Posted: 04/12/2017
This article was originally published as a blog on leading sports law website LawInSport in November 2017. It has since been updated for accuracy and comprehensiveness both here and on the LawInSport website.
This blog in our series for international athletes explains the key points to consider when entering into sponsorship and endorsement deals or merchandising agreements.
Most athletes in most sports have relatively few years at the top. The average playing career of a Premier League footballer is eight years, 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 name and image rights, through sponsorship and endorsements (and possibly also merchandising). Not only is it an important revenue stream but it may also enable the athlete to maintain their 'brand value' long after their playing career has come to an end.
This blog examines some of the key issues to consider including:
There are three main ways that an athlete can seek to commercialise their 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 sponsorship. 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.
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. For more detail on how an athlete’s brand and image rights can be protected, please take a look at our related blog post on that topic.
Third, the role of social media has become increasingly important in daily life, and marketing activity is no exception. An athlete’s use of social media is now often a key feature 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. Athletes may even fall foul of national rules on advertising as numerous social media influencers have already done, such as needing to make explicitly clear when they are advertising products on behalf of a company. Clubs and teams are also generally much more active in trying to shape and control the social media output of their contracted players and, particularly at the most high-profile events, there can be conflict between the kind of social media engagement an athlete’s club, team or even event committee will permit, and the kind of social media engagement a sponsor expects. Athletes must make sure these issues are discussed with both sides at the earliest possible stage before signing up to a deal.
Fourth, while there has been increasing media attention on young athletes and other young public figures unwittingly signing up to unfavourable or unfairly long-term contracts, there are still relatively few legal protections to assist in these situations. It is therefore vital that all athletes, but particularly young athletes and their parents or guardians have properly understood what the nature and duration is of the obligations they are signing up to, and that they have carefully weighed up the pros and cons of a deal.
Exclusivity
A sponsor will usually expect to obtain exclusivity and this should be limited in two important ways.
Marketing rights granted
The nature and extent of rights granted should also be considered. These would typically include (by the sponsor):
Reputation management
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 or changing circumstances are likely to cause substantial harm to the reputation of the athlete if the athlete remains associated with them.
Duration and flexibility
The athlete should make sure that the contract provides enough flexibility in general, so that the athlete is not tied in for an unreasonably long period of time in case their achievements and increased brand value mean they should be able to negotiate a better deal. Most sponsorship or endorsement deals should also provide for the ability to earn bonus payments upon achieving certain milestones of success to reflect the fact that their ‘brand’ may now be worth more.
The athlete's liability
The athlete should ensure, both generally and especially in the case of product endorsements, that they receive 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 their 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, athletes 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?
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