Diminishing Endorsement Deals

With companies spending more and more each year on sponsorships and endorsements, why is it still so difficult for veteran athletes to land endorsement deals? Sure, all-star caliber athletes in major markets ink new deals every year but veteran athletes who aren’t quite star players or who are in smaller markets fail to sign any sort of endorsement deal.

As I have address in a previous blog post, companies are becoming more and more afraid of aligning their brands with an athlete who could end up damaging their brand. For this reason, and perhaps others, companies are forgoing endorsing athletes and instead sponsoring teams, venues and events. It is much less likely a venue or event will damage its brand.

While this can be demonstrated in every major sport, the arena this has become most evident in is NASCAR. In 2004, Dale Earnhardt Jr. was quoted saying that he was currently making more in endorsements than he was driving. Earnhardt’s sponsors included Wrangler, Gillette, Drakkar, Nabisco, Polaris, and Nextel. At this early point in his career, he was reportedly making $5 million a year in endorsements and it seemed that number was continuing to climb.

Fast-forward to 2012 and Earnhardt make an estimated $25.9 million dollars. While numerous sources argue the breakdown of his revenues, the most generous source estimates that only $13 million (50%) of his income came from endorsements although most insiders believe few endorsements exceed $500,000 a year. Some estimate his endorsements to be closer to $5 million. The remaining part of his 2012 earnings came from his race team salary as well as winnings and bonuses. As the most popular driver in NASCAR, the most endorsed, and the highest paid, its safe to assume Earnhardt’s generous 50% endorsement income to be much greater than his fellow drivers.

So where is all of this endorsement money going? It’s going to the race teams as sponsorships, baseball stadiums for signage, and title sponsorships for golf or tennis events. Companies have discovered that they can gain the demographics they need, the activation it takes to market a brand, and avoid any potential damage to their brands by partnering with leagues, events, teams and venues as opposed to athletes. Of course, athletes will always be making millions of dollars but now, the money must pass through the teams as sponsorships and then to the players as salary. Companies will still be able to market their products and athletes will still get their share as well.

Personal Branding and Endorsements

Marketing athletes is one of the most appealing aspects of being a sports agent. As a young agent progressing through the business, the realization that sponsors and endorsements do not come easily is becoming evident. While convincing companies to spend large sums of money to have athletes endorse their products is difficult enough, a new hurdle has made things even more difficult.

Over the last few years, numerous athletes have created bad publicity from scandals and off-the-field behavior. Lance Armstrong, Barry Bonds, Ryan Braun, Aaron Hernandez, Michael Phelps, and Tiger Woods were all endorsing major brands when their scandals became public knowledge. Most of the companies endorsing these athletes immediately terminated their contracts while a few others gave these athletes the benefit of the doubt. In both cases, these companies and their brands were damaged in the public’s view. This has created a lot of hesitation amongst companies to further endorse athletes in fear that their brands may be weaken instead of strengthened.

Nowadays, nearly every endorsement contract contains a morals clause, which allows a company to terminate or take corrective action against an endorser who is damaging the company’s name due to inappropriate or immoral behavior. Even though companies have this clause to fall back on, the potential damage is often too great for the company to tolerate.

The good news is that some sports agencies are beginning to offer training programs to help athletes create personal brands. While some athletes may not actively think about their personal brand, these training programs will most likely force athletes to think about their personal brands. Although this training doesn’t create or change an athlete’s character, forcing them to think about their personal brands may greatly diminish some of this poor off-the-field behavior. In turn, companies may regain the trust in athletes and the endorsement deals will become a great source of athletes’ incomes once again.

Press Credentials for Bloggers?

The sports industry has always been a very difficult industry for many to break into. With very few opportunities and numerous job hunters willing to work for less, it is nearly impossible for many to even dream of having a job in sports. While most want to become sports agents or front office personnel, others are seeking to enter the media realm of sports. Photographers, writers, and even bloggers are beginning to seek press credentials with very little experience in the field. Who wouldn’t want access to pregame activities, locker-rooms or their favorite athletes while the rest of sports fans have to wait in long lines, pay expensive ticket prices, and never get to see their favorite athletes up close? Recently, bloggers have been getting press credentials, which now makes it seem like almost anyone can get them.

Recently, Peter Robert Casey has received press credentials as a micro-blogger. Casey has one of the top ten most followed basketball-related Twitter accounts. He is also the most followed user in the basketball field that isn’t a professional player, coach, or team. As a micro-blogger, Casey’s works are less than 140 characters long. Will this type of micro-blogger become the new fad and will even more micro-bloggers gain press credentials?

While Casey’s credentials may seem acceptable to most, many other bloggers and micro-bloggers seek press credentials without nearly the following Casey has. Where should teams, leagues, and sports venues draw the line? In the past, the NHL has issued press credentials to over one hundred bloggers. Some teams welcome bloggers into their locker rooms while others shun them. Should a visiting team that doesn’t allow bloggers into their home locker rooms be forced to allow credentialed bloggers into their locker rooms on the road? Some cities that are traditional sports cities such as Chicago, St. Louis, New York, Boston, and Los Angeles will find it very difficult to accommodate bloggers in addition to their already sizable media personnel. Other non-traditional sports cities such as San Antonio, San Diego, and Washington may find it advantageous to provide popular bloggers and micro-bloggers with press credentials.

