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Endurance Law

How to Negotiate Winning Athlete Endorsement Deals

The 2016 athlete endorsement season is upon us! Now is the time that most brands begin making marketing decisions for the following year and are approached by athletes to get sponsored (or do the approaching).

A question that we often get from athletes (and brand sponsors) during initial contract negotiations is so important that we think it’s worth blogging about. But before I do the big reveal, let us set the scene…

Brand A is interested in Athlete B because Athlete B is has a loyal following of fans and could be great ambassador for Brand A.  However, Brand A is a small company without a real marketing budget.  Athlete B could potentially change that by promoting their products. Athlete B, seeing dollar signs, wants to ask for as much as she can get. Alas, Brand A has few dollars at the present moment. Once both parties are at the dreaded negotiating table, they both ask…

Let us keep you in suspense just a bit longer. The “negotiation table” is the figurative place where parties with varying levels of experience try to figure out what the terms of a contract will look like and who will do what for whom. This is literally the most important moment for both parties to find a mutually beneficial understanding and determine clarity about deliverables. In our experience, there is a lot of room for improvement in this area.

So what is the question that we always get asked? Stated simply: “How do we get started?”

You might be surprised by this basic question. We have seen this question enough to know exactly what to do and it has everything to do with being prepared for the conversation. Having a plan for the negotiation from both the brand perspective and athlete perspective is crucial for living happily ever after…or at least through the term of the contract.

We recommend that athletes and brands start any negotiation with the following three steps; the first two steps happen before arriving at the negotiation table and the third step at the negotiations.

Step One

·      Brands should have a clear idea of how they think the athlete can help their brand and what kind of time commitment and exposure they want from the athlete.
·      Athletes should have a clear understanding of what the brand does and decide whether it is a good fit for their image/personal brand and whether there are any conflicts with any existing sponsors.

Step Two

·      Brands should think and write down what they see as primary and secondary deliverables that they want the athlete to be able to achieve. This could be public appearances, participating in specific races or events or generating content for the brand.
·      Athletes should think about how they can help the brand achieve its strategic marketing goals (usually more sales) and be a great asset for the brand.

Step Three

·      Brands should open negotiations by presenting how they see the athlete fitting into their strategic goals and be transparent about important things like athlete compensation and potential bonus structures.
·      Athletes should open negotiations by presenting how they see themselves fitting into the brand’s vision and lay out any compensation and incentive concerns.

The key in all three steps is being realistic. In our experience there’s entirely too much poker playing during negotiations. A small endurance accessories sponsor (socks come to mind) is never going to be able to provide large sums of money, but it could be a great fit to work together on original content that helps both the athlete and the brand grow.

It is also important for both sides to come to the table with best intentions. The athlete should see themselves as an “employee” of the brand and work hard to help the company achieve its goals. The brand should communicate well with the athlete so that he or she is clear on what is expected.

One final tip: help make the world a better place by being straight forward and honest. Happy mediums can be achieved in any negotiation if the parties want them to. Trust us, while this all seems super basic, we have seen too many instances where communication breaks down (or never gets started) because of lack of clarity. Follow these three steps and you’re assured better outcomes that result in happier athletes and brands (and sports agents).

Early Termination/Injury Clauses in Endorsement Contracts (Pro Contracts 101 Series)

At Presidio Sports Management we believe that one of the ways that we can be of service to the endurance industry at large is by simply sharing good information.  Over the next couple of months we will be posting brief articles that provide important considerations for athletes and brands in drafting and executing endorsement contracts.  The first topic that we will address are termination clauses in pro deals.

Termination Clauses Generally

Most endorsement contracts have (or should have) a clause that details the circumstances when the brand can terminate an athlete's contract before the end of the contract term.  These clauses list out grounds for termination like if an athlete dopes, violates governing athletic body (e.g., USAT or USATF) or specific terms of the agreement. Athletes should make sure to read these clauses carefully to ensure that they fully understand under what conditions they may be terminated.  Now at this point you might be asking yourself why we should have such a keen sense for the obvious? Trust me, there are reasons why this post is not wasting your time.

Injury Clauses

One type of termination clause in particular warrants closer attention. Most termination clauses include language regarding when a contract may be terminated due to injury.  These clauses usually state that if an athlete is unable to perform or race for a certain time period, usually 60 to 180 days, the sponsor is allowed to terminate the sponsorship.

The problem with this type of contract language is that it is usually very vague.  What happens if the athlete is injured testing prototype equipment provided by the sponsor? What if the injury occurred while making an appearance for the sponsor?  Without the protection of clear contract terms athletes may be left without a key sponsor.  This is not to say that sponsors are evil and looking for ways to shed injured athletes off of their roster because they are not.  The point is only that athletes are left unprotected by vague clauses.  As they stand, if these clauses are acted upon the only recourse for an athlete to challenge the termination of the contract would be potentially costly litigation (or more likely, binding arbitration).

The best…most tried and true…guaranteed to never let you down…works every time way of dealing with vague contract language is to not let it happen in the first place.  Clear language protects the athlete and the brand.  Below is an example of a vague/bad clause followed by a more detailed/better clause.

EXAMPLE OF A BAD CLAUSE

“SPONSOR” shall have the right to terminate this Contract immediately upon written notice if “ATHLETE”: (i) fails any IAAF or NGB sanctioned drug test; (ii) breaches any term of this Contract; or (iii) any medical condition that prevents Athlete from competing or more than sixty (60) days.

EXAMPLE OF A BETTER CLAUSE

This Contract may only be terminated by “SPONSOR” upon written notice to “ATHLETE” if one of the following conditions occur: (i) athlete fails any IAAF or NGB sanctioned drug test; (ii) any material breach of a term of this Contract after there has been a failure to remedy the default within twenty (20) days; or (iii) any medical condition that prevents Athlete from competing or more than one hundred and eighty (180) days and medical condition was not caused due to equipment provided by SPONSOR or as a result of duties requested by SPONSOR as detailed in this Contract.

You will notice that while the two clauses are pretty similar there are some profound differences making the better clause, well, better. The main difference is that if the clause is acted upon, both sides will have a clear understanding as to why.  The ultimate outcome hopefully being that litigation will be avoided and we can all live happily ever after.

Knowledge is power people! 

A Simple Mission

Presidio Sports Management began as a simple idea with a simple mission: to provide high quality legal and management services to pro athletes, brands, teams, and race and event directors in the endurance industry in an honest, professional, and principled way.  Now that the launch is in full effect, we are looking forward to see what the future holds for this simple idea.

If you’ve checked out the website you will see that PSM put its heart on its sleeve by laying out the company philosophy on its own page.  Why did we do this?  Besides the obvious answer (because we wanted to let everyone know!), it is our goal to bring the highest level of professionalism and personalism (I just made that word up) to the endurance sports industry in every interaction.  And what better way to do this than by just telling people.  While this isn’t a typical approach (especially for lawyers), it is our approach, our principle. Period. (Still feel free to insert your favorite lawyer jokes here.)

So what does this mean for our clients?  It means that our clients will know our thoughts and can trust that we will have their best interests at heart. It also means that whether the stakes are low or super crazy high, we will apply the same principle in every matter.  From the very beginning as a company we have already applied and seen this principle in action.  One of our first clients hired PSM after we literally tried to convince them that they didn’t need our legal services and could have done it themselves.  Nothing speaks truer to our mission. (And we’ll take the positive karma points!)

As PSM grows (and it’s growing fast!) we will continue to circle back to our simple idea and ensure that every interaction that we have displays our integrity, loyalty, work ethic, and intelligence.