In 2001, I saw Lebron James play in high school, and I remember telling myself, “that is the next Michael Jordan.” Of course, I meant this from a basketball standpoint, but you can’t refer to Michael Jordan without refering to his brand. MJ’s brand is one of the most prolific in sports, and its longevity continues to impress. It turned out that Lebron lived up to my basketball potential billing. The brand of Lebron James has not disappointed either. He recently partnered with McDonald’s, effectively creating relationships between his brand and three of the 100 most powerful brands in the world, as reported by Millward Brown. (McDonalds, Coca-Cola, and Nike).
I became more acutely interested in the way that Lebron James manages his brand after reading a press release today from Home Furnishings Business about a brand license deal that Lebron James recently struck with American Signature, Inc., of the the nation’s largest furniture retailers and manufacturers. I was directed to Lebron James’ brand marketing company, LRMR Marketing.
I had known about LRMR Marketing for some time. It was started by Lebron and two of his best friends with one giant asset already on the roster to use as leverage: the brand of Lebron James. Capitalizing on the value of this brand, the company has entered into numerous outsourcing licensing deals with a certain focused initiative that most celebrity athletes don’t exercise to full potential. The business model, without reading further, may seem very Jerry McGuire-ish and written off as just another talent agency or sports agency. But after following Lebron’s business moves over the past few years and studying the deals that have been made, it appears that LRMR, and Lebron James, understands the potential in using intellectual property and trademark branding as a business asset to create a profit center with little operating cost.
On LRMR’s website, an informational piece caught my eye under the heading “The Methodology”, which read: ”To create partnerships that are greater than the sum of their parts.” At first glance, this seems like a glaze-over tag line. But in reality, this is exactly what the focus of a trademark or brand license should be. The licensee (American Signature, Inc.) desires to create a competitive advantage which cannot be attained with the resources currently owned or used, and so it seeks to create the advantage through the use of a trademark which creates inherent market demand. The licensor, LRMR, seeks to monetize its intangible asset, the Lebron James brand, without having to spend to manufacture or produce its own products using the brand. The brand license, therefore, creates a business partnership between the entities, the result of which is economically greater than the sum of each entity’s respective assets doing business separately. Below the line just mentioned is the following line: “Strategically construct integrated programs that will leverage the assets of both parties.” Exactly. (Should Lebron James be in the IAM 250?)
The company names its “approach” to brand management “Open Architecture”. As the firm states on its site, “Creativity is born from Communication.” After reading further about the services offered, and researching the deals struck by LRMR, it seems to me that there is not a far stretch in equating their “Open Architecture” approach in brand management to “Open Innovation” in the patent and software management space.
“Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology.” (Chesbrough, H.W. , 2003, Open Innovation: The new imperative for creating and profiting from technology. Boston: Harvard Business School Press, p. xxiv) In essence, companies are better served by sharing and transfering assets and resources to fit needs, rather than relying solely on internal research. In the brand management space, LRMR’s “Open Architecture” approach seems to emphasize leveraging intangible assets to fit gaps needed by other companies that recognize that it is economically more efficient to license those already valuable brands rather than attempt to create them.
Along these lines, it is apparent that sports and celebrity brand management benefits, and is benefitted by, many industries and markets. To the extent that brand managers such as LRMR seek to exploit brands and brand marks as assets through licensing opportunities and open innovation platforms, instead of as a talent agency, these brand assets will be utilized more closely to their full potential (See Lebron James).
(Added after publication as an afterthought): As one added benefit to brand licensing in the sports brand management context, the risk of dilution is not as great. Lebron James is a brand, but the value of that brand is completely contingent on two things: (1) his basketball credentials, and (2) his personal credentials. The value has not been built on products which use his name (at least not to a great extent). Therefore, in determining the value of a Lebron James brand license, the potential for diluting the value of the Lebron James brand because of an inferior product is not great. With that said, to the extent LRMR chooses quality products and brands to partner with the Lebron James brand, it can only increase the Lebron James brand value.