As the popularity of blogs continues to grow, so will the number of bloggers seeking press credentials. Leagues may try to set rules to prohibit or accommodate bloggers but I believe it should be left up to each individual team. Smaller market teams or teams in non-traditional markets such as the Phoenix Coyotes can benefit greatly from bloggers while big market teams have no room to further accommodate these same bloggers.

Legal Issues in the Sports Industry

Legal issues have been numerous within the sports industry. While lawsuits and complaints regarding sports agents have remained in the public spotlight, other issues have become popular among the media this year. Roc Nation has been in the news this year for several legal reasons including recruiting violations. However, one legal issue it has had may not have reached the general public, which will be discussed later in this blog. Sports agent Terry Watson has also been indicted earlier this year after a long investigation by the NCAA into UNC’s football program. Perhaps this year’s biggest sports related legal issue is EA Sports ongoing battle with current and former football players over its use of players’ personas in its NCAA College Football video game.

Earlier this year, Volcom (a modern lifestyle brand for youth) filed suit against Roc Nation (Jay-Z’s entertainment company) for infringement on its trademarked diamond-shaped logo. Volcom has insisted that Roc Nation’s diamond logo too closely resembles its stone logo. Volcom has been using the logo since 1991 and has spent more than $100,000,000 marketing its logo. On the other hand, Roc Nation began using its log in 2009. Volcom issued a cease and desist but Roc Nation has refused to comply. While it is nearly impossible for a company to avoid this situation, Roc Nation should have considered Volcom when drafting its logo since Volcom has been heavily involved with promoting both recorded and live music. Both companies operate in overlapping markets and a logo similar to Volcom’s may be seen as confusing the Roc Nation brand with Volcom. If the logos are deemed similar, Roc Nation could be spending a large sum of money to rebrand itself. This is an issue that should be avoided at all costs by Roc Nation and future agencies without question as most agencies are not recognized by their logos but by their agency names and lead sports agents.

Another issue plaguing the sports realm is agents violating various state athlete-agent acts. These acts were created to protect collegiate athletes who still have college eligibility. Recently, sports agent Terry Watson was charged with 13 felony counts of violating North Carolina’s Uniform Athlete Act in addition to a felony charge for obstruction of justice. Watson is accused of providing gifts to former UNC football players including Greg Little, Robert Quinn and Marvin Austin. These gifts included monthly payments, hotel rooms, and travel expenses.  According to North Carolina state law, sports agents must register with the Secretary of State and are prohibited from initiating contact with a student-athlete or providing anything of value to a student-athlete not under contract with the agent. These violations are still numerous and new laws are required to further prevent this behavior. Agents still have a motive to breach this act and will continue to do so until the reward is no longer greater than the risk. Until then, I would expect these violations to continue to plague the industry and damage the reputation of agents as a whole.

A recent settlement between EA Sports and former collegiate football players has also been a topic of discussion in the sports industry. EA sports announced earlier this year that it would cease to produce its NCAA Football video game, which does not use college football players’ names. The suit began when players alleged that the game used players’ jersey numbers, biography information and physical attributes without their permission or compensation. Both former and current players will receive substantive compensation for the game’s use of their personas. The settlement may not result in student-athletes making a healthy earning off others use of their personas but may spark the discussion of if (and how much) student-athletes should be paid. While former college players in the suit are no longer student-athletes, current college-football players will be receiving compensation for their likeness being used by the EA Sports NCAA Football 2014 game this year. This marks the first time student-athletes will legally be paid other than from scholarship for their efforts on the field.

Biggest Story of 2013: IMG for Sale

With 2013 slowly winding down, the big story has been the much talked about sale of IMG Worldwide’s sports and entertainment management agency by private-equity owner Forstmann Little. IMG Worldwide, which was founded in Cleveland, is expected to sell for nearly $2 billion. IMG pioneered the marketing of primarily individual sport athletes, which consists of megastars like Tiger Wood, Peyton Manning, Novak Djokovic, and Maria Sharapova. IMG was on the forefront of shaping the professional sports and sports management industries since it was created from a handshake with golf star Arnold Palmer. The sale of its athlete management business doesn’t come by complete surprise as IMG has been moving away from representing athletes in recent years, after the death of the co-founder of Forstmann Little, Theodore Forstmann. Properties owned by IMG Worldwide include IMG Academy, IMG College, IMG Consulting, IMG Media, IMG Fashion, Sports, and Talent.

Initial bids were due by mid-September. A potential deal is expected to be reached sometime before Thanksgiving in 2013. IMG Worldwide may receive attention from buyout firm Bain Capital, private equity firm KKR & Co. and entertainment companies Creative Artists Agency and William Morris Endeavor Entertainment. Numerous other private equity firms have also expressed interest.

This sale will involve a sizable portfolio of athletes in various sports including tennis, golf, and football. While IMG’s list of athletes it represents has decreased in recent years, it still represents megastars Roger Federer, Rafael Nadal, Cam Newton and Sprint Cup driver Danica Patrick. The buyer should still retain a significant level of influence in the sports industry. A buyer such as Creative Artists Agency will likely form a monopoly of the athlete management industry since it already dominates the industry. Entering the holiday season, IMG will likely accept and complete a deal. The story is likely to become one of the biggest sports business stories of 2013 and will likely outshine the sports agency news with rapper Jay-Z and the formation of Roc Nation.