Jeremy Lin's a Rocket, but will his marketing appeal follow?July 18, 2012: 7:00 AM ET
The surprise loser in the Linsanity's Texas-sized switch isn't New York or Houston -- it's the league itself.
By Alex Konrad, reporter
FORTUNE -- Jeremy Lin's rise to fame and resurrection of a floundering New York Knicks team was a priceless story, making his departure through free agency a lightning rod topic -- tough for the NBA's largest media market to stomach and a sign of hope for a battered Houston franchise still eyeing a larger prize. Lin's broad marketing appeal couldn't sway New York to swallow the rookie's 'poison pill' offer sheet worth $25 million -- and up to $45 million more in luxury taxes. In the transfer of marketing dollars from East Coast to the Gulf, neither team really loses.
As an Asian-American Harvard graduate with a unique story in the spotlight of New York, Lin captured national attention in a way that seasoned stars often never do. His stellar stretch of 25 starts for the Knicks earned him cachet with sports marketers rivaled only by another athletic phenom, football player Tim Tebow. "You had Tebow in Denver and Lin in New York doing something that had such an impact outside the typical realm of sports," says John Brody, a president at sports marketing agency Wasserman Media Group. "It was about the transformative nature of their stories, but in less than twelve months, both of them will be wearing different jerseys."
While both Tebow and Lin carried great national interest and marketing appeal, that didn't prevent them from leaving the teams where they had their respective storybook runs. In New York, the Knicks' slow decision to cut ties with Lin upset fans and journalists alike. The New York Times' Nate Silver argued the Knicks should keep the point guard because the team's parent company, The Madison Square Garden Company (MSG), gained hundreds of millions in market capitalization once Linsanity began and that Lin's salary would be justified in wins added should he play reasonably well. "Even if Lin is a merely good player, the marketing boost he provides should more than justify the expense," Silver wrote.
That marketing value of Lin, however, is not as clear-cut. The Atlantic, in a caution to both the Knicks and Rockets, noted that the Rockets' last Asian star, Yao Ming, only improved his team's net worth in the short-term. And Bloomberg Businessweek reported that due to league revenue-sharing, Lin's boost from merchandise sales likely benefited the Knicks less than his role as an impetus for Time Warner Cable (TWC) to back down in its dispute over rights to air the team's games did.
So did the Knicks really just lose a marketing golden goose? Sports marketing experts say not really. Given that the NBA pools most merchandising and national television revenues, no one player has the impact one might think.
"In fact, the trend in modern sports is to guard against these small, uncontrolled and unpredictable shifts," explains Bob Boland, sports management chair at New York University, in an email. Critical revenue streams for teams come from multi-year deals that move more slowly, such as through in-stadia advertising or media rights. That trend insulates the Knicks from fallout -- with the possible exception of fan outrage.
Houston, however, has a more immediate marketing upside in acquiring Lin. As with the Knicks, the team won't directly benefit as Lin draws larger away crowds to games or sells jerseys to fans worldwide. But he could provide a greater boost for in-stadium sales and attendance in his new home arena, as the Rockets had one of the worst attendance rates in the league last season.
Sports marketers note that Lin's brand in Houston will now rest even heavier on his personal play. While Lin has inked deals with Nike and Volvo -- the car manufacturer has added incentive in a Chinese parent company to pursue the Asian market -- future endorsements won't have quite the same bling away from Broadway. "If I was a marketer thinking about using Jeremy, I would maybe wait and see how this plays out now," says Mark Ippolito, president and general counsel of Burns Entertainment and Sports Marketing. If Lin stays healthy, however, Houston's lack of other stars might actually allow him more time with the ball and a better shot at lasting stardom.
As the New York Post noted, third-party retailers in the New York area will undoubtedly suffer an immediate hit. But the biggest loser as Lin's marketing power transfers west could be the NBA itself. "The Knicks are a huge deal to the league," says Matt Powell, an analyst at SportsOneSource. "With their market share, the Knicks are essentially subsidizing the Charlotte Bobcats."
New York carries an outsized share of the load for the NBA when it offers a compelling product -- but that doesn't just depend on Lin. According to Powell, the Knicks drove 38 percent of the market share of league revenue last year, compared to just 17 percent for the next-best Chicago Bulls. New York's numbers have been up since Carmelo Anthony joined the team in 2011. The league will have to hope that Lin's departure doesn't reverse that trend, and that the Brooklyn Nets pick up some of the slack.
"Fact is, the NBA is better off with Jeremy Lin playing than not playing at all," says Brody at Wasserman. Still, commissioner David Stern must hope that Linsanity travels well.