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Active Brands Reexamining Endorsement Deals in Intermittent Sports World

Rosemary Feitelberg and Jean E. Palmieri
·15 mins read

After months of a world without professional sports, the leagues, elite athletes and their sponsors hope that pandemic-weary consumers will tune in now that games are finally restarting. But where endorsement deals will go from here is another story altogether.

Some have greeted the delayed start of the National Basketball Association’s season and current playoff rounds with a shrug. The season may be short-lived anyway though, as it’s been reported several NBA players are discussing a boycott following the police shooting of Jacob Blake in Kenosha, Wisc., on Sunday. On Wednesday, Milwaukee Bucks players didn’t take to the floor for their game against the Orlando Magic, and following that, the NBA postponed the night’s two other playoff games. (Major League Baseball’s Milwaukee Brewers as well as four WNBA teams later joined the NBA teams’ stance and called off their Wednesday games.)

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Others are wary of how the recent spikes in coronavirus cases may affect the National Football League’s upcoming opening season, as it has impacted Major League Baseball teams like the Miami Marlins. With the Summer Olympics and recreational events postponed — and many college sports downright canceled — some athletic brands and industry observers are counting on nonathletic personalities to endorse their labels and share beliefs that extend beyond sports.

Where multimillion-dollar endorsement deals with sports stars and musicians used to be the norm, companies will need to be more selective due to COVID-19-induced financial constraints, executives said. With many anticipating a slow economic recovery, athletic companies and fashion brands are reevaluating their marketing budgets in light of ailing sales, furloughs, layoffs and ongoing consumer reluctance to spend.

As for what companies should be exploring or surveying consumers about in relation to endorsement deals, Luca Solca, senior research analyst, global luxury goods for Sanford C. Bernstein Ltd., said, “This doesn’t change. Brands are confronted with the challenge to stay relevant and desirable to consumers. That is the name of the game in the discretionary space.”

With more brands being risk-averse due to the challenging economic climate, they will be more likely to line up pay-for-performance endorsement deals, said Conrad Wiacek, Sportcal’s head of analysis and consulting. AB InBev and Nike started taking this approach across their partnership portfolios before the pandemic, he said, referring to Nike’s multiyear deal with Liverpool Football Club, which included increased royalties and cash bonuses based on good on-field performances.

“The era of huge checks in exchange for a prominent logo was already dying and brands have been thinking about how to reach potential consumers more effectively for a number of years. Rights holders are going to have to demonstrate the ability to engage their fans and to understand who their fans are, in order for brands to be willing to enter into high-value agreements,” Wiacek said.

“Sporting events without any fans may be a short- to medium-term reality, and partnership models need to be reworked so that both parties benefit. Otherwise, marketing partners will walk away and use their sponsorship spending in other ways,” he added.

From his perspective, the landscape for endorsement deals has changed — perhaps permanently. Given the value of consumer engagement, brands are seeking partnerships that will ensure direct access to fans. If a musician or nonathletic personality has that reach, then so be it — brands will use them appropriately, he said. “With the amount of data now available to rights holders, those opportunities are there if creative solutions can be found.”

The merging of musicians, designers and artists with athletic brands has been gaining momentum for years. In light of the ongoing calls for social justice and racial equality in the U.S., some brands are aligning with activists. Two years after Nike first signed Colin Kaepernick, the former NFL quarterback continues to be a marquee athlete for the company and has generated a windfall of publicity and media coverage.

Puma recently linked up with model and activist Winnie Harlow, and Reebok continues to work with Pyer Moss’ designer Kerby Jean-Raymond, a champion for social justice issues. In a new twist on athletic partnerships, Tracksmith recently signed Mary Cain, a former Nike athlete, and fellow runner Nick Willis as brand ambassadors and full-time marketing executives to build community engagement.

The general consensus among executives is that the return to packed stadiums and crowded sporting events will be contingent on a vaccine. While the six-month outlook for professional, collegiate and recreational organized sports is murky at best, e-sports provide a more reliable medium to connect with fans. Heron Preston is on board with that approach, having just joined Gen.G as an executive brand adviser and Public School’s Maxwell Osborne was tapped as creative director of Andbox.

As sneaker and activewear companies reassess their endorsement deals and consider less traditional sports, that may lead to inroads for women’s athletics, lesser-known male and female athletes and non-fitness personalities, executives said. Olga Harvey, chief strategy and impact officer at the Women’s Sports Foundation, noted less than 2 percent of all sponsorship dollars go toward women’s sports. The sector also only garners about 4 percent of all media coverage.

Harvey pointed to AIG’s recent renewal of its LPGA sponsorship, AT&T’s doubling down on its WNBA deal, and investor support from Alexis Ohanian, Natalie Portman and other bold-faced names for the National Women’s Soccer League’s new Los Angeles expansion team as encouraging signs despite the pandemic. “Investing in women’s sports is not a social good proposition. It’s really a business move that positions a company for long-term success and to grow,“ Harvey said.

The fact that many female and male athletes are garnering coverage for fighting for social justice issues (LeBron James’ campaign to get out the vote in the presidential election, as an example) heightens their appeal with the press and on social media. Musicians, actors and artists also meet that criteria and are increasingly working with athletic brands. But what kind of lasting power they will have post-COVID-19 is uncertain.

Matt Powell, senior industry adviser for sports at the NPD Group, said the use of non-athlete endorsers has “been going on for quite some time.” He cited Kanye West’s association with Nike as far back as 2009 and his jump to Adidas in 2013.

“In the beginning, the celebrity had to have a honest connection to the product,” Powell said, such as they wore it in high school, etc. But today, the rules have changed. “Now it’s about who’s going to pay me the most money,” he said.

