Endorsement deals can be a bit of a misnomer within the sports industry. Often misconstrued as a handshake deal of “talk about how good this product is in exchange for a bunch of money,” endorsements at their core allow for fruitful sponsorships to arise between athletes and brands.
At its best, modern-day sponsorships and partnerships are less about a money grab and more of an interconnected, multi-platform marketing relationship that aligns an athlete’s interests, passions, and affinities with a brand’s marketing strategy. These activations can take many forms, ranging from a first-hand discussion of the use of products and services (which can be showcased on social media) to longer-term content generation geared around everyday integration (such as athlete’s spotlighting their favorite brands, workout supplements, and equipment, additional companies that fall into their affinity, etc.).
These superstar athlete endorsements often take multiple forms so it’s no surprise to see celebrity endorsements within spokesperson roles in various forms of media and distribution outlets. And yet while sponsorship deals and athlete endorsements are more dynamic than ever, they are not all constructed quite the same. Marketers are now tasked with evaluating the market differently and evaluating sponsorships such that endorsement contracts now allow for different niches such as exclusivity, morality clauses, strict licensing, and NIL usage.
Exclusive sponsorships are pretty cut-and-dry in the sense that the agreement clearly spells out which other products or services CANNOT be activated. Often reserved for the big-name superstars, these labels or monikers within athlete and celebrity endorsements will often state “Exclusive Partner of ____” or “Official Partner of ____.”
When an athlete or celebrity signs an exclusivity-based sponsorship, they are signing on to solely represent that brand within that particular category. For instance, if someone signs an exclusivity deal with Coca-Cola, they would only rep Coke brands (Coke, Coke Zero, Powerade, etc.) and not any competitors within that space (Pepsi, Diet Pepsi, Gatorade, Aquafina, etc.).
*More on how exclusivity can turn ugly later on. Exclusivity may have different variations of what constitutes competition within a product category.
The quest for exclusivity must be well-vetted and specifically spelled out should athletes wish to expand their potential earnings with other organizations. However, the question of what constitutes exclusivity (which is a conversation that comes up often within the realm of sports team-based sponsorships) must be specified to clear up ambiguity.
In most cases, a fast food-endorsing athlete wouldn’t have to avoid fine-dining or other higher-priced options that do not directly compete with a fast food audience. But where is that line? Does an athlete’s involvement with other restaurants, in general, weaken their affiliation with a fast food brand? And if so, by how much?
Essentially, exclusivity deals are put into place to strengthen the relationship and to incentivize the athlete with more money and assets to keep them loyal to that particular brand and dissuade them from engaging with competitors.
Morality clauses give a party the right to terminate an endorsement contract if it would be hazardous for that party’s reputation or image to remain bound to the contract. This has historically been a way for a brand to escape their relationship with an athlete who has come under fire for a PR nightmare (accusations of infidelity, bad public image, criminal accusations, etc.). And it has been activated time and time again with contract language in place to protect large organizations from being guilty by association.
Yet, it is the rise of powerful athletes and celebs that have forced the conversation to extend to both sides of the sponsorship deal. The question is now being asked:
“what if an athlete wants to distance themselves from the bad image/PR nightmare that a brand has created?“
Often this has discussion has stemmed from brands generating bad publicity from extreme political stances, unfair working environments for their employees, and lack of support for social causes. The fact that the modern athlete has leveraged his/her social following like never before, which draws the bevy of offers from brands wanting to forge endorsement deals. It’s no surprise that the negotiating power and public favorability has slowly but surely swung in the direction of the individual rather than the corporation.
Licensing and NIL usage:
Strict licensing is specific language that clearly outlines how the brand and the athlete can talk about and activate the partnership between the two. While there is room within here to expand upon future promotional campaigns (social media activations, commercial spots, branded campaigns), the bare minimum within the subject of strict licensing dwells upon what is deemed appropriate within the relationship.
