The lifecycle of an international athlete: negotiating sponsorship and endorsements deals
In the latest of Penningtons Manches’ series of blogs for international athletes and their advisers, Hamish Corner explains the key points to consider around sponsorship, endorsements and merchandising agreements.
Most athletes, in most sports, will have relatively few years at the top. The average playing career of a Premier League footballer is eight years, for instance, and it’s a similar story at the highest level of most other professional sports. For this reason alone, it is important that athletes and their advisers consider how to leverage their elite status and commercialise their image rights, through sponsorship and endorsements (and possibly also merchandising). Not only is it an important secondary revenue stream (and in some sports such as golf, the primary stream), it may also enable the athlete to maintain their 'brand value' long after his or her playing career has come to an end.
This blog examines some of the key issues an athlete should consider when entering into sponsorships and endorsement arrangements.
Specifically, it looks at:
- What are the different options available to athletes?
- What are the main things that athletes should be considering?
- What are the key terms to be considered when negotiating a contract
- Marketing rights granted
- Reputation management
- Athlete’s liability
- Control and approvals
- Overall strategy
What are the different options available?
There are three main ways that an athlete can seek to commercialise his or her rights.
- Sponsorship. Under a sponsorship arrangement, a corporate brand pays the athlete (or provides the athlete with products) in exchange for being granted certain marketing rights by the athlete, in order to promote the brand’s image generally. The marketing rights might take the form of participation in advertising, or wearing branded clothing, for instance.
- Endorsement. An endorsement arrangement goes one step further than this. It involves the personal recommendation by the athlete of products made by the sponsoring brand, or at least a close association between the athlete and those products. In this case, the brand in question is not merely seeking to raise its profile but to affect purchasing patterns of the public. For example, many premium and luxury watch manufacturers have endorsement arrangements with athletes.
- Merchandising. Merchandising arrangements operate by monetising the athlete’s own image rights and status, by applying it to the athlete’s 'personal' range of products. Generally merchandising requires considerable investment of resource into protecting and growing the athlete’s own image and 'brand', including investment in a trade mark portfolio. This goes beyond what most athletes would require and this blog does not provide further detail on merchandising.
Are there any wider considerations?
There are a few important points to think about at the outset.
- First, athletes will be under contractual restrictions with their club or team, and possibly their national team, as well as under the rules of their sport’s governing body. Typically, clubs or teams will require their players to ensure their personal sponsorships and endorsements do not conflict with their corporate and kit sponsors. There can also be tensions between sponsorships at club level and national level to be considered. Therefore it is important to ensure that all existing personal sponsorship and endorsement arrangements are discussed with any new club or team to ensure that the athlete does not find they are conflicted, or in breach of contract.
- Second, is it clear what the athlete’s underlying rights, which might be the subject of any endorsement or sponsorship, are? And are these suitably protected in the UK (eg as trade marks)? As the athlete begins to commercialise their own rights, the likelihood of “false endorsements” would increase. A “false endorsement” occurs where another business uses the athlete’s image or trademarks without authorisation, in order to imply an endorsement. The athlete’s rights might need to be enforced rigorously in these circumstances, and so it is crucial they are properly protected.
- Third, the role of social media becomes increasingly important and this now features in many sponsorship and endorsement negotiations. Due to the nature of social media, it is much easier for athletes to fall foul of sponsorship or endorsement rules, or get into difficulties with their own sponsors or their club’s sponsors, by inadvertently endorsing a competitor product or perhaps creating negative publicity for their own sponsor. Clubs and teams are also generally much more active in trying to shape and control the social media output of their contracted players.
What are the key terms to be considered?
A sponsor will usually expect to obtain exclusivity and this should be limited in two important ways.
- First, exclusivity should only be granted in a specified product category, or by reference to a defined industry sector. This should be carefully negotiated and defined.
- Second, exclusivity might only be granted for a specified territory, for instance, the United Kingdom, although increasingly sponsors want worldwide rights. If worldwide exclusivity is to be granted then this should be considered in the light of the value and duration of the deal, and the agreed product category.
Marketing rights granted
The nature and extent of rights granted should also be considered. These would typically include (by the sponsor):
- use of the name, likeness and image of the athlete in connection with the promotion and sale of the sponsor’s products (in the case of an endorsement) or in general (in the case of a personal sponsorship);
- the right of the sponsor to be designated as a personal sponsor of the athlete;
- appearance of the athlete at events hosted by the sponsor. The timing and nature of this should be set out in detail, but it might, for instance, include major sponsored events or product launches;
- participation of the athlete in a dedicated PR and marketing campaign (particularly in relation to specific products);
- the right to create dedicated webpages on the sponsor’s website relating to the relationship - typically sponsors wish to create a continuing narrative to explain the importance of the relationship with the athlete, and relevance of the athlete to its audience; and
- in certain cases, obligation of the athlete to wear branded clothing or appear or to use products or services of the sponsor (the circumstances of this are typically heavily negotiated!).
The sponsor will always be keen to ensure it has the ability to exit the agreement if anything happens which could damage its reputation due to its association with the athlete. There are many examples of this: typically the so-called “non-disparagement” provisions are triggered in cases of illegal or allegedly illegal conduct, most usually alcohol or drug abuse, but occasionally might include financial impropriety or other illegal conduct.
These kinds of clauses should be expected, but care needs to be taken to ensure that they are not too tightly-worded, and that they only permit the sponsor to exit the arrangement in cases of harm, whether actual or anticipated, which is substantial and where there is a direct link to the actions or conduct of the athlete. In many cases, the non-disparagement obligation should be mutual, and so apply in a similar fashion in cases where the sponsor’s actions are likely to cause substantial harm to the reputation of the athlete.
The athlete’s liability
The athlete should ensure, both generally and especially in the case of product endorsements, that he or she receives a full indemnity from the sponsor to cover any claims that a member of the public might bring for defective, misleading or unsafe products.
Control and approvals
The athlete should ensure that any sponsorship or endorsement agreement contains a clear approval process over the use of his or her images, trade marks or likeness (including photographs, videos and marketing materials). This is crucial to ensure that athletes can maintain control over all uses made of their image and reputation. It is especially important in the context of videos and images (whether this is through viral advertising, social media output or otherwise).
As a final point, the athlete and their advisers should have a clear strategy from the outset about the sorts of sponsors and brands with which the athlete wants to be associated. How would these various brands sit together? What messages would these associations send to the wider public about the athlete’s interests and concerns? And, last but not least, can the athlete devote sufficient time, energy and enthusiasm to fulfil the sponsorship obligations required of each sponsor?
This article was first published as a blog on leading sports law website LawInSport in November 2017.
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