Reebok nets Yao in endorsement pact

The deal marks the first time the Canton company won an endorsement battle against archrival Nike Inc. Though Nike signed Yao in 1999 to a $200,000 contract when he played in China's pro basketball league, the agreement expired last year, Yao's rookie NBA season, igniting a fierce competition among Nike, Reebok, and Adidas-Salomon AG.

"Reebok is becoming more of a threat to Nike in basketball than it ever has been," said Marc Ganis, the president of Sportscorp Ltd., a sports consulting firm in Chicago.

Reebok yesterday also posted its strongest quarterly financial performance in six years, driven by gains in sales of brand-name sneakers and clothing. Sales rose 14 percent to $1.04 billion and third-quarter net income climbed 19 percent to $63 million, or 96 cents a share.

But Reebok's move to sign Yao is risky because other big centers haven't worked out well as endorsers. Even if Yao fails to sell shoes in the United States, analysts said, he could give Reebok a large leg up in the potentially enormous and fast-growing Chinese market.

Reebok officials wouldn't disclose what the company will pay Yao. But a Reebok executive confirmed that in terms of base salary the offers from Nike and Reebok were comparable, rivaling those of other top NBA players such as LeBron James's seven-year $90 million deal with Nike. James is this year's top draft pick.

The Yao deal could also entitle him to royalties on sales of Reebok and NBA-licensed products in China, the Reebok executive confirmed. That could make the seven-year deal one of the most lucrative shoe contracts in history, rivaling the $20 million a year Michael Jordan collected at the height of his endorsement deal with Nike.

Basketball is the second most popular sport in China, behind soccer. NBA games are broadcast live several times a week, people huddle around TVs to watch Yao play, and roughly 260 million people play basketball in China. Shoe companies sell $500 million worth of sneakers a year in China, which is expected to grow to $1.5 billion by 2008, Reebok said.

"People know Yao Ming in the US," said Bob McGee, the editor of Sporting Goods Intelligence. "But in China, Yao Ming is an icon."

Some sports marketing specialists question how effective Yao will be in selling shoes in the United States, however. For starters, Nike is formidable. Shoe companies sold nearly $8 billion of sneakers in the United States last year, and Nike owns nearly 40 percent of that market. At 12 percent, Reebok is a distant second. Nike is even more dominant in basketball, the second-largest category behind running.

While Yao's size works for him on the court, it may work against him in the marketplace, said Paul Swangard, director of the University of Oregon's Warsaw Sports Marketing Center. Conventional wisdom is that big guys don't move shoes because kids don't relate to them. A case in point is Los Angeles Lakers center Shaquille O'Neal, who Reebok signed to an estimated $15 million deal in 1992, only to let it lapse in 1998 because of lackluster sales of his signature shoe.

Yao agents and Reebok say he breaks that mold. Yao draws fans wherever he goes, and he has a large following of Chinese-Americans fans. He's been in ads for products as varied as Apple Computer, Gatorade, and the Visa Check Card.

"He's already broken the rules," said Bill Duffy, a sports agent on the four-person team who represented Yao in the negotiations. "Here is a young man who doesn't speak our native language and was commercially popular within eight months of arriving in this country."

Yao's defection from Nike to Reebok marks a sea change for the company. Though Reebok signed a deal with the NBA two years ago to stamp its vector logo on team uniforms and boasts Philadelphia 76ers guard Allen Iverson as a star endorser, the company fell behind in signing top NBA players. In May, it lost a high-profile bidding war for James.

Since then, the company has gained momentum. In June, it signed a deal with the NBA to be the sole provider of jerseys and other NBA-licensed products in Asia. Earlier this month, it hired Sonny Vaccaro to build a pipeline of future star endorsers. When he worked for Nike in 1984, Vaccaro bet his job that it would be worth the company's money to sign Jordan. He signed NBA players Kobe Bryant and Tracy McGrady to endorsement deals at Adidas, and makes contact with the nation's top high school players through all-star camps and tournaments he runs. Nike declined to comment on how it viewed the loss of Yao. "Yao Ming is a very talented athlete and a great ambassador for the game of basketball," said Nike spokesman Rodney Knox. "We wish him the best."Naomi Aoki can be reached at naoki@globe.com.