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Money Smart Athlete Blog

Athlete earnings beyond the professional sports contract: The different types of deals

Oct 5, 2022 | NIL

By Vasilia Polycarpou, The Sports Financial Literacy Academy      

With professional athletes having a volatile income relative to other professions, due to their playing career having an expiry date, it is critical to diversify their income streams beyond their sports contract, to maximize their earnings potential, as part of their financial planning.

Leveraging their fame and the support of their fans, professional athletes can work towards building a strong brand; commercializing their name, image and likeness (NIL) in a strategic way; highlighting their competitive advantages and emphasizing on their personal values and beliefs, to build their wealth even beyond their sports years.

Personal sports brands can be seen as tradable commodities, since they can be strategically monetized in a number of ways. Specifically, professional athletes can get involved in endorsement deals, which refer to utilizing marketing communication strategies to promote a specific message to the general public regarding a product or service. With athletes having countless social media followers- in an era where social media can make or break you- promotion of an endorsement in this way can provide a direct way for the celebrity athletes to share their enthusiasm about a specific product with their fans. Celebrity athlete endorsements are considered valuable for brands and are highly sought after. It should be highlighted, that endorsement contracts usually have a specific time frame with an option for renewal, and compensation can range from a fixed fee to a percentage of the sales of the endorsed products. Brands on the endorsee end, may even provide bonuses for athletic achievement within the endorsement period, to incentivize athletic performance. Legendary athletes such as LeBron James and Cristiano Ronaldo, managed to secure lifetime endorsement deals with brands like Nike, exceeding $1 billion; possibly being the biggest endorsement deals in history.

Another type of deal, is a sponsorship; offered by sponsoring brands who donate to support a sports celebrity for public recognition, hoping to boost their sales. Sponsorships entail a higher degree of involvement and contractual commitment for the celebrity athlete, due to their long-term nature and the requirement of certain actions from the athlete in return for the sponsorship fee. Sponsorships can be a great source of income for star athletes, since they can be sponsored by multiple companies in different industries simultaneously, seeking to raise awareness and bring attention to their brand through the athlete. However, it is worth mentioning, that with sponsorships being tied to the fans’ perceptions of the celebrity athlete, one wrong move could lead to a disaster. A known example, is that of tennis star Maria Sharapova, who lost millions in discontinued sponsorships including Nike, Porsche and TAG Heuer, after admitting that she failed a drug test at the Australian Open.

Moreover, merchandising refers to the sale of a range of products under a famous athlete’s name. Merchandising involves several parties, while the athlete is at the center of the product’s marketing campaign; without being responsible for design or production. It is very common for a company with experience in a specific field to seek permission to use the celebrity’s name for a particular line; making this a licensing deal. Elite athletes have traditionally made profitable licensing deals with established fashion houses, in which retailers take advantage of the athlete’s name, image or likeness to sell a pre-produced line of clothing. A famous example, is that of Rafael Nadal’s deal with Tommy Hilfiger, for merchandising of its underwear, tailoring and fragrance. This led to instant success for Tommy Hilfiger, which saw an immediate surge in their sales.

Furthermore, a professional athlete’s club may enter into a separate contract with them for the commercial use of their image on merchandise or for appearances. Soccer legend David Beckham has led the way for this, setting an example in the soccer industry, by always requesting separate compensation from soccer clubs for the commercial use of his name, image and likeness.

All in all, it is crucial for athletes to be aware of the different types of deals they can get involved in, beyond their professional contracts, in order to safeguard their financial stability and build their wealth, on their road to financial freedom. Their brand can be their winning card in the game as long as it is used wisely, since the high volatility of public perception may negatively affect their brand’s commercial capitalization potential at any point of time.

The Money Smart Athlete® Blog is established and run by the Sports Financial Literacy Academy® (SFLA).  Through its education programs, the SFLA has the vision to financially educate and empower athletes of all ages to become better people, not just better athletes.  For more information on our courses, our SFLA Approved Trainer Program®, and how they can benefit you and your clients, please get in touch with us at info@moneysmartathlete.com.

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