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.