Athlete Investors… Sort Of.

There’s always been a preconceived notion in the endorsement industry that the biggest giants – be it Nike, Apple, Gatorade etc. – have a hugely large advantage over smaller and midsize “competitors” in recruiting and retaining spokespersons.  It’s largely accurate, these established corporations and conglomerates have more assets to offer, a Grand Canyon sized room for error, and the inherent benefit of being aligned with such recognizable brands.  Potential endorsers WANT to be associated with them.

The past 6-8 years give or take, has seen a slight shift in this.  Or at least, perhaps, a ripple created.  Beginning with Vitamin Water, in the mainstream, who partnered with David Ortiz and Brian Urlacher, a trend was set of startups working with endorsers who were willing to take equity as compensation and little or even no cash.  It’s become widespread, especially in the energy drink industry.

The latest is BodyArmor and its SuperDrink.  Or, the latest newsworthy.  Last week BodyArmor signed MVP and two-time World Series Champion Buster Posey to a partnership to be a spokesperson.  The new performance drink has a very long list of star-studded names (and now partners) including Mike Trout, Rob Gronkowski, Ray Rice, LeSean McCoy and now Posey.

This (relatively) new practice is certainly mutually beneficial, but produces a new element not commonly seen in the past – risk on the athlete side of things.  Sure, if companies who had the capital or underwriting sponsors to cover athlete fees ever tanked for non-business reasons (or even business reasons), that association could hinder the spokesperson’s personal branding and perception.  But at least at the onset of campaigns, there was financial compensation.  And even with poor results of brands, many contracts would have line items protecting the athletes with insurance etc.

Not to say that new deals wouldn’t.  Now more than ever legalities and minute specifics and conditions are written into contracts.  But still, athletes and celebrities deal in dollars and most see themselves as commodities working off market value and should be paid as such.  Working in equitable terms guarantees no immediate return.  Which, for the brand, is a very good thing.  This new risk and “skin in the game” creates an incentive for the endorsers to perform when asked.  If they’re better at increasing the brand equity of these companies, their reward increases.

This also opens up capital and operating budgets for other expenses and investments.  In the case of BodyArmor, their roster of athletes could command more than $10 million if dealing in cash terms.  With a shareholder agreement, BodyArmor has been able to retain and grow that portfolio, while sponsoring events like World of Dance and Rock Solid Mud Run to increase their footprint in more targeted demographics and geographies.

For the endorsers, their investment is time and effort.  In the short-term, many charities and their programs are included in programming.  The endorsers also have more of a say in the strategic planning and execution of initiatives rather than signing on for a specific package.  With the threat of hopping into multi-million dollar heads, aligning with a product they truly do believe in and want to see grow, rather than those that afford the greatest value, also carries a certain emphasis.  At least to some who have verbally said as much.

Looking at the bigger scope, these deals provide a certain measure of future security as well – if these brands are Under Armour or Vitamin Water in 5 years, they’re initial “sacrifice” will certainly be worth it.  Further, operating within this framework lends a type of business acumen that could potentially serve them once their career has ended.  Maybe it’s just continuing to endorse the product if the name carries that much weight, maybe it’s becoming a marketing executive within the company.  Or perhaps ideally, the spokesperson is sitting on the Board helping to make large-scale business decisions.

For the industry as a whole, these new structures for payouts have created new levels of thinking and projecting for new and thus smaller companies.  There are countless startups in the sunglasses, watches, apparel, social media, health & wellness and many other industries.  With the right business plan, pitch, and financial support, these companies have a new avenue to market themselves, be more efficient with capital and revenues, and procure new partners wanting to grow with the brand…and being assets themselves.

With an endless stream of new brands looking for validity and recognition combined with more and more high-level talent willing to engage in equitable programs, these partnership transactions along with new and innovative ways to activate them will continue to grow in the coming years.

 

BodyArmor Sources:

http://www.marketwire.com/press-release/bodyarmor-superdrink-catches-a-winner-in-reigning-mvp-world-champion-buster-posey-1792002.htm

http://www.forbes.com/sites/lancemadden/2012/10/10/bodyarmor-superdrink-up-to-five-athlete-endorser-investors/

http://www.worldofdance.com/2011/10/31/bodyarmor-makes-world-of-dance-debut-in-san-diego/img_5596/

http://www.dkeventmarketing.com/2012/04/23/bodyarmor-signs-sponsorship-deal-with-rock-solid-mud-run/