Athlete and Sports-Related Endorsements

Athletes

Companies and brands often pay famous athletes for permission to use their names, images, and likenesses when advertising products, typically through commercials or the athletes’ social media accounts, where they have a huge fan following. 

Here are some examples of famous athletes who are top endorsers, like Virat Kohli (cricketer), LeBron James (NBA), Tom Brady (NFL), and Cristiano Ronaldo (soccer), with their top endorsements and their followers on social media: 

Virat Kohli is one of the greatest cricketers in cricket history, the former captain of the Indian national team, and one of the most famous athletes in the world. Kohli has 226 million followers* on Instagram, which is the highest number of followers for a cricketer. Due to his fame and popularity, he earns over $20 million annually through endorsements and sponsorships with Audi, Hero, MRF, Puma, and more.  https://www.instagram.com/reel/Clc62_igrpK/?igshid=YmMyMTA2M2Y%3D

LeBron James is one of the greatest basketball players in NBA history, with four NBA championship titles. Labron has 138 million Instagram followers*, which is the highest fan following on Instagram for NBA players. James has a long list of endorsement deals, which help him to earn an estimated $96 million per year on top of his salary. LeBron’s major endorsement deal is with Nike, which is a $1 billion lifetime sponsorship deal. Other endorsements include 2K Sports, AT&T, Beats Electronic, Coca-Cola, McDonalds, and GMC. https://www.instagram.com/p/CdJJF4buEwM/

Tom Brady is the winningest quarterback in history with seven Superbowl rings and 15 Pro Bowl selections. Although Brady has 12.9 million followers* on Instagram, which is fewer compared to other players, he still has a long list of endorsements that reportedly earned him $76 million per year. One of the biggest deals is with Aston Martin, and part of the deal even included a special edition Aston Martin Vanquish S for Brady. Other endorsement deals include Under Armour, TAG Heuer, UGG, Christopher Cloos, and Swiss watch company IWC Schaffhausen.  

Endorsement Contract Clauses

Athlete endorsement contracts vary, depending on the company, how famous the athlete is, etc.  But the following are some of the key provisions typically included in athlete endorsement contracts:

1.   ENDORSER'S EVALUATION OF PRODUCTS

Endorsement contracts typically include a clause like the following that gives the endorser the opportunity to use and evaluate products:

“Endorser will conduct such evaluations and use as Endorser reasonably believes necessary to be satisfied that the Products are worthy of Endorser's use and recommendation. Company will provide Endorser [at no charge/at a reduced charge], with [a reasonable quantity or number] of Products for Endorser's own use so that Endorser has the opportunity to meet its obligations under this Agreement.”

In this provision, the company agrees to provide the endorser with sample products that the endorser may use to determine if the products are worthy of his or her endorsement and recommendation. This also gives the endorser the chance to determine if he or she wants to associate his/her brand with it. For example, Cristiano Ronaldo's sponsorship with Jacob & Co. suggests that he was likely provided the watch for free to use on his Instagram page for promotional purposes. It is important to note that this agreement is incentivized therefore can create biased views. With the example provided, Cristiano Ronaldo is paid by Jacob & Co. to promote their product based on his experience, yet his opinion may be biased because he is getting paid. We asked Nick Hawkins about this type of provision. 

2.   EXCLUSIVE USE OF THE PRODUCTS 

Endorsement contracts often include a clause that prohibits endorsers from endorsing competitive products:

“To facilitate and enhance the Company's use of the Endorsement, the Endorser shall:

 1.  Use Products Exclusively and not Competitive/Competitors' products or services;

 2. Make affirmative efforts to be seen using the Products when: (A) Appearing [in/on] [PUBLIC VENUE RELATING TO ENDORSER'S RENOWN]; (B) Participating in promotional activities in any media, including but not limited to a website, blog, tweet, or other social media; (C) Taking part in photoshoots; or (D) Otherwise appearing in public.

3.    Use [his/her] best efforts to promote the sale and use of the Products and promote the relationship between Endorser and Company.” 

This provision includes the obligation for the endorser to only use the companies' products and not the products of competitors. When making public appearances, the endorser is expected to show off the sponsored products virtually or in person. This includes endorsers engaging in social media and partaking in photoshoots to advertise the product. All these efforts are to expose the company's brand by using the influence of the endorser. When an athlete is sponsored by a company and promotes a competitor's product, it can negatively affect the company. This can cause a loss in profit for the company and negatively affect its brand.

In our interview with Nick, he mentioned that companies approach the negotiation by seeking broad rights in the contract while the endorsers will approach the negotiation by seeking to limit how much control companies have over them and their brand. 

3.   PROMOTIONAL APPEARANCES AND ADVERTISING

Endorsement contracts typically include the obligation of public appearances that highlights the importance of the physical representation of the company's brand. 

“1.   In each Year, Endorser shall be available at times and places reasonably convenient to Endorser and the Company, for up to [NUMBER] hours on each of (a) [NUMBER] days to make personal appearances on Company's behalf; (b) [NUMBER] days to produce media content and television commercials on Company's behalf; and (c) [NUMBER] days to pose for photographs and otherwise assist Company in the preparation of its advertising and/or promotional materials utilizing the Endorser Identification.

2. Company shall make all required travel arrangements for Endorser's appearances … and pay (or reimburse) Endorser for all reasonable expenses including airline tickets, hotels, meals,” etc.

This provision details public appearance obligations for the endorser. For example, athletes attend in-person events for sponsored companies where they meet fans, sign jerseys, and promote items. The parties to an endorsement contract negotiate terms such as the days and hours of availability for the endorser to partake in these activities. For example, LeBron James is required to make public appearances because his endorsement contract with Nike has a clause that requires him to make appearances. Additionally, when athletes make commercials, this is because they have a contract clause like this one. 

4.  MORALS CLAUSES

The morals clause typically grants the company the ability to suspend or terminate the endorsement contract in the event of scandalous, criminal, or publicly reprehensible behaviors of the endorser. 

This clause is considered one of the more controversial provisions and demands serious negotiations in an endorsement contract. Morals clauses typically include a cure provision that allows for contract renegotiations. The artist Ye, previously known as Kanye West, has recently (Fall 2022) been under scrutiny due to his controversial views and behaviors toward the Jewish community. This has caused him to lose millions of dollars in endorsements recently as companies such as Gap, Adidas, Balenciaga, and Foot Locker have terminated their contracts with him. This is likely because those companies’ contracts with Ye contained a morals clause, which allowed the companies to protect themselves when the endorser’s values don’t align with the company’s values, as Nick explained to us:

Unlike lower-level athletes, high-profile athletes such as LeBron James may have the leverage to negotiate Morals Clauses that allow them to terminate their endorsement contracts with companies if the companies engage in problematic behavior or if their views do not align.  Endorsement contracts may also include clauses permitting companies to terminate the contracts if an endorser commits an act that is reasonably deemed by the company to be derogatory towards the company or the products, or which may tend to injure the success of the company.