like atmosphere, complete
with lasers, bursts of flames and smoke, amid thousands of screaming fans, and spoke of their desire
to win multiple titles. 11 However, the Heat could not live up to the hype in James’ first season in Miami,
in which they lost in the Finals against the Dallas Mavericks. James finally won the championship ring
he so coveted the next year, in 2012. “It took me to go all the way to the top and then rock bottom
basically to realize what I needed to do as a professional athlete and as a person,” said James. 12 He
captured another league title the next year.
Homecoming. Citing a desire to give back to his hometown and be an example for children in
Ohio, James returned to the Cavaliers in 2014. “I’m not promising a championship,” James wrote in an
essay published on sports magazine Sports Illustrated‘s website at the time. “I know how hard that is to
deliver. We’re not ready right now. No way. Of course, I want to win next year, but I’m realistic.” 13
Cleveland fans were delighted to have James back—the Cavaliers sold out of season tickets less than
eight hours after the article was published. 14 Nike put up a new, giant mural across the street from the
Cavaliers’ arena, portraying James wearing a jersey with the word ‘Cleveland’ written across his back.
The Cavaliers prepared for James’ return by forming their own ‘Big Three’—with Kevin Love, traded
from the Minnesota Timberwolves, and top draft pick and rising superstar Kyrie Irving. The approach
paid off in 2016, when they—to the delight of millions of Cleveland fans—won the NBA championship.
“It was everything for him as a basketball player,” said Carter. “But that’s not to say that winning again
isn’t everything—that is now everything all over again.”
Off the Court: LeBron Inc.
Although basketball was his primary focus since his start in the NBA in 2003, James soon established
himself as an effective and innovative businessman as well. At first, he pursued fairly conventional
endorsement deals, even if the amounts he earned were record-breaking: his agent Aaron Goodwin
helped negotiate a $90-million endorsement deal with Nike, believed to be the richest initial shoe
contract ever offered to an athlete at the time, which instantly turned James into one of the country’s
highest-paid sportspeople. He also signed lucrative deals with brands such as Bubblicious and CocaCola. However, James soon shifted to a different approach.
LRMR. In May 2005, toward the end of h…
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