The Superstar Effect: Comparing the Impacts of Lebron and Ronaldo's Respective Franchise Changes

On July 10, 2018, just two months after Spanish soccer powerhouse Real Madrid won

their record thirteenth (and third straight) Champions League title, superstar winger

Cristiano Ronaldo confirmed what many pundits had rumored to be true: He had just

played his last game for Los Blancos. Looking to take on a new challenge and

completely alter the steady trajectory of his career, Ronaldo soon joined storied Italian

club Juventus. Not two weeks earlier, basketball megastar Lebron James had

announced his decision to take his talents to Long Beach to sign with the LA Lakers,

making him just the latest––and perhaps the greatest––NBA star to don the famed

purple and gold.

Neither player was unused to switching teams. Ronaldo, for his part, had made a name

for himself on English side Manchester United before spending a decade in Madrid;

Lebron, for his part had left the Cleveland Cavaliers once before to build a superteam

and chase championships in Miami, only to return four years later with two rings. But

their legacies were by and large built on the teams that they both decided to leave this

past summer. Both their presences on and departures from these teams would forever

change the face of their respective franchises. What’s more, these simultaneous moves

marked momentous shifts in the financial power dynamics of their respective sports.

One obvious way to analyze the monetary impacts of these moves is to consider how

they have impacted and will continue to impact the values of the teams they are joining.

To gauge this impact, we looked at how Ronaldo and Lebron’s arrivals have influenced

ticket prices, ticket sales and attendance levels, and merchandise sales. Juventus are

selling out––and doing so at higher ticket prices. According to Tuttosport, seats in one

section of the stadium for a Juventus home game would normally go for €25 but are

now being resold for up to €178. On top of attendance records and higher prices,

merchandise sales are through the roof; as Calcio Mercato notes half-jokingly, Juventus

are running out of letters to print Ronaldo’s name on their jerseys and their online shop

is continually crashing. The Independent posits that the immense transfer fee and the

wages that Juventus have invested in Ronaldo have at least partly been compensated

for, given that they pocketed around $60 million in jersey sales within 24 hours of

Ronaldo’s unveiling alone. As a franchise, Juventus’ estimated $1.472 billion valuation

puts it at the ninth most valuable soccer club in the world. Forbes’ June 2018 calculation

states that this value is up 17% from the previous year; who’s to say how much this is

thanks to the Ronaldo Effect, but he definitely contributed.

The Lakers experienced similar trends upon the arrival of the King. According to USA

today The average ticket price (ATP) for the Lakers’ home opener on October 20

against the Houston Rockets was $1,238, with the cheapest nosebleed seats selling for

$282. To put these numbers into perspective, the ATP underwent a 427% increase from

last year’s opener, for which there were tickets selling for only $60. According to

Bleacher Report, the Lakers and Warriors are the two teams averaging the highest

ticket prices on resale markets at $463 and $444 respectively. The $19 gap between

these two prices is much narrower than the identical figure from one year ago (which

averaged about $157). Not surprisingly, Lebron’s new Lakers jersey has been flying off

the shelves. Ebay’s metrics say it was the most popular-selling jersey this summer,

going at around 200 sales per day (upwards of 12,000 in total). One HighSnobiety

article says that sportswear retailer Fanatics saw a 600% increase in Lebron jerseys

sold in the hours after his announcement. His custom sneaker, the Lebron 15, was also

the top-selling shoe on Ebay this summer. These spiked ticket sales, increased

attendance, and merchandise sales, will, of course, be reflected in the overall valuation

of the Lakers franchise. As of February 2018, the Lakers were listed by Forbes as the

second most valuable NBA franchise (behind the New York Knicks) at $3.3 billion with a

$371 million revenue. Those numbers will only go up with the acquisition of Lebron.

An adequate and comprehensive examination of the financial impacts of Ronaldo and

Lebron’s moves would be incomplete, however, without looking at the reverberations

they have precipitated for their former franchises. One statistic that starkly

demonstrated the drastic and swift impact of Ronaldo’s absence was the fact that Real

Madrid’s 2018 home opener––their very first game in Madrid since Ronaldo’s

leaving––featured their worst home crowd since before the CR7 era. It follows that, due

to the 9-year lows on demand, ticket prices themselves have dropped as well. On top of

altered revenues from ticket sales, Real Madrid will certainly see a difference in their

incoming cash flows due to merchandise sales; a 2016 Marca article claimed that 40%

of Real Madrid’s shirt sales were attributed to Ronaldo. Though these changes will

undoubtedly impact the overall estimated value of Real Madrid, they likely will not do so

by much. Real Madrid, valued by Forbes at a whopping $4.123 billion, are the second

most valuable soccer club in the world behind Manchester United. Franchises this size

with such global bandwagon fan bases are more stable and less vulnerable to high

fluctuations in value with the move of any single player, but if there’s one player who

can best test the level of truth in this hypothesis, it may very well be Ronaldo.

Ticket prices for the Cleveland Cavaliers’ home opener on October 21 against the

Atlanta Hawks are going for as cheap as $7 per ticket. After hosting the finals last year,

the Cavs’ average ticket price has fallen 38.4% according to TicketIQ since James

announced his departure over the summer. The Cavaliers are projected to have around

30-31 wins according to various sports books, so, barring a complete surprise, they will

lose out on the playoff revenue they have enjoyed throughout Lebron’s runs to the finals

each of the last four seasons. Further, the Cavs will lose the revenue they had from

Lebron’s jersey sales (which were second only to Golden State’s Steph Curry). The

value of Cleveland’s franchise more than doubled over the course of Lebron’s second

stint in Cleveland, skyrocketing from $515 million in 2014 to around $1.3 billion in 2018.

