Tiran Gunawardena

how football endorsement deals are done

Tiran Gunawardena
how football endorsement deals are done

“Reevaldo’s on fire, your defence is terrified!”

The Brazilian wonderkid, Reevaldo, has had a phenomenal start to the new football season for his new team, King Cross United FC! He’s scored 12 league goals in their first 16 games, contributing magnificently all over the pitch, and has delighted fans with his South American flair and wizardry. He’s won back-to-back goal of the month awards, and Kings Cross United home and away matches are selling out fast as all their fans want to see him action.

As a result, he’s making headlines for all the right reasons and, if his good form continues, there is even talk of him possibly making an international debut as Brazil look to inject some youth into their strike-force after their disappointing World Cup.

On the back of all this new fame, Reevaldo’s agent, Jaco Moreno, has been inundated with calls from brands and marketing agencies looking to buy into brand Reevaldo and for him to endorse their products.

These endorsement contracts could potentially generate significant income for Reevaldo in addition to his Kings Cross United salary and playing bonuses, and Jaco Moreno will need to carefully calculate which endorsement deals will earn the most for his client (and him) over the next few seasons, but also reflect well on Reevaldo and improve his image. Jaco Moreno knows that Reevaldo’s career will only continue for another 10 years or so and commercially it’s vital to maximise his earnings now, especially while he’s such hot property.

There are, however, many other factors for Jaco and Reevaldo to weigh up as they sit down one afternoon at Reevaldo’s house to talk through the options.

The Kit Deal

Most professional footballers have kit (or ‘boot’) deals with sportswear/sports shoe brands, under which the player agrees to wear only that brand’s football boots (and possibly other kit produced by the brand) when playing matches and training.

Reevaldo is no different. Before he was transferred to Kings Cross, he had already entered into a boot deal with the global sports brand, Abibos. However, when he signed that deal, Reevaldo was only 17 years old and not very well known outside Brazil. As such, Abibos only pay him a relatively low fixed annual fee to wear their boots and other kit (including their shin pads, casual clothing range and sunglasses).

The good news for Reevaldo is that this original Abibos deal is about to expire, Abibos want to renew the contract on much improved financial terms and Abibos’ arch-rival, Cougar, also want to sign him up!

Abibos or Cougar?

As Reevaldo and Jaco talk through the 2 competing offers from Abibos and Cougar, it becomes obvious quickly that this will not be an easy decision.

Financial terms

On the one hand, Abibos are offering Reevaldo a fixed 5 year contract renewal, which includes a very high fixed annual fee (or ‘retainer’). This means that he and Jaco can calculate quite easily how much he is likely to earn over the course of the deal. The amount will only reduce slightly if Kings Cross United (or whichever other club he plays for) are relegated, and that is very unlikely, and it will not reduce if Reevaldo is injured or loses form or is not selected for his club or country. In other words, there is a significant financial upside without too many strings or risk attached.

On the other hand, Cougar are offering him a shorter 3 year deal and a lower fixed retainer. However, Cougar are also offering a wide range of very generous bonuses if Reevaldo is selected to play for Brazil, plays in a Copa América or even the World Cup, and if – as expected – Kings Cross United win the league or any of the domestic or European cup competitions. They are also offering fantastic bonuses linked to the size of Reevaldo’s social media following and if it can be shown that his Cougar endorsements result in an increase in sales of Cougar products during the term of the contract. Jaco thinks that, if all goes well, Reevaldo could end up being one of the wealthiest players in the country from endorsing the Cougar brand!

The endorsements

Like most boot/kit deals, both Abibos and Cougar are insisting that Reevaldo only wears their products when he plays matches, is training, is interviewed on TV or is filmed or photographed while on official duty or when the media are present.

The Abibos products

Abibos have told Jaco they will be quite relaxed about specifically what products they want included in the deal and for Reevaldo to endorse. They have only talked, so far, about an endorsement of their new ‘Abibos Bazooka’ boots and their range of Bazooka leisure wear clothing and trainers. This potentially gives Reevaldo the chance also to enter into separate deals with other companies to promote their goods, for example sun-glasses and watches.

Jaco has made it very clear to Abibos that Reevaldo is already obliged by Kings Cross United to wear the club’s official kit/training kit and other leisure wear when he is on official King Cross United duty (e.g. when he is travelling to and from club matches on the team coach, training and warming-up etc.). The official club kit is produced by Goalah, an Abibos competitor. This is a perfectly normal arrangement in professional football and, as such, Abibos are relaxed about it1.

