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Sponsorships

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! 

Sponsorship and Ultrarunning: Towards a New Professionalism

Recently irunfar.com (one of our favorite resources) posted an editorial in the AJW Taproom regarding the future of Ultrarunning. Nice job Logan! You’re wise beyond your years dude! (Check out the editorial at http://www.irunfar.com/2014/10/ultrarunning-and-the-future.html)

We wanted to expand on this discussion since we made it our mission at Presidio Sports Management (PSM) to help elite men and women in endurance sports reach a new level of professionalism in every interaction with brands and sponsors. We take the development of the sport very seriously. Since PSM is the only management firm representing ultrarunners (that we know about) we realize how high the stakes are for us to do this right for the sport. We want to raise the level of professionalism in a way that’s in line with the history and values of ultrarunning while being open-minded about the inevitable growth of the sport and the burgeoning opportunities available to athletes.

Let’s use sponsorships as an example of the growth needed in ultrarunning. Agreeing on a number of valid points mentioned in Logan’s post, we see a large disparity in the content of sponsorship agreements across brands.  

Part of the problem that we have observed since launching PSM is the lack of a clear industry standard in contracts. The only real “standards” that we have seen are derived from each individual company and the employee(s) within the company advocating for sponsorship and by the athlete themselves. Also at play is the athlete’s ability and comfort in marketing him or her self. This approach leads to mixed results with success hinging upon the negotiation prowess and business sense/experience of each individual athlete.  These mixed results also lead to mixed expectations from sponsors that lead to missed marketing opportunities for athletes.

From a sports marketing perspective, presenting yourself to a sponsor is just the tip of the iceberg for athletes. What about social media presence, blogging, or other ways to show influence, character, charisma and personality to sponsors? Athletes can be more to a brand than a simple marketing tool. A committed marketing person or team (along with a budget to properly 'sponsor' an athlete) can activate an athlete in greater ways to garner the highest value from the sponsorship. But as mentioned above, this is all negotiated…or should be.

We think that professional representation allows for more of a collective bargaining approach thereby leveling (and ultimately raising) the playing field by creating and applying industry standards that serve our athletes and the sport. This is where we feel that our expertise and market intelligence at Presidio Sports Management comes in. These companies are looking for exposure, increased awareness and ROI (return on investment). We know that athletes can deliver ROI and sponsors know it too. We also know that the “industry” can do a better job of sponsoring athletes in a way that allows them to race at their best while growing the brands that have invested in them and PSM can help them do just that.

This is truly an exciting time for the ultra and trail running community and we look forward to helping it grow with integrity.