How Magic Johnson Made His Fortune Away From the NBA

James Logie
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When you’re a household name in the world of sports, you expect to get paid.

NBA legend Earvin ‘Magic’ Johnson was no different.

What separates Magic from most other pro athletes is how he made his true fortune away from the game.

Whereas many athletes squander away their career earnings, Magic Johnson only built on it. His salary — it turns out — only makes up 6% of his entire wealth.

This is a look at the rise of the NBA legend, how he grew his wealth and businesses, and what entrepreneurs at any level can learn from him.

The Early Days of Magic Johnson

In case you’re not an NBA fan, Magic Johnson was born in Lansing, Michigan, in 1959.

He was the son of working-class parents and at an early age, grew to love the game of basketball.

He was a standout in high school and routinely put up 30 point, triple-doubles like it was nothing.

It was this prolific scoring — and his skill and finesse on the court — that gave him the nickname ‘Magic.’

When it came time to choose a college, everyone recruited Johnson. He chose nearby Michigan State for the next phase of his career.

In college, his skill, dominance, and legend only continued to grow.

As a sophomore, he helped lead his team to an NCAA championship beating a young Larry Bird and Indiana State.

After his brilliant college career, it was time for the NBA draft where he was chosen first overall by the L.A. Lakers.

In his first year in the league, he helped lead the Lakers to the NBA finals, won the championship, and took home MVP honors.

We could be here all day discussing his astounding career, but here are a few highlights:

  • 5 x NBA champion
  • 12 x NBA All-Star
  • 3 x NBA finals MVP
  • 3 x NBA MVP
  • Did a voice on an episode of the Simpsons (If you can quote his line, you and I are now best friends)

Building His Fortune

Even though he was at the top of his game — and the top of his league — Magic wasn’t earning the same type of money awarded to today's athletes.

The NBA wasn’t the financial powerhouse it is now. TV contracts and advertising back in the 80s had nothing on today’s revenue.

The big contract that Magic signed was in 1981, where he agreed to $25 million over 25 years. Converted for today, this is around $70 million.

This is a lot of money — and the biggest contract in sports history at the time — but still doesn’t compare with what top athletes today are making.

Just compare it to Tom Brady’s recent contract that pays him $50 million guaranteed for just two years (with another possible $9 million in incentives).

That’s a significant amount considering Brady is on the downward spiral of his career. (This is not only my own personal dig at Tom Brady — but an epic football pun…).

By the end of his career, Magic had earned $40 million. After he retired, he turned to the investment world to grow his net worth.

He started ‘Magic Johnson Enterprises’ for all the investments he planned to make. Some of his early investments included:

  • 125 Starbucks stores (Johnson was the first “outside owner” of a location. He also put locations in urban areas and changed the menu to cater to his market.)
  • Movie theatres and malls
  • 31 Burger Kings
  • EquiTrust Insurance
  • 24 Hour Fitness

Investing In His Love of Sports

When Johnson continued to diversify his portfolio, he went with what he knew: sports. The running thread throughout all of his success is how Johnson invested in people.

When it came to the sporting world, he already had established significant relationships.

The first big team investment he made was with his own Lakers. In 1995, Johnson bought a 4.5 % stake in the Lakers for $10 million.

As the NBA grew, the value of the teams escalated — especially the Lakers.

In 2010, the Lakers were now worth $607 million. Johnson’s $10 million investment was now worth between $40-$50 million and he sold his stake in the team.

Magic Johnson invested in sporting teams beyond the basketball world.

He invested in the LAFC of Major League Soccer and after only three years; the team has already been valued at $700 million.

In 2014, Johnson also invested in the L.A. Sparks of the WNBA by outright buying the team alongside Los Angeles Dodgers owner, Mark R. Walter.

And speaking of the Dodgers, Johnson was involved in their $2 billion purchase by putting up $50 million.

Key takeaway: we don’t all have the option to be involved with million-dollar sports teams, but the lesson here is to put your energy into areas you are knowledgeable and passionate about.

When you have the knowledge — and understand your market — you give yourself a better chance of succeeding in it.