However, Reevaldo will be expected to wear their Bazooka boots and shin pads when he is playing and training, and wear the Abibos leisure wear and trainers when he is not on official club duty. Jaco is pretty sure that this will not be a problem under the terms of Reevaldo’s King Cross United playing contract, but he will have to double-check the position. The last thing Jaco wants to do is to expose Reevaldo to a potential claim for breach of contract from his employer!

Jaco knows that Abibos already sponsor the Brazilian team under a long-term deal. This is good news because it means there will not be any commercial conflict between a personal endorsement deal with Abibos and Reevaldo’s duties as a Brazilian player to wear Abibos training and leisure wear when on official Brazil national team duty.

The Cougar products

In contrast, Cougar are really keen for their proposed Reevaldo deal to cover a really wide range of Cougar produced and branded products, including their football boots, shin pads, trainers, clothing range, sunglasses, hats and winter sports range, shower gel and other male grooming products and there is even talk of Cougar soon releasing their own branded headphones and wanting Reevaldo to wear them at all times, including when on international team duty (which is not likely to please Abibos – the Brazil team sponsor – very much at all).

Brand quality/reputation/moral dilemma

Reevaldo is confident that, if his good form continues and he carries on working hard, he can become an international superstar and, as a result, become very wealthy from the deal offered by Cougar. Some things are troubling him though.

Firstly, he does not like the Couger boots because, having tried on various pairs in their different styles and ranges, he finds them uncomfortable and is worried this might have a detrimental impact on his performances on the pitch.

Secondly, as a brand, he thinks they are also nowhere near as cool as Abibos, which as a brand is popular with the rest of the Kings Cross United team and all of his footballer friends back in Brazil. Abibos have a great brand, which is edgy and fun, and which Reevaldo would love to promote on his social media platforms, and all their sports goods and clothing are excellent quality.

His concern is that an association with Cougar might damage his marketability, especially as Cougar want to include a right to renew his contract after the initial 3 year term if all goes well, and that could mean he ends up locked in as a Cougar brand ambassador for a very long time indeed.

To make matters worse, Reevaldo’s agent has recently seen newspaper stories alleging that Cougar employs child labour to produce their boots in Cambodia and has been involved in a number of shady tax avoidance schemes. The founder of Cougar is known to be a bit of a maverick and prone to making highly controversial comments to the press when intoxicated, which seems to happen very regularly.

Aside from the reputational risk, Reevaldo and Jaco also agree that Abibos have also been very supportive of him and his family from a young age and that he and Jaco have a great relationship with the staff in the Abibos football division. They’ve really become an important part of ‘Team Reevaldo’.

How to proceed?

After a long discussion, Reevaldo and Jaco eventually decide they prefer the Cougar offer as it really is so much better financially (assuming all goes according to plan with Reevaldo’s playing career). Reevaldo asks Jaco (and their English legal team) to advance discussions with Cougar and to negotiate an endorsement contract with them as soon as possible (and certainly before Abibos withdraw their offer or news of the Cougar offer leaks to the press).

When doing so, Jaco has promised Reevaldo that he will iron out various important or particularly sensitive terms of the deal and, if he cannot secure an acceptable position from Cougar, to walk away and take the Abibos offer instead. Jaco prepares a list of deal points for further discussion:


The key Cougar deal discussion points

The Cougar products / exclusivity

  • Precisely what Cougar products will Reevaldo be expected to endorse (now and throughout the term of the deal)?

  • What third party or competitor brands/products will Reevaldo be allowed to endorse while the Cougar contract is in place, particularly audio equipment? Presumably, Reevaldo will be completely free to endorse categories of products that are not produced by Cougar at all, including watches, cars, alcoholic drinks etc.?

  • Aside from during matches and training sessions, at precisely what other times will Reevaldo be required to wear Cougar products? What happens if, for example, he is photographed by the paparazzi while out for dinner with friends and he happens to be wearing competitor or other clothing or footwear? Will the contract include specific financial penalties if Reevaldo inadvertently slips up?

  • Will Reevaldo be contractually required to promote the Cougar brand and products across his own personal social media platforms and, if so, how often and by what means? Who will produce this content?

  • What happens if Abibos – the current Brazil team sponsor – insist that Reevaldo must not wear Cougar headphones while on international official duty? What constitutes ‘official duty’ in this context?

  • Will Reevaldo be entitled to use football boots produced by other brands if Cougar cannot produce a football boot that Reevaldo finds comfortable? If not, what special modifications to the boots will Cougar agree to make and how/by whom and at whose cost?

  • If Cougar intend to release a new range of boots for Reevaldo to wear, could they agree to include Reevaldo in any product testing, or in the design process?

