Josh Hamilton. Adrian Peterson. Ray Rice. Hope Solo. Lance Armstrong. Michael Vick. Tiger Woods. The list of athletes in controversy off the field is a constant reminder of the modern problems society faces. The issues these athletes have off the field garner a lot of attention, much of which is negative. Athletes and his/her family are not the only ones who want to deflect negative attention when these situations arise, their corporate sponsors also want to avoid the association with negative conduct.
Many brands advertising in sports become engrained in athletics and their corporate image becomes closely intertwined with the athletes themselves. It has become more important than ever for these entities to be able to sever a relationship with an athlete quickly in the event that athlete garners negative attention for their off-field actions.
A clause contained in nearly every endorsement and sponsorship agreement today is called a “morality clause.” A morality clause gives sponsors the ability to suspend, terminate, and/or seek remedies from their sponsored athlete for certain actions. These clauses are negotiated and every word matters because only the actions falling within the language of the clause is covered. Most of these clauses in one way or another cover criminal, scandalous, reprehensible, drug/alcohol abuse, or other actions looked down upon by the general public. Defining what conduct is covered in each agreement can be difficult, and if a situation arises where the morality clause is triggered, it may result in additional negative press if there is a dispute between the sponsor and the athlete.
So, how do athlete attorneys structure these deals for their clients with questionable decision-making or a history of conduct covered in these clauses? While it always depends on the unique situation for the client, there are a number of game plans available for specific clauses typically included in endorsement contracts.
Payment schedules are a common inclusion in endorsement/sponsorship deals. Payment schedules provide the athlete some compensation up front, and the company pays out the remainder over time. These clauses are not just good for the company, but good for the athlete as well.
Payment schedules assist an athlete by extending the cash flow time period. It has been well reported many athletes face financial difficulties shortly after the clock runs out on their playing career. Extending payments can help some athletes better manage the money they have coming in and extend the time frame for when the athlete has significant money coming in.
Pay or Play
These clauses permit the sponsor to determine which advertisements (if any) will be aired/printed featuring the athlete. In these clauses, it is in the athlete’s interest to get as much guaranteed (or a solid commitment) air-time/print for the athlete as possible during the course of the agreement term. It is also important for your athlete to get some lead-time in the event the company has decided to pull an advertisement featuring your athlete client. With some lead-time, a press release or statement can be drafted and released to get ahead of the situation if it becomes a media issue.
While the airtime may not affect the value of the current endorsement deal, it may affect the value of future deals. If an athlete is featured regularly in advertisements, their value can go up, but if the athlete is not receiving the attention associated with successful brands, then the athlete’s public profile and value for use of his/her image may decrease, or remain stagnant.
Pay for On-Field Play
Several companies are now implementing clauses requiring sponsored athletes to be on the field in order to be compensated by the company. The company wants to use a player who is playing in the games and identifiable included in their advertisements, and this makes sense from a sponsor’s perspective. However, athlete lawyers should take into account that the larger the deal, the more important it is to keep this provision out of a deal.
Your athlete should not put his/her future ability to make income within their sport in order to get the money from an endorsement deal. For example, if an athlete has an endorsement deal worth $50,000 and he is making $4 million this season, it is less likely he will let this endorsement factor into the decision to play compared to an endorsement of $1 million.
For an athlete lawyer, the goal is not just to get your client the most amount of money, it is also to increase the value of his brand. Sometimes, the clauses may appear to be protections for the sponsor, but when in reality, they may also benefit your client in a number of other ways. You will need to know your clients needs, propensities, and personality in order to get your athlete the best deal possible and keep them from getting thrown out of a deal.