Endorsement Deals

Making millions from sports isn't the only way athletes can make big money. Big companies love signing star athletes to help them with sales and marketing. When audiences see their favorite athletes on advertisements it makes them want to buy the company's product that the athlete is wearing or using. As a kid I always wanted a new pair of Michael Jordan sneakers. Even today I browse through Jordan shoes when I need a new pair. Athletes can make huge amounts of money from endorsements depending on the company and how popular the athlete is.

Michael Jordan, who many believe to be the greatest basketball player of all time has made a name for himself in the shoe industry. He signed a $2.5 million deal over 5 years in 1984 with Nike. This was right after winning a national championship at North Carolina and being taken 3rd overall in the NBA draft. This deal was huge for both Nike and Jordan, as the shoes are still very popular today. Jordan's clothing line is very popular as well, selling shirts, shorts, socks, hats, etc. It is estimated that Michael Jordan makes around $100
million a year from Nike. To put this in perspective, Jordan made a total of $90.2 million dollars throughout his whole NBA career. Every other basketball shoe that was bought last year was a Jordan shoe. You cannot walk into a shoe store like Foot Locker or Finish Line without seeing the new pair of Jordan shoes on display. Michael Jordan's success playing basketball helped create the most popular basketball shoes of all time.

Jordan Spieth, a 22 year old who is taking the golf world by storm lately, is endorsed by Under Armour. He just broke the record for the most prize money earned in one golf season, but also sees a nice paycheck outside of golf from Under Armour. He is currently the number one golfer in the world and he is getting a lot of interest from golf fans. When young golfers see him wearing Under Armour, they become interested in the brand and want to get a shirt or hat of their own. He also has endorsement deals with Rolex, NetJets, BioSteel Sports Supplements and Perfect Sense Digital. Forbes has him making $11 million dollars in endorsement deals per year. If he keeps it up, he could see the same amount of money that Tiger Woods was bringing in from endorsement deals during his time as the best golfer in the world.

Endorsement deals, as we can see, are huge for both the company and the athlete. Almost any young child who plays a sport looks up to a certain athlete and wants to be just like them. In order to be like them they think they need to wear the same gear that certain athlete does.  Without Jordan, Nike may not be near where they are today, as you can imagine how much more money that have made per year after signing the star athlete.

Endorsement Deals... Because making millions from playing the game just isn't quite enough. 

Are Long-Term Deals Worth It?

Your favorite professional sports team just signed the biggest name in free agency to a 7 year deal worth big time money.  You love it, but will it be worth it?  It depends.  Many long-term contracts these days end up not working out so well for the team.  A lot of these contracts are signed halfway through the player's career, leaving the player with only a few quality seasons left in many cases. These contracts usually contain quite a bit of guaranteed money for the player as well.  Let's take a look at some long-term deals that haven't worked out quite as hoped.

Vernon Wells, Toronto Blue Jays - 7 Years / $126 Million

Wells signed his contract with the Blue Jays after the 2006 season.  For the next three seasons he struggled with injuries and didn't have a season worth noting until 2010 where he batted .273 with 31 home runs.  The next season he was traded to the Los Angeles Angels, and he never returned to form from there on out.  He had his worst season ever with his first year on the Angels, batting .218 with 86 strikeouts.  He was eventually traded to the Yankees in 2013 and had his final season as a player there while batting .233.  Vernon never found his groove once signing this big contract and cost all the teams involved some big money for poor player performance. 

JaMarcus Russell, Oakland Raiders - 6 Years / $68 Million

JaMarcus Russell hadn't play a single snap in the NFL when the Raiders took this big gamble on him in 2007. He had his first career start on the last game of the regular season, where he threw two interceptions and lost a fumble.  He finished that season with only 373 yards passing.  Russell's 2008 and 2009 season were so lousy the Raiders decided to release JaMarcus in May of 2010.  Russell only saw $39 million of the contract, but also only played 3 season, averaging that out to be $13 million a year for a player who struggled continuously throughout his short career.

Not all long-term contracts turn out to be as poor as the ones above, but it is very difficult for a team to find a player who will play well throughout a whole long-term contract worth big money.  Teams have to evaluate the age of players and decide whether or not they will be worth the investment for years to come.  Sometimes taking the next best guy for a shorter and cheaper contract is the way to go. 

About Me

My name is Austin Eller and I am a senior at the University of Northern Iowa majoring in both Finance and Management Information Systems.  I have always been a huge sports fan and have played sports for the majority of my life.  As of late I have been interested in professional teams and players and how they control their finances.  Many know that professional athletes make huge amounts of money, but there's a lot more to it when it comes to teams and where they get all their money from. There are so many different ways that a team or player can make money.  This blog will cover many different financial areas of sports.

Check out my Twitter page https://twitter.com/profsportsmoney