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The Basics of Sports Endorsement Deals

By Bisk
The Basics of Sports Endorsement Deals

Exceptional athletes often gain the attention of companies who wish to use the athlete’s popularity and reputation to help promote a service or product. Endorsement deals can provide the athlete and the agent with an unexpected source of income. Before signing any agreement, though, a player and agent should consider a number of factors when approached with an endorsement contract.

Agent and Athlete Compensation

Compensation will most likely be the primary concern for the athlete as well as the company offering the contract. Agents should note details for royalties, incentives, free products, testing products and fixed fees, and discuss these with the athlete in detail. Some companies may include an indemnification clause which may specify that the company is compensated for any loss, should the athlete terminate the contract. Agents should make sure the indemnification clause protects the player as well, in case the company terminates the contract.

Endorsement Contract Details

A signed contract gives the company a legal right to use the player name and image, so agents must make sure the players have the ability to exercise control over the product/service they will be asked to endorse. The player must understand exactly how the endorsement will be used, in what form it will be used, such as print media, online or television, and where it will be used geographically. Endorsement methods need to be fully understood by all parties, so player and agent must discuss all aspects of the contract in great detail. Where will the athlete be asked to provide an endorsement? When? What product?

The agent should consider what may happen if other companies seek the player's endorsement. How exclusive is the contract? Companies usually try to get as much exclusivity as possible. If a company wants the player to endorse gloves, for instance, then that specific item should be in the contract. If the contract uses a blanket term like “sports apparel” or “apparel”, it may prevent the athlete from signing a second endorsement contract for shirts or shoes, for example, at some future date.

The contract should include advance notice for all endorsements where the player will need to appear in person. This prevents conflict that may prevent participation in sporting events. The agent should know ahead of time where the player will need to be and how long the appearance will last. It is customary for the company to pay travel-related expenses for the athlete, but if the agent wishes to be at the appearance, he or she may not be compensated for travel.

The player will probably be asked at some point to speak for the company. The agent must make sure that any testimonial posted to Facebook, Twitter, Pinterest or elsewhere is true. The player could be liable for a false statement, or an unsubstantiated comment, even if the text of the comment comes directly from the company. The agent and the player should make sure to retain the right to review any public statements in advance and refuse them if necessary.

Injury and Morality Clauses

Sports-related injuries are an accepted risk, but bear in mind that the athlete is expected to perform to the best of their ability. Eating bad take-out food may result in missing an event. A broken bone could take a player out for an entire season. A severe injury could end the player’s career. What happens then? The agent must have contingency plans in place for all possible scenarios.

While a temporary illness or injury shouldn't result in termination of a contract, although compensation may be reduced during that period, the player must understand what will happen if they can't participate in their sport for an extended period of time. Will there be a difference if the injury occurs on or off the court? What happens if the injury results in negative publicity for the endorsing company, such as the athlete obtaining a head injury while in a contract with a helmet manufacturer? Again, the agent should work hard to make sure the player is contractually protected in all possible situations.

A morality clause will probably be included in the contract. Morality clauses seek to protect the company from being linked to immoral behavior. Since an image is being used for promotion, activities that tarnish that image may result in breach of contact. The player and agent must be aware of exactly what this covers, since immoral behavior is subjective and the company seeking the endorsement may have specific concerns.

While illegal activity, violence and drunk driving are generally considered immoral behavior, what happens if a player signs an endorsement for vegan products and is later photographed eating a bacon sandwich?

Every endorsement deal will be different. Having full understanding of these basics will help the agent, and subsequently the player, identify companies and organizations that will benefit them, and avoid potential complications. 

Category: Business and Law of Sports