Magic Johnson Enterprises Today

Johnson has taken his investments and business to the next level. Today, Magic Johnson Enterprises says its mission is all about fostering community and economic empowerment.

They do this by providing access to high-quality entertainment, products, and services that meet the demands of multicultural communities.

They continue to build businesses, grow communities, and have been helping small businesses survive and grow.

Johnson has also continued his investments. One enormous investment includes a joint venture in the $8 billion rebuild of LaGuardia Airport.

(If you’ve ever been to this airport, you know it needs a rebuild more than life itself. It has all the charm and appeal of a double root canal).

Magic Johnson Enterprises also invests in new tech that can help improve people’s lives. One such investment is Superheroic, which encourages children to be active through a data-informed sneaker made just for kids.

Johnson has invested in real estate, especially in urban communities.

MJE has partnered with Canyon Capital, and they have financed 30 real estate developments in13 different states.

This has generated $2 billion, and his involvement in this type of real estate sums up his approach to growing his wealth:

“You can do good, and you can do well at the same time.”

A few more of the companies that have helped grow the wealth of Magic Johnson Enterprises include:

  • Mitu: a Latin-fueled media brand
  • Uncharted Power: a renewable energy company
  • Walker and Company: a company making beauty products and services for people of color
  • The Marvel Experience
  • Walt Disney Imagineering

This is just a small sample, but you can see the diversity and growth of his enterprise that now has holdings of around $1 billion.

The One Big Investment Magic Johnson Missed Out On

Despite all his fortune and success, it could have been even better for Magic Johnson. And there’s one deal he’s still kicking himself for.

In the late 70s, shoe companies as we know them were not the marketing powerhouses they are today.

Celebrity endorsements weren’t really a thing, and sneakers were just something you wore to get around. There were no Air Force 1s, LeBrons, or Yeezys.

But an upstart new company from Oregon approached Johnson about an endorsement opportunity.

The year was 1979, and the company was Nike. Not only did they want to sponsor Magic — they would do whatever they could to get him.

Nike was only a few years old and didn’t have a ton of cash, so Phil Knight offered Johnson a stock-based shoe deal. Knight saw the enormous potential with Magic Johnson and how critical it was to get a top athlete on board.

Johnson went with Converse.

This is the decision that still haunts Magic Johnson. But in his defense; there’s no way to have anticipated what Nike — and the shoe industry — would become.

Cash is king, and they didn’t even offer him any.

Things would work out OK for Nike… They would end up endorsing another up-and-coming basketball player named Michael Jordan, and Nike would go public the year after they offered Johnson the deal.

The stock deal Johnson could have had is now up over 70,000 % and the company makes $37 billion a year.

From Nike’s IPO back in 1980, just one share at the IPO price (18 cents a share if you can believe it) would actually be worth 128 shares — and those would be worth $11,520 today.

If you had spent $1000, it would get you 5,555 shares.

Nike had 2 for 1 stock splits so over the years, those 5,555 shares would turn into around 700,000. If you had invested just $1000 in that first IPO, it would be worth over $65 million today.

It’s never been revealed exactly how many shares Nike offered Johnson, but it’s thought that they offered enough to have made him a multi-billionaire today.

In one last kick in the teeth, Nike would end up buying Converse in 2003.

The Key Takeaways

We all can’t be a sports legend — and have his capital — but we can learn a lot from Magic Johnson and his financial success off the court.

  1. Become familiar with the market and the buyers
  2. Diversify and consider a wide range of investments. Even if you don’t have capital like his — It pays to own equity.
  3. As an entrepreneur, you will miss out on opportunities the way Johnson did with Nike. No one has a crystal ball, and you will take losses along the way. Try to learn from it — and move on.
  4. Invest in your community and give back to others
  5. When you make others successful, you become successful

These takeaways can be summed up by the legend himself. Johnson didn’t worry about things like Facebook ads, CTA’s, or sales funnels — but put all his time and attention into people.

He didn’t spend his energy on creating the best branding and logo, but instead, learned everything he could about who he invests with and the people he wants to serve.

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Personal trainer, podcaster, Amazon best-selling author. Writing about some health, a little marketing, and a whole lot of 1980s.


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