[Note: the below article was written by Gerik Jenco of Del Duca Sports]
Endorsements are of great importance to an athlete because not only can it increase his annual salary dramatically it can also lead to post-athletic career opportunities. With the increasing popularity of professional sports today, marketing your client is a vital part of the athlete representation business. Whether it is the backup quarterback signing autographs at a local sporting goods store or a national television commercial involving the star wide receiver, marketing the athlete through endorsements can be instrumental in securing a long-term relationship with that athlete. Endorsements allow athletes to serve as spokespersons for companies, promote a specific brand, and even become part of the entertainment industry. In addition to receiving monetary compensation athletes may also receive the endorsing product as payment. If the product is athletic equipment in the particular sport in which the athlete plays it can be very beneficial to that athlete by aiding in his training and/or his season.
Team vs. Individual Sports
Three out of the four major professional sports leagues have a salary cap in place with Major League Baseball being the lone exception. As a result, teams can only spend so much money on its players and, consequently, players are “capped” in terms of what they can make for their on-the-field athletic ability. Therefore, players and their advisors must look for other ways for the athlete to make money. This is where the importance of endorsements comes into play. Of the top ten highest paid athletes in 2009, LeBron James (ranked 3rd overall) made the most from endorsements for athletes involved in team sports. His earnings of $28,000,000 through endorsements were nearly double his salary for that year of $14,410,581. Next on the endorsements earnings list was Shaquille O’Neal (ranked 5th overall) at $15,000,000 followed by Peyton Manning (ranked 10th overall) at $13,000,000. The top Major League Baseball players listed were Derek Jeter (ranked 9th overall) at $8,500,000 and Alex Rodriguez (ranked 4th overall) at $6,000,000. Relying on these aforementioned numbers one can interpret that although the level of importance of endorsements may fluctuate depending on what league the player participates in (i.e. NBA versus NFL versus MLB), endorsements are nonetheless very essential to an athlete’s earnings.
When dealing with individual sports – such as golf and auto racing – endorsements can play an even bigger role in an athlete’s annual compensation because the athletes in these sports only make the bigger bucks when they win a tournament/race, or at least finish near the top of the final standings. Referring back to the previous ranking list for 2009, the two highest paid spots were taken by athletes who participate in individual sports. Tiger Woods’ endorsement earnings were $92,000,000 (ranked 1st overall) which engulfs his 2009 winnings of $7,737,626. Right behind Woods was another golfer, Phil Mickelson (ranked 2nd overall), who earned $46,600,000 through endorsements, compared to his tour winnings of $6,350,356. NASCAR driver Dale Earnhardt, Jr., who hasn’t won a race since 2008, ranked eleventh due, in large part, to his endorsement earnings of $22,000,000. Other athletes who participate in individual sports who made the top fifty highest paid list were NASCAR driver Jeff Gordon (ranked 21st overall) with $15,000,000 in endorsement earnings and PGA golfer Jim Furyk (ranked 41st overall) with $11,000,000 earned through endorsements. Again, these rankings and numbers illustrate how the endorsement factor in individual sports, such as golf and NASCAR, may be more important to these athletes than athletes in football or basketball.
Although the degree to which an athlete uses endorsements for his annual compensation may depend on the sport and league in which he plays, it is extremely important to understand the crucial part that endorsements play in the professional athlete’s life.
The representation fees for negotiating contracts on behalf of a professional athlete can range between 2 percent and 5 percent, with 5 percent being close to the maximum. Conversely, negotiating endorsement deals for that same athlete can earn the representative a fee of anywhere from 10 percent up to, and sometimes beyond, 30 percent. Accordingly, not only do endorsements play a crucial role in the lives of professional athletes but being adept at finding, negotiating, and securing endorsement deals for these athletes can be very rewarding for his representative as well.
Facebook, Twitter, and the Like
As the internet and network sites become increasingly effective in our everyday lives so, too, do they become part of the professional athlete’s daily repertoire and routine. Over the past few years we have witnessed athletes “tweeting” at halftime or on the sideline during a game, their faces plastered all over the internet, and having thousands of Facebook friends all the while still participating in the sport he plays. While some may view this new occurrence as disruptive, ignorant, or being “cocky” it has become a major marketing tool for the representative and the athlete.
Whether it is the athlete having his own website, creating his own Facebook page, or “tweeting” about the touchdown he just scored, these endorsing companies look for ways to get their name/product in the public eye as much as possible. As a result, the more friends an athlete has on Facebook, the more times he “tweets” his opinion, and, especially, the bigger his personal website becomes the more endorsement deals he could receive.
Post-Athletic Career Opportunities
An athlete’s professional playing career does not last forever so he must plan for his career after sports. Securing the right endorsements is one way for an athlete to find his niche in his new career. Through his endorsements Peyton Manning found his way to hosting Saturday Night Live, among other ventures. Chad Ocho-Cinco, a.k.a. Chad Johnson, has his own reality television show due, in part, to his “tweeting” ability and endorsement opportunities. Shaquille O’Neal has his own reality television show as well thanks to his numerous appearances through his endorsements. The entertainment industry is an obvious post-career choice because of the athlete being comfortable in front of the television public through his endorsements as well as countless interviews. However, even if you are not the star player for your particular team – as the above players happen to be – endorsements can lead into post career choices for other athletes as well. Whether it is a spokesperson for local companies, motivational speaker for community groups, or your everyday businessman, getting your name and image in the public as much as possible can help attract people to the athlete in any field in which he may endeavor.
Endorsements help create a good brand image and a good brand image assists the athlete in solidifying his confidence to make any post career move he wishes to make.
Insurance and the Economy
A recent trend in the endorsement field has athletes approaching these contracts in a different manner. Over the past couple of years more athletes have become involved in negative, off-the-field scandals or issues which have their endorsing companies taking out insurance to protect themselves against the loss of endorsements through these negative actions. When an athlete is viewed in a negative light not only does it show poorly on the athlete but it can cast the company and its product in a dark shadow as well. In addition to the off-the-field issues, the poor economy also has companies taking a more precautionary approach as to what athlete they choose, how long the contract should be, and what specific terms should be included in the contract, such as a morals clause so they can terminate the endorsement contract at will if the athlete does actions that offend society.
The recent developments in this field not only put the athlete on notice in regards to how his off-the-field behavior can affect his endorsement deals but also may put more emphasis on the decision of choosing the correct representation. The athlete wants to choose the representative that can not only handle the contract negotiation the best but who now also has the keen sense of knowing the right endorsement deal when it appears. Of course, if the athlete is a superstar in his respective sport these deals may be easier to come by but it does not mean that these same athletes are immune to the reactions in today’s world.
When all is said and done the endorsement deal has become more of a necessity than ever before. The representative wants to, and by most parts, needs to maximize the athlete’s opportunity, both on and off-the-field. The endorsement “factor” has become such an integral part of the athlete representation business that an ‘Endorsement’ class could be introduced into the growing Sports Management Educational Programs across the globe and we would still need extra time to familiarize ourselves with the concept.
Thursday, September 16, 2010
Thursday, September 9, 2010
Seems that the participation of Tiger Woods at the Ryder Cup In Britain October 1-3 is presenting a major tax problem to him and other U.S team golfers -- and not in terms of being taxed by the U.K. on that event's prize money (there isn't any). The Brits want to tax a portion of Tiger's approximate $50 million a year endorsement income since he has now made the U.S. team. Read more about here.