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Are commercial deals more financially rewarding than professional sports contracts?

By Stefanos Gregoriou, The Sports Financial Literacy Academy, Nicosia, Cyprus  

Due to their relatively short careers, athletes need to create multiple revenue streams, diversifying their sources of income beyond their athletic contracts.

This type of diversification can help athletes to optimize their earning potential, as part of their long-term financial strategy. As a result, athletes today tend to get involved in numerous off-field arrangements, including endorsements and sponsorships, which often provide them with as much or even more money than their sports contracts.

In fact, some athletes make far more money selling their celebrity image off the field than they make from their professional salaries. 

Famous and recognized athletes land lucrative contracts, through commercial collaborations with companies that want the public to associate their brands with the celebrity athlete’s name, image, likeness (NIL) and notoriety. Name recognition is a significant parameter. High-profile athletes, with great media influence and many followers, are excellent candidates for endorsements and sponsorships, thus increasing their overall earnings to a great extent.

LeBron James, the basketball legend and entrepreneur, is undoubtedly a great example.

 LeBron has the NBA largest athletic shoe contract, amongst current players, as well as a long list of endorsement partners, such as Rimowa, Walmart, GMC, AT&T, PepsiCo, and, most recently, Crypto.com. In contrast to his US$41.2 million sports salary, his off-court earnings are expected to surpass $80 million in 2022. This is an outstanding paycheck from endorsement and sponsorship deals of which many professional athletes would be jealous.

Another extraordinary example is Tiger Woods.

Many consider Woods to be the greatest golfer the world has ever seen. Bridgestone, Discovery Communications, Inc., Hero Motocorp, Monster Energy, Nike, and Rolex are amongst a few of Woods' commercial partners. Woods' golf earnings for 2022 are only US$40,000, yet he earns US$68 million off the field. His income off the field accounts for about 99.9% of his overall earnings, making his main job - playing competitive golf - seem like a side show.

Despite these extraordinary examples, it is important to note that most athletes make much more modest salaries and have zero or only a few endorsement and sponsorship deals. Not every athlete is expected to receive the same compensation, whether through a professional contract or commercial arrangements.  

It is worth noting that there are also a number of extraneous factors that affect a professional athletes’ compensation: one such factor, is the nature of the athlete’s sport.  

Basketball, for example, is immensely popular in the United States, and famous professional athletes in this specific sport may earn large amounts, in contrast to soccer, which is less popular.

Sports, such as soccer, may be more popular in other locations, like Europe, compensating outstanding athletes with relatively larger sums both on and off the field.  Despite the existence of extraneous factors, however, it is really up to the athletes how they will go about developing their brands and making a name for themselves within their own athletic sphere and beyond.

Given the high level of commercial revenues that athletes earn these days, it is important that they invest time and effort in building their personal brands, thus making their NIL a very valuable asset.

The payoff can be quite substantial and it can definitely contribute to the athlete’s long-term financial sustainability, especially in their post-playing future!

For further advice on developing and commercializing an athlete’s NIL, log onto:

‘www.moneysmartathlete.com’



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The editors of  the Journal Sports Law & Taxation are Professor Ian Blackshaw and Dr Rijkele Betten, with specialist contributions from the world's leading practitioners and academics in the sports law and taxation fields.

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