  • How often and in what quantities will Cougar boots and other products be delivered to Reevaldo? How will deliveries be made?

  • If a new range of specifically Reevaldo branded football boots (or other products) is launched by Cougar, will Reevaldo be entitled to further bonuses?

Cougar’s right to extend the contract
  • Under what circumstances will Cougar be entitled to extend the contract beyond the initial 3 year terms and for how long and on what terms?

  • Rather than Cougar being the only party allowed to extend the contract, could Cougar instead agree to include a right for each party to discuss, during a specific negotiation window, a possible extension on terms they both agree? This approach will provide greater flexibility and ensure that neither party will be forced to renew if they don’t want to.

Financial terms
  • Who will monitor (and how will monitoring take place) and decide whether Reevaldo’s endorsements lead to an increase in Cougar sales, thereby triggering the various proposed bonus payments? Will specialist marketing agencies be retained to evaluate sales performances and, if so, who will appoint them (Reevaldo or Cougar?) and at what and whose cost?

  • When Reevaldo travels on Cougar-related business, will Cougar pay his expenses and will any caps apply? In particular, will he be allowed always to fly first-class and stay in hotels of his choosing?

Other key ‘commercial’ terms
  • Personal appearances: on how many occasions per year will Reevaldo be expected to make personal/celebrity appearances on behalf of Cougar? Where will appearances take place and what types of duties will he be expected to perform, for example will this include photo shoots, social media appearances, live ‘chats’ and store openings etc.?

  • How much notice will be given to him before the staging of each such personal appearance? Will Reevaldo be expected to appear in any television commercials (or similar) and, if so, will Cougar pay him more for doing that? Surely he will not be expected to appear if any of the required dates conflict with his club or country playing duties, or if he is injured or unwell?

  • Rights of approval: will Reevaldo have a prior right of approval with respect to Cougar’s use of his image or his intellectual property (such as a trademarked Reevaldo name) in their advertising/promotional materials and, if so, how far in advance will such promotional materials be provided to him for approval? In what circumstances will Reevaldo be entitled to withhold approval (e.g. is this an unconditional right, or must it be exercised reasonably)?

Other key ‘legal’ terms
  • Reevaldo termination rights: given the news reports of Cougar child labour abuse and tax avoidance and the unconventional behaviour of the Cougar founder, will Reevaldo have a right to terminate the contract if he can demonstrate that his continued association with Cougar is causing damage to his brand (a so-called ‘morality clause’)? If so, under what circumstances and how will Reevaldo be entitled to exercise this right – what must he demonstrate (and to whose satisfaction) beforehand?

  • Cougar termination rights: similarly, will Cougar want to include a morality clause in their favour, meaning that Cougar could terminate the contract if Reevaldo does something to damage the Cougar brand, for example through the use of unlawful performance enhancing or social drugs, or if he is involved in match fixing, convicted of a serious criminal offence or is sacked for another similar reason by King Cross United? Also, what are the implications if Reevaldo is forced to retire due to injury while the contract is still in force?

Deal done!
They got there in the end! After tough and lengthy negotiations between Jaco (and his legal team) and the Cougar team, all of the terms of the contract have been agreed to each party’s satisfaction. Reevaldo and the Cougar Global Marketing Director each sign the contract on the dotted line. Reevaldo is now a leading Cougar international brand ambassador and he proudly wears a pair of Cougar ‘Weapon’ headphones to the press conference at which the deal is announced to the world’s press. He also announced the deal with posts on his official Instagram, Twitter and Facebook pages.

football-instagram-headphones.jpg

Jaco and his legal team negotiated the deal skilfully. They carefully and subtly leveraged the competing interest from Abibos in their favour and to put pressure on Cougar to accept key commercial and legal points. They agreed a 3 year deal with an option for Reevaldo to renew for a further 3 years on terms he finds acceptable. Jaco even persuaded Cougar to pay an increased amount of the fee as a fixed retainer and not as performance based bonuses. Their concerns about Cougar’s reputation have been addressed by including some very specific triggers that enable Reevaldo to exit the contract if Cougar is engulfed in scandal. All in all, it really couldn’t have gone better. Most importantly, Reevaldo is delighted with his new deal and was eventually persuaded that the new range of Cougar boots will be a great fit and look good. He’s certainly very impressed with his Weapon headphones.

  1. Many extremely well-known footballers have entered into long-term personal brand endorsements deals despite playing for football clubs which are sponsored by competitors. For example, Ronaldo agreed to be a ‘lifetime’ Nike brand ambassador whilst playing club football for Real Madrid (sponsored by Adidas) and he subsequently moved to Juventus (also currently sponsored by Adidas).