How should the product/services be discussed in casual passing (appropriate setting, no “bashing” of the brand)? In what context should the endorsement be referenced? Is it an “official” sponsorship? Is it more of an athlete ambassadorship?
Names, image, and likeness (NIL) usage deals with how a brand can utilize an athlete’s persona within their marketing collateral and advertising campaigns. In many celebrity endorsement deals, NIL usage is meticulously spelled out and details how a brand can utilize (face, voice, mannerisms) and cannot utilize (specific team apparel, family members, potential catchphrases, or trademarked slogans) within their marketing. While most commonplace amongst professional deals, the world of NIL usage is undergoing a massive overhaul and forward-thinking transformation within the realm of college athletics. With college athletes on the brink of being able to utilize their personality, social following, and play on the field to generate income, the world is preparing to help them take advantage of their hard-earned work.
Endorsement Deals Gone Wrong
Now you have a better idea of how successful endorsement deals and athlete sponsorships can come to fruition. Unfortunately, that doesn’t mean that athletes and brands alike are impervious to deals going awry. Whether it is breaches of exclusivity or activating the ever-timely morality clause, many athlete endorsements have fallen by the wayside through the years.
Vijay Singh and Stanford Financial Group:
The golfer and financial institution cam together on a 5-year $8 million endorsement deal back in 2009. Yet what seemed like a win-win at the time hit a snag after the latter was implicated in a Ponzi scheme one month after the deal was finalized.
Upon being accused and later found guilty of doping, Armstrong’s net worth and sponsorship backing declined dramatically. A whopping eight of his sponsors severed contracts or choose not to renew with him…all within one day. Dropped sponsors include Nike, 24-Hour Fitness, and Anheuser-Busch amongst others.
Ronaldinho and Coca-Cola:
A classic case of breaching an exclusivity-based contract. Ronaldinho, unfortunately, learned the hard way about the pitfalls of not respecting the scope of the sponsorship. The Brazilian footballer lost his $750,000 Coke sponsorship because he showed up to a press-conference nonchalantly drinking a Pepsi. Losing nearly a million dollars because of a soda with a couple of bucks. Such is the life of exclusivity. Breach at your own will.
O.J. Simpson and Hertz:
Simpson and Hertz forged a partnership back in 1975 when the football star was in the prime of his athletic career and his persona was achieving larger than life marketability that transcended the football field. This peculiar case of loyalty amongst the two parties was tested throughout the years even as Simpson was accused of domestic violence against his wife Nicole Brown Simpson in 1989 while his Hollywood prowess diminished. The relationship was finally severed when Simpson was accused of murdering Brown and Ronald Goldman in 1994.
Athletes are in a better position than ever before to reap the rewards that fulfilling endorsement deals have to offer. With a robust personalities, dynamic social followings, and a yearning to flex their business acumen, today’s top athletes can and will often earn more off-the-field than from any contract they sign within their own sport.
With this in mind, it is important to be aware of potential parameters and pitfalls that could sink an endorsement deal just as quickly as one is signed:
- Know the relationship of the endorsement. If it is exclusivity based or there is consideration for that route, truly do some soul searching to determine if that is a commitment you are willing and able to keep.
- While you don’t necessarily need to have a squeaky clean personality and lifestyle to earn and maintain a sponsorship, know that reckless and controversial actions may cause you to lose such deals. Brands can be very quick to pull the plug on a relationship if they believe it can cause more headaches and more bad press than it’d be worth it to carry on.
- On the other side of the coin, look to flesh out that same morality clause on your behalf. Brands should be held accountable for their actions as well. Hold decision-makers responsible for the actions they take and make sure that any endorsements that you sign align with your personal goals, values, and actions.
- Have an honest discussion about NIL usage and clearly define and come to an agreement upon what is acceptable and what is off-limits in regards to a brand’s marketing. If you are to be associated with a brand, be aware of where you may find yourself within the marketplace.
The athlete empowerment era is here. With more endorsement deals around the corner, there has never been a better time for athletes to take advantage of their talents on and off the field.