By Mina Quist-THERSON & Michael APALBILAH B.Y
For many African athletes, signing an endorsement deal early in their careers represents a huge milestone, bringing with it both financial rewards and visibility. Given the very high attrition of athletes as millions of talents battle to make it through the professional athlete funnel, bagging an early endorsement deal can lay the foundation for a promising career.
While it’s thrilling to see young talent being recognized and rewarded, there are potential pitfalls to be aware of. In this article, we explore how athletes can avoid the traps of signing an endorsement deal early in their careers and protect their future opportunities, ensuring they can maximize their potential both on and off the field.
What is an endorsement deal?
An endorsement deal is a type of agreement where a company or brand (“the sponsor or endorsee”) pays an athlete, celebrity, or public figure (“the endorser”) to promote or publicly support its products or services. In return for their endorsement, the endorser often receives compensation, which can include cash payments, stock options, free products, or royalties based on sales.
Endorsement deals typically involve public appearances by the endorser at the endorsee’s promotional events and product launches, the use of the endorser’s name and image or likeness for advertising campaigns as well as the endorser promoting the endorsee’s services or products on their platforms.
Analysis of the early endorsement deal
Endorsement deals are fundamentally contractual agreements and must, therefore, be binding and legally enforceable by all parties involved. The law upholds the principle of freedom of contract, allowing parties to enter into agreements of their choosing. Provision is, however, made to intervene in a private contract in specific circumstances, such as:
- when the stronger party exploits the weaker party,
- when the terms are excessively oppressive or unjust, or
- when the weaker party lacks the ability to negotiate or fully comprehend the implications of the agreement.
While it is acknowledged that parties to a contract may not always negotiate on equal terms, as long as the thresholds listed above are not crossed, the law will respect and enforce their agreement.
More often than not, athletes who sign endorsement deals early in their careers come to the table in an inferior bargaining position. They usually do not have enough financial resources at their disposal as compared to the sponsor and are at best local champions.
Their sole leverage lies in their budding careers and the potential marketability. In most cases, athletes early in their careers need a lot of investment to enable them focus on their sport.
While sponsors may enter negotiations from a relatively stronger position, they expose their resources and brands to substantial risks. For instance, less than 4% of football youth academy prospects go on to play elite professional football and of those who make it to professional football, fewer than 1% become elite stars.
These statistics, along with other factors, play a key role in determining the value a sponsor attributes to their association with a budding athlete and how well it aligns with the sponsor’s business goals.
In Africa, budding talents are often represented during negotiations by friends, close family members, or coaches. While well-intentioned, this approach may not serve the athlete’s best interests.
The complexities involved in negotiating endorsement deals require a deep understanding of legal, financial, and commercial aspects. To ensure fair terms and protect their long-term interests, it is crucial for athletes to engage experienced legal professionals and qualified agents to represent them during these negotiations.
The advice of these professionals can be crucial in avoiding the pitfalls that come with the signing of early endorsement deals. Agents and legal advisors understand market trends, the value of the athlete, and how to negotiate terms that protect the athlete’s interests.
Key considerations to avoid potential pitfalls
Endorsement deals at the early stages of an athlete’s career present several potential challenges. These include limitations on future opportunities, inadequate compensation, misalignment with the athlete’s personal brand and identity, being locked into long-term unfavorable contracts, and low fixed payments over an extended period, among others.
To mitigate these risks, it is crucial for athletes and their representatives to carefully evaluate endorsement deals, particularly in the early stages of their careers, by considering the following factors.
- Restrictive or Exclusivity Clauses
Given the sponsors’ leverage at this stage, it is common for them to request exclusivity. Exclusivity prevents the athletes from signing with competing brands or pursuing opportunities in other product or industry categories.
While exclusivity is often valuable to a sponsor, it can significantly limit an athlete’s ability to explore lucrative deals among others with other brands. Adopting narrowly tailored exclusivity clauses can help balance the interests of both parties. Until early 2024, Tiger Woods had a longstanding deal with Nike, which he first signed at the age of 20 upon becoming a professional golfer. Under the terms of the agreement, he was reportedly required to exclusively wear the sportswear giant’s apparel. However, after sustaining an ankle injury, Woods switched to another brand’s footwear, citing its suitability for his health needs.
This situation highlights how rigid exclusivity clauses can limit an athlete’s choices, even when personal or health considerations come into play.
- Choose suitable contract duration
For athletes, endorsement deals can be categorized as short-term, medium-term, or long-term. A short-term contract typically lasts less than a year and is often tied to a specific tournament, season, or marketing campaign. A typical example is the contract between Usain Bolt and Visa as part of a campaign leading up to and during the 2008 Beijing Olympics. As the name suggests, these contracts conclude quickly, allowing both parties to avoid long-term commitments.
Short-term deals provide sponsors with the opportunity to test an athlete’s marketability and effectively drive targeted product launches. For athletes, these contracts offer flexibility, as they are not bound by restrictive conditions for extended periods and can explore new opportunities once the agreement concludes.
