Visibility is paramount in the sports apparel sector, so when the NBA announced in 2015 that it was partnering with Nike Inc. (NKE - Get Report) as the league's official apparel outfitter the move made sense.
The $32.4 billion company spent about 10% ($3.3 billion) of its fiscal 2016 revenue on marketing, or what the company calls "demand creation spending."
So when Cleveland Cavaliers star and Nike brand ambassador LeBron James' jersey tore during the NBA season's nationally televised opening game Tuesday night, the company couldn't have been happy.
"It definitely wasn't a good thing to happen, but they are getting a lot of press and that helps visibility. It's still early in the season and people will probably forget about it at the season goes on," Susquehanna Nike analyst Sam Poser told TheStreet.
Reports are that Nike's 8-year deal with the NBA is worth about $1 billion. So the $125 million annual average the company pays to be featured prominently during every NBA game is a drop in its marketing budget bucket.
However, Nike is experiencing greater competition from rivals than it has in a while, and besides the look of the gear, sports apparel consumers care most about the quality of the product.
What Nike has going for it over its competitors is its size. Poser pointed out that Nike's marketing budget is the same size and Under Armour's (UA - Get Report) entire top-line. The benefits far outweigh the risks as the NBA remains immensely popular in China where Nike has invested a lot of time and money to pick up market share.
Outside of soccer, where Adidas AG (ADDYY) , still reigns basketball is the world's most popular sport. Potential consumers worldwide will see Nike's logo on the jersey's of the world's best players. You can't put a price on that type of visibility.
"Nike is known for basketball and there is a lot of attention on basketball in China," Poser said.
Nike shares were up 0.41% Thursday afternoon despite a note from Goldman Sachs where the firm cut the company's rating to "neutral" from "buy" due to "signs" of weakness in foreign sales which make up about half of the company's revenue.
Buckingham Research analyst Scott Krasik has a different view of the company ahead of its Investor day next week.
"Despite well-discussed challenges in its home market, NKE is still seeing steady gains in its largest international markets," Krasik said. Buckingham expects international sales to total $20 billion in fiscal 2019, representing 56% of total sales.
Nike did not respond to a request for comment.
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