NBA legend Earvin Magic Johnson officially joins the ‘Billionaires Club.’ Here is how he built his $1.2 billion empire

BY Ben Ebuka Oji November 30, 2023 5:04 PM EDT
Magic Johnson. Photo Credit: Atlanta Life Insurance

Earvin ‘Magic’ Johnson Jr., the iconic NBA point guard often hailed as the greatest in his position, has achieved an extraordinary milestone by joining the exclusive ranks of billionaires globally. This accomplishment solidifies his status as one of the wealthiest Black individuals worldwide.

Through strategic investments in various professional sports teams and the remarkable growth of a life insurance company under his ownership, the Basketball Hall of Fame member now boasts a staggering net worth of $1.2 billion.

Presently, Magic Johnson holds minor interests in prominent sports teams such as the NFL’s Washington Commanders, MLB’s Los Angeles Dodgers, the WNBA’s Los Angeles Sparks, and MLS’s LAFC. His Magic Johnson Enterprises has played a pivotal role through his investments in diverse sectors, including movie theaters, fast-food franchises, real estate, healthcare, and notably, EquiTrust, a life insurance provider based in Des Moines, Iowa. EquiTrust represents the majority of Johnson’s net worth, estimated at $1.2 billion by Forbes.

Unlike some counterparts, Magic Johnson did not accumulate significant income during his playing career. His earnings with the Los Angeles Lakers from 1979 to 1991, along with a brief comeback in 1996, amounted to around $40 million (approximately $110 million adjusted for inflation). This sum pales in comparison to LeBron James’ ongoing earnings of $479 million. Even during his prime years, Magic Johnson’s endorsements brought in an estimated $2 million to $4 million annually, according to Forbes.

However, Magic Johnson’s journey to billionaire status wasn’t a result of chance. He approached business with the same determination that defined his basketball career, navigating challenges with resilience.

His Path to Billionaire Status:

According to Mandalay Entertainment CEO Peter Guber, who has partnered with Magic Johnson on multiple ventures including the Los Angeles Dodgers, Magic Johnson “was born with that special talent; he’s had it since the beginning of his career. If I could know exactly what it was, I would bottle it and give it to myself and everybody in my company.”

Decades ago, at The Forum, Magic Johnson had his first encounter with Guber. At that time, Guber held the position of CEO at Sony Pictures, while Joe Smith was a music executive. Johnson approached both of them, seeking guidance on how to enter the business world. Recognizing his potential, Guber and Smith became his mentors.

In 1987, Peter Guber and Joe Smith introduced Johnson to Michael Ovitz, co-founder of CAA and a prominent Hollywood agent. Initially, Ovitz was not interested in working with athletes due to their “limited earning potential”. However, Johnson’s charisma and determination won him over, leading Ovitz to agree to a business boot camp for Johnson. This comprehensive program included providing him with subscriptions to business publications and involving him in simulated business meetings. Impressed by Johnson’s progress, Ovitz even went on to renegotiate his Lakers contract and connect him with potential business partners, all without accepting any commission.

“It’s probably the first and only time I ever did that,” Ovitz tells Forbes. “I just made a decision, I can’t really tell you why, that I was just going to help him out and make it work for him. But I did it, and he was just terrific. I was very happy that I did what I did.”

 “That Magic trick worked several times over the years. In 1990, Ovitz watched Johnson charm executives from PepsiCo over lunch at the 21 Club in midtown Manhattan, eventually landing a 33% stake in a $60 million deal to take over a bottling plant near Washington, D.C., reportedly for a cash outlay of less than half of its value. “He was unbelievable,” Ovitz recalls.

 A couple of years later, Magic Johnson approached Guber with the proposition of constructing a cinema in the Baldwin Hills area of Los Angeles, which was grappling with gang violence during that period. Despite this challenge, Guber’s Loew’s movie theater chain willingly entered into a 50/50 partnership. Magic Johnson took the initiative to engage with representatives from the Crips and Bloods, successfully persuading them to designate the theater as a neutral zone.

 “I said, ‘I am not here to disrespect either one of you,’” Johnson recounted in the 2022 Apple TV+ docuseries They Call Me Magic. “What I am here for is to say, this theater is going to help the entire Black community. I want you to come. I want your families to come. But you guys gotta agree that we can’t have violence, outside or inside that theater. And I am creating jobs. So if you guys got some guys who want to work, I will employ them.”

Within six years, the theater achieved a remarkable milestone by generating a staggering $5 million in ticket sales, solidifying its position as one of the highest-earning movie venues nationwide. Subsequently, Magic Johnson expanded his theater empire to predominantly Black neighborhoods in Houston, Atlanta, New York City, and Washington, D.C. However, in 2004, he made the decision to divest the theaters, selling them back to Loews.

During that same time frame, Magic Johnson extended an invitation to then-Starbucks CEO Howard Schultz to his Baldwin Hills theater for a screening of Whitney Houston’s “Waiting to Exhale”. Johnson convinced Schultz of the potential of Black America’s significant spending power. Three years later, in 1998, Starbucks formed a 50/50 joint venture with Johnson to establish over 100 coffee shops in Black neighborhoods throughout the country. To finance the rapid expansion, Starbucks permitted Magic Johnson to obtain a loan from the company for his share of the capital. He repaid the loan in full and subsequently sold the locations back to the company in 2010 for a reported $75 million profit.

