Ronaldo’s Coca Cola Snub: The Lucrative World of Sports Endorsements
Football fans watching the pre-game interview for Portugal’s EURO 2020 clash with Germany would have seen Cristiano Ronaldo removing the prominently placed bottles of Coca Cola from the camera’s frame and prompting the audience to drink water instead. This simple move was widely reported to have erased $4 billion from Coca Cola’s market valuation, though vigilant market observers would have realized this was not the case, with the soft drinks company’s shares having already fallen in value prior to the snub. Yet, sportspeople such as Cristiano Ronaldo have a profound influence on their fans, leading to the creation of the lucrative world of sports endorsements.
Celebrity endorsements have long been a staple of marketing strategies, with the practice having its roots all the way back to Ancient Greece and Rome, where wines were endorsed by generals, politicians, and other people of fame within their societies. Sportspeople are a relatively new addition to the target lists of companies looking to increase the demand for their products.
Originally, endorsements by sportspeople were focused on sports-related products. Footballers would endorse football shoes, tennis players would endorse racquet producers, and golf players would use specific clubs from specific manufacturers. Yet, the reach of sportspeople nowadays and the loyalty shown by sports fans to their clubs and idols have made sports endorsement a multi-billion-dollar industry, marketing the whole range of products. The most successful sportspeople can expect to star in advertisements throughout the world and even their less widely known colleagues can expect to gain freebies and cash for posting pictures with a certain brand’s products on their social media.
Cristiano Ronaldo is the perfect example of the diverse range of products endorsed by sportspeople. Being the most-followed person on Instagram, with more than 300 million followers, CR7 (as Cristiano Ronaldo is usually referred to) posts almost daily, and his audience spans the whole world making him one of the most influential people in the world. Marketing companies know of his wide appeal and have offered extravagant sums to earn CR7’s endorsements, even for non-sports products.
In addition to a lifetime deal with Nike estimated to be worth around $1bn, CR7 has signed endorsement deals with Toyota, video-game producer EA, sports streaming platform DAZN, nutrition company Herbalife, anti-dandruff shampoo CLEAR, watch-maker TAG Heuer, and even runs his own clothing and underwear brands. As a result, CR7 earns more from his endorsement deals than he does in wages from his club, Juventus.
Getting lawyers involved
The huge sums involved have naturally meant that long and complicated contracts with sportspeople became necessary, with these contracts containing unique clauses and complex reward structures designed to incentivise the sportsperson to promote the brand’s products.
As explained earlier, top sportspeople can expect to have endorsement deals with dozens of businesses, yet those businesses will want to have some form of exclusivity over the use of the athlete’s image. Hence, endorsement contracts will confer a sector-specific exclusivity to the business paying the sportsperson. For example, Nike will include an obligation in the contracts of the sportspeople they work with to not have any deals with Adidas, Puma, or any other competitor of Nike regarding sports-apparel or sports shoes. Such clauses will have to be drafted carefully, with the ambit of the exclusivity clause usually being very specific and being subject to extensive negotiations. This is especially so due to the wide range of products sold by the world’s biggest brands. The athlete will have to disclose any other endorsement deals they have in place, and the consent of those businesses may be necessary whenever the sportsperson agrees to endorse another brand.
The endorsement contract will usually provide for the sportsperson's obligations in detail, covering matters ranging from the sportsperson's public appearances, social media posts and even the sportsperson's outfit choices. Sportspeople will have social media posts quotas that they have to meet under their endorsement deals and they may be mandated to attend a certain number of brand events, acting as ambassadors for the brand they represent.
Both during the brand events, and when posting in social media, the brand will have the right to moderate or even dictate what the sportsperson can say and write. Any failure by a sportsperson to abide by a brand’s guidelines when posting on social media or making public statements may lead to the termination of the endorsement deal and, in extreme cases, even a lawsuit by the brand against the sportsperson. As an example, Rashard Mendenhall, a top American Football player saw his lucrative deal with Champion terminated when he tweeted controversial statements about the killing of Osama bin Laden and 9/11.
The regulation of a sportsperson’s conduct does not end with the sportsperson's public appearances. Endorsement deals include widely drafted clauses that allow brands to terminate the deal when an sportsperson gets involved in any activity that may harm the brand’s reputation, such as the use of doping substances, being the perpetrator of domestic violence, being responsible for a car accident or even just being caught using recreational drugs.
Brands may terminate an endorsement even if there is no proof of the sportsperson's involvement in such activities; being allegedly involved in such activities might be enough for the brand to let go of the sportsperson. Wayne Rooney, an icon of English football, was taken off Coca Cola’s ads in 2010 due to allegations of cheating on his wife, something that was never substantiated with any evidence.
The reward structures in endorsement deals can range from the payment of a single fixed sum, to complicated algorithmic calculations that make the assistance of accountants mandatory. Frequently, athletes are paid based on the performance of their branding campaign. The sale of specifically branded products with the sportsperson's name or face on them make it easy for brands to calculate the impact of the endorsement and enable the adoption of performance-based rewards for the sportsperson. Even for products that are not directly linked to the sportsperson, the rise of online shopping over recent years, and especially during the Covid-19 pandemic, has allowed brands to gather more data that enable them to estimate the influence of the endorsement, including online activity metrics.
The top sportspeople in the world are heavily sought after by brands, which offer them scarcely believable sums for what is seemingly very little work. Yet, there is a reason that brands are competing for the signatures of the most famous sportspeople. Sports fans tend to be very loyal to their favourite sportspeople. Study after study has proven the positive correlation between a sportsperson's endorsement of a product and its sale to fans of the sport that the sportsperson is involved in.
The more popular and successful a sportsperson is, the stronger the correlation is between that sportsperson’s endorsement and the brand’s sales. It is for that reason that Roger Federer, Lebron James, Connor McGregor, CR7 and Lionel Messi all earn more than $90m per year, with around half of that coming in the form of earnings from endorsement deals. Brands have realised the importance of recruiting the top talent out there, engaging in a battle with other brands to retain their sportspeople and tap up those with the talent to become the best from an early age. In football, for example, young French prodigy Kylian Mbappe, signed a multi-million long-term sponsorship deal with Nike in 2017 when he was only 18.
Both sports and online shopping have risen in popularity over recent years, creating the perfect environment for sportspeople to maximise their earnings through endorsement deals with brands seeking to increase their sales and the strength of their brand. The sums involved in these deals have necessitated the use of complex contracts which mandate how sportspeople talk, post, and behave, and specialised lawyers in this field are in high demand, with even more growth expected in this field.