This number will likely drop off in the coming years with Lebron’s departure.

Of course, we can also look at how Ronaldo moving to Italy and Lebron moving to

Hollywood can alter their personal net worths. While neither Ronaldo nor Lebron can

truly have any concern about their own personal revenues, and though they each will

claim that these moves are motivated by nonmonetary incentives, there is no question

that switching teams will only amplify the flow of money into their pockets. Despite

taking a pay cut, Ronaldo’s contract will bring him roughly $65 million annually over the

next four years. Of course, these wages will be supplemented by royalties from jersey

sales (of which there were over 520,000 in the first 24 hours of his arrival) and other

merchandise sales. More importantly, Ronaldo remains the most heavily endorsed

soccer player on the planet, earning $47 million annually from off-the-pitch

sponsorships, appearances, and licensing. It would be remiss to note, however, the

ongoing scandal that has kept Ronaldo in the news for other reasons since his switch to

Italy: A variety of sexual assault allegations have come out over the course of a few

months, all of which have been categorically dismissed as false and simply unfounded.

It will be interesting to see how this headline pans out and, in the context of this

analysis, how potential severed sponsorship deals might influence his personal net

worth.

Lebron signed a fully guaranteed 4-year, $153 contract with Lakers with an average

annual value of around $38 million (40% less than Ronaldo’s contract). This contract will

bring his total earnings strictly from contracts to a total of over $387 million by 2022. It is

important to mention, however, that California’s top income tax rate of 13.3% is the

highest in the country. Upon James’ announcement, Rep. Devin Nunes––a member of

California’s congressional delegation––tweeted: “LOL! Prepare to pay the highest taxes

you ever have in your career!! You should have held out for more just to afford the

Moonbeam weather tax!!!” Notwithstanding the staggering taxes, Lebron has no reason

to worry. Another source income for Lebron will be the continued royalty payments for

merchandise sales, which one would expect will only increase as Lebron transitions

from the desolate market of Cleveland to the more crowded and popular market of the

storied Hollywood franchise. Then it comes to off-the-court endorsements. According to

Sportcal, the eighteen distinct sponsorship deals to which Lebron has agreed

throughout his career currently bring him around $55 million a year. With that said,

Lebron’s new platform in Hollywood will allow him to leverage his public identity as not

merely a basketball player but also as a public figure, which only promises to increase

that number. Since his move to LA, HBO pioneered “The Shop,” a new show that stars

Lebron and Maverick Carter and includes other celebrity guests. “The Shop” is just one

example of how Lebron is and will continue to take advantage of the publicity that

naturally comes with living and starring in in the big city out west.

Finally, due to the global stardom (and sheer talent) of these two players, Ronaldo and

Lebron’s sudden moves have brought and will continue to bring about much larger,

more macro repercussions for their respective sports at large. The global following of

Ronaldo and Lebron will broaden the fanbase for each of these two teams. Ronaldo

moving to Serie A, the top tier Italian soccer league, will patently increase national and

international viewership of that league. On the other hand, La Liga, the Spanish league,

has now seen one of greatest rivalries (or dichotomies) in modern sports––Messi vs.

Ronaldo––slip away. There seems to be little reason to suspect that La Liga will fail to

maintain high international viewership, with Barcelona and Real Madrid still being two of

the biggest clubs in the world.

Likewise, Lebron’s transition to the West Coast has significantly altered the overall

power dynamic in the league. To put Lebron’s single-handed prowess into context, the

last time there was an NBA finals without a Lebron-led team was 2010, when current

NBA stars DeMarcus Cousins, Blake Griffin, John Wall, Paul George, and Kyrie Irving

(who was still in high school) hadn’t yet played a single NBA game. Since that time,

Lebron had represented the Eastern Conference on two separate franchises for eight

straight finals. Prior to Lebron’s recent departure, the Cavaliers were the perennial

Eastern Conference favorites; without Lebron, the East is wide open, with a variety of

teams posed to take its crown. Conversely, the West has gotten even stronger. With the

addition of Lebron and the subsequent influx of a variety of other NBA vets, there are

talks of a new superteam (potentially eventually including Kawhi Leonard) that could

emerge in LA. In the meantime, the Lakers offer a new blueprint for an NBA team, by

surrounding an experienced superstar with a cast of exciting young talent, instead of

trying to stockpile stars on max contracts.

Overall, the movement of these two 33-year-old superstars has caused seismic shifts in

their two sports. Ronaldo’s move to Juventus has shifted the soccer landscape, and

temporarily removed Real Madrid as a perennial powerhouse, in the same way that

Lebron’s move away from Cleveland has left the Cavs in a rebuilding state. In fact, both

Real Madrid and the Cavaliers coaches have already fired their respective coaches

after abysmal starts to their respective seasons; Madrid sacked new manager Julen

Lopetegui after a humiliating 5-1 loss to archrivals Barcelona that left Los Blancos in

ninth position in the league table, and Cleveland gave the boot to Tyronn Lue after an 0-

6 start left them last in the Eastern Conference. The movement of these superstars

show how much of an impact the few elite players have in their respective sports. Now,

all eyes will turn to baseball slugger and heartthrob Bryce Harper, whose impending

free agency decision is expected to reign in up to $500 million. It will be interesting to

see how the patterns found in the trails blazed by these two superstars either factor in

or are reflected by superstar free agent decisions in the near future across all sports.

Tyler Friedsam & Issac Silber

USBC Journal Writers

Class of 2022