Medium-term contracts, typically lasting between 1 to 3 years, provide a balance between short-term flexibility and long-term commitment. For example, Naomi Osaka partnered with Citizen Watch from 2018 to 2021 following her rise to fame, showcasing how such agreements can effectively leverage an athlete’s growing influence over a defined period.
Contracts lasting more than four years are considered long-term and are often extended indefinitely. Some athletes even secure lifetime endorsement deals, such as LeBron James with Nike[1] and Lionel Messi with Adidas[2]. These contracts signify a strong commitment from the sponsor, often involving substantial financial investment. For the athlete, they offer stability and long-term security.
Each type of contract comes with its own set of advantages and disadvantages. An informed decision should be made regarding the type of contract to adopt, with clauses carefully negotiated to reflect the athlete’s current value and potential future value over the short, medium, and long term.
- Consider Performance-Based Clauses
Including performance-based clauses in endorsement deals provides flexibility for both parties. These clauses enable athletes to renegotiate terms or earn bonuses upon achieving specific milestones or accomplishments, ensuring that their endorsement agreements align with their growing career and marketability. Similarly, such clauses allow sponsors to adjust the deal to reflect the value their brand gains from its association with the athlete.
After Serena Williams announced herself on the world state as a global superstar, Nike offered her a deal with performance bonuses for winning Grand Slam tournaments and reaching No. 1 in the rankings.[3]As she cemented herself as a dominant force, this relationship evolved to a more stable relationship.
- Include Brand-Alignment Flexibility
An athlete must insist for the endorsement deal to include brand alignment flexibility clauses. This is important because the athlete’s image and career trajectory can change over time, and their brand preferences may change. Having brand alignment flexibility allows the athlete to walk away from a brand that no longer aligns with their personal brand and values or can hinder future opportunities, growth or even tarnish their brand.
There are many instances where an athlete’s newly discovered beliefs or aspirations become incompatible with the brands they represent. To minimize the impact of such situations, it is essential to include provisions that address these potential conflicts. Incorporating alignment flexibility clauses into contracts can provide a practical solution, allowing both the athlete and the brand to navigate these changes while preserving their respective values and interests without suffering significant financial loss.
- Consider the Full Career Arc
A career arc represents a person’s professional journey, encompassing its beginning, high points, challenges, and changes. Athletes should adopt a long-term perspective when signing early deals, factoring in not just their current standing but also their aspirations for the next five, ten, or even fifteen years. As their career progresses, the sponsorship landscape will naturally shift, making flexibility in agreements essential. Athletes should prioritize deals that align with their personal and professional development and account for their eventual transition from peak performance to ventures such as punditry, media, coaching, or entrepreneurship.
Sponsors, too, can benefit from this approach by aligning their products with the athlete’s evolving career stages, ensuring relevance and mutual value throughout the journey.
- Image and Intellectual Property Rights
In endorsement deals, sponsors frequently leverage an athlete’s image, likeness, and personal brand to promote their products or services, creating a strong association between the athlete’s success and the sponsor’s identity.
This often includes the use of photos, videos, and social media content in various promotional mediums such as billboards, advertisements, packaging, and digital campaigns, aimed at increasing visibility and consumer engagement. Athletes should critically assess the extent of access granted to their image and likeness, ensuring clear boundaries are set to protect their personal brand and long-term interests.
Retaining a reasonable level of control allows athletes to remain flexible and strategically leverage their brand in other ventures without unnecessary limitations. As their public persona evolves beyond sports, this control becomes even more crucial. Moreover, athletes can negotiate terms to limit the geographical markets where their image can be used and specify the precise ways in which the sponsor may utilize their likeness, ensuring alignment with their personal and professional goals.
Conclusion: Think Beyond the Present
Early signings can feel like a dream come true for many young athletes. However, endorsers, particularly athletes in emerging markets like Africa, where opportunities are expanding, must adopt a strategic approach to early endorsements. With thoughtful planning and the right mindset, they can optimize their early opportunities, secure future prospects, and prioritize their long-term well-being.
[1] https://www.satra.com/bulletin/article.php?id=1623
[2] https://www.cbssports.com/soccer/news/barcelona-star-lionel-messi-signs-new-lifetime-contract-with-adidas/
[3] https://theworldlink.com/sports/serena-nike-agree-on-sponsorship/article_edd1607c-535b-545c-baf8-b429c155e170.html
[i] The authors are lawyers at AB & David Africa, a pan-African business law firm with independent offices in six (6) countries and a network of firms in 30 African countries.
Mina is the Deputy Managing at the Ghana Office of AB & David. She heads the Finance & Banking as well as the Real Estate & Property Groups in the Ghana Office. Mina is a die hard supporter of Accra Hearts of Oak and Manchester United
Michael Apalbilah B.Y specializes in Public Sector Advisory & Government Business, Dispute Resolution and Africa Trade. He holds a DALF C1 certification from the Centre International d’Études Pédagogiques in France. Beyond his legal expertise, Michael is a passionate football enthusiast and a Liverpool fan.