“We got a tremendous amount of leverage in those partnerships,” says Ken Lombard, president of Johnson Development Corporation (1992 until 2004). “Because we could get into a room and Earvin comes in and all of a sudden everyone is trying to figure out ways to make it happen versus reasons why they shouldn’t.”

Apart from capitalizing on his fame, Magic Johnson incorporated his perceived expertise in catering to Black consumers into every business transaction. As an illustration, he enhanced the offerings at his cinema venues by introducing a variety of flavored sodas and an increased selection of hot dogs.

“I told Loews, Black people are going to eat dinner at the movies,” he told the New York Times about the strategy in 2000. “Those hot dogs are our dinner. Same with the drinks. Our soda sales were just okay. I said Black people love flavored drinks because we were raised on Kool-Aid. So we put in punch and strawberry soda and orange, and the numbers went through the roof.”

In his Starbucks shops, Magic Johnson replaced scones with sweet potato pie and introduced picnic tables with chess boards while playing R&B music over the speakers. Notably, despite being situated in lower-income neighborhoods, the average customer expenditure at his Starbucks locations exceeded the national average.

The Starbucks agreement proved to be a pivotal moment for Magic Johnson, as it garnered the admiration of institutional investors who had previously rejected him. In 1996, the California Public Employees Retirement System (CalPERS) invested $50 million in a real estate development venture that he co-established with San Francisco-based investment management firm MacFarlane Partners, with a focus on Black communities.

Magic Johnson later collaborated with Canyon Capital, a hedge fund based in Los Angeles, to implement the same idea. They successfully raised $300 million in 2001, a real estate fund of $600 million in 2005, and $1 billion in 2008.

 “Sometimes people try to criticize people who do joint ventures, especially an African American entrepreneur,” says Earl Graves Jr., another professional athlete-turned-businessman who worked on Johnson’s first deal with PepsiCo alongside his father, the founder of Black Enterprise magazine. “When you go to deposit money at a bank, they don’t ask you whether you were creator of the business or just in a joint venture.”

 In 1994, Jerry Buss, the owner of the Lakers, gave Magic Johnson the opportunity to acquire a 4.5% ownership share in the team for a sum of $10 million. Eventually, in 2010, Johnson sold this stake to Patrick Soon Shiong, shortly before the significant surge in NBA team valuations.

Over the course of three decades, Magic Johnson progressively expanded his investments. The proceeds generated from his involvement with the Lakers and Starbucks in 2010 granted him the financial capacity to contribute a substantial $50 million sum towards becoming a member of the Dodgers ownership consortium in 2012, alongside Guber and Guggenheim Partners. His present ownership stake of 2.3% has seen significant growth, surpassing its initial value, and is now estimated to be worth approximately $110 million.

In the year Johnson acquired a stake in the Dodgers, he also made a modest investment in Simply Healthcare. This investment coincided with the launch of a Medicaid plan specifically designed for individuals with HIV and AIDS. Subsequently, when Simply Healthcare was sold for a substantial sum of $1 billion in 2015, Magic Johnson utilized the proceeds to purchase a 60% ownership interest in EquiTrust Life Insurance from Guggenheim.

His Major Asset

Magic Johnson Enterprises’ portfolio now boasts EquiTrust as its largest asset, a testament to Johnson’s success as a businessman. Under his control, the company’s total assets have increased from $16 billion to $26 billion, with annual revenues of approximately $2.6 billion.

Today, Magic Johnson’s financial interests span various sectors, including NFTs and CBD, among others. He is widely regarded not only as an athlete but also as a successful entrepreneur, serving as a role model for future generations in bridging the gap between sports and business.

 It comes as no surprise that in ‘They Call Me Magic,’ Dwyane Wade, Charles Barkley, and Shaquille O’Neal, all esteemed members of the Basketball Hall of Fame, acknowledge Magic Johnson as their foremost source of inspiration in the business realm. As Shaq expressed, “We all owe Magic.”

Recalling years back in 1990, Magic Johnson, who was 31 years old at that time, expressed his desire to achieve a financial milestone of $100-$200 million in an interview with Sports Illustrated. The magazine pondered how he would utilize such immense wealth, to which Johnson responded by stating his intention to invest in a sports franchise. He emphasized that his interest was not limited to the Lakers or even the NBA, as he considered himself a passionate sports fan. Magic Johnson further expressed his openness to exploring opportunities in baseball if they arose before basketball, highlighting his ambition to engage in significant business ventures.

Now, it’s apposite to say that Magic Johnson has not only surpassed his previous aspiration of being a millionaire but has also achieved an even more impressive and desirable status – a billionaire. Undeniably, his success can be attributed to his strong partnerships and extensive networking. Earvin ‘Magic’ Johnson Jr. is undoubtedly prepared to surpass existing limits and achieve new milestones.