Despite the recent popularity of celebrities linking to sports brands, Powell doesn’t believe it’s accelerating. “It’s already deeply entrenched,” he said.

Footwear, in particular, with celebrity endorsers are generally limited in their availability as a way to increase the hype, especially among young sneakerheads. When kids are buzzing about a new pair of shoes, it’s a way for the brands to reach a new audience that may not have necessarily been familiar with the company. “It works if you’re not paying them too much,” Powell said. “If you are, then it’s difficult to recoup your investment.”

For Fila, the company has been utilizing a hybrid model for a number of years. It has an ongoing collaboration with the hot Korean boy band BTS and in mid-July dropped a special-edition capsule of apparel and accessories including graphic T-shirts, hoodies, bucket hats and backpacks. The collection is available at Urban Outfitters in the U.S.

Jennifer Estabrook, president of Fila North America, said the brand has been working to “increase our voice in the market.” She said the company tends to emerge and make a lot of noise around specific events such as big tennis tournaments, but then goes quiet again until the next one. “We want to express ourselves more consistently and storytell 365 days a year,” she said.

In order to do that, Fila explored options outside the sports world “to see where the stories lie.”

“We are an authentic sport brand and sports remain important to us, but we can still play in the worlds of lifestyle and fashion,” she said.

So in addition to BTS, Fila also partnered with Rowing Blazers, a buzzy men’s brand, on a co-branded collection of preppy-inspired apparel and footwear. It even held a fashion show during Milan Fashion Week in February focused on its history in winter sports.

With tennis, Fila’s primary sport, resuming — with the U.S. Open kicking off on Monday — the company is launching an initiative to promote the wearing of face masks featuring some of its sponsored athletes. The brand will also be promoting a new collection that is being developed for the U.S. Open.

On July 28, the company launched a collection of footwear and apparel with NBA star Grant Hill. Additional models of the shoe are dropping this month.

“It’s not one versus the other,” Estabrook said of sports stars and celebrities. “We have 365 days to fill, so both are important.”

And with more and more athletes being seen as style setters, the lines are blurred even more. So with the tennis season restarting this month, the brand is also showcasing its player ambassadors and what they’re wearing on social media.

In addition to tennis, Fila is increasing its presence in the growing pickleball world and Estabrook said the brand will be revealing a sponsorship there in the near future. “We’re doing different things with different people,” she said.

Consumers who play or watch these sports are usually rabid about their interests and want to dress like the stars. Ditto for celebrities such as BTS. Estabrook said their “army” of fans is “so engaged” with the group that its association with Fila allows the brand another avenue of growth. “We want to engage as many people as possible,” she said, “and if we can cross-pollinate, it’s even better. I don’t see us walking away from sports — that’s our roots — but there’s absolutely an intersection between sports and fashion.”

Former Adidas America president and chief executive officer Steve Wynne, who had the foresight to sign Kobe Bryant as a teenager, said agents and athletes used to only be interested in the dollars. Given the success of Michael Jordan’s Air Jordan label with Nike and companies’ willingness to use sub-brands such as Kanye West’s Yeezy deal with Adidas, royalty interests have become more attractive to athletes, Wynne said.

Amateur and pro athletes are increasingly entrepreneurial. In addition to the reported $32 million that James earned last year through his Nike deal, the NBA star recently lined up a $100 million investment for his media empire SpringHill Company. World Rugby Hall of Famer Phaidra Knight recently launched her mission-driven line PSK Collective in partnership with The Powell Companies Real, the force behind Dubgee from Whoopi Goldberg. Knight, a Black female business owner, has created affordable, inclusive and androgynous ath-leisurewear.

Athletes and individuals who are helping brands to make more credible inclusivity claims like Kaepernick, will be of interest to brands, according to Solca of Sanford C. Bernstein. He said, “The recent past has seen a continuing shift of marketing dollars from one category of celebrities to the other. The world of sport is no exception. In general, we are seeing a trend toward more fragmented and grassroots commitments,” he said. “But this seems to be on top, rather than in place of, everything else.”

Given the financial strains that COVID-19 is putting on brands, Solca said it could be useful to look at how luxury‘s marketing spend is changing in the broader context of the pandemic. “I expect marketing costs to be down materially across the board,” he said.

In a recent webinar about sports endorsements, Euromonitor International said sports leagues, teams and everything associated with them have experienced severe financial hardships from the shutdown of games and their return without fans. “The economic success of professional sports properties is known to be tied to the exposure they generate and the number of fans that attend, watch live on TV or engage” with the events, said Davide Calzoni, senior analyst of sports and entertainment for the group.

In particular, apparel and footwear have been hard hit, Euromonitor said, since those categories are intrinsically tied to in-person events. And the organization is not expecting a return to pre-pandemic levels until at least 2023. Until then, brands and organizations should reevaluate how they spend their marketing dollars regarding sponsorships, the group recommended.

Matt Weiss, director of runner engagement for Brooks Sports, said the company is continuing to focus on its athlete roster even though major events such as the Olympics and high-profile marathons have all been postponed or canceled. “This is uncharted territory for everyone. But we take a long-term view to our athletes,” he said, adding that despite world events, when Brooks signs someone, it’s a lasting relationship. And the pandemic didn’t change that. “For us, things didn’t change dramatically,” Weiss said. “Our plans didn’t waver.”

Although Brooks is not telling as many athlete stories as it generally would in running season, that hasn’t stopped the brand from continuing to bolster its roster of sponsored athletes. It recently signed Nia Akins, an 800-meter star runner from the University of Pennsylvania. And some professional racing events are just beginning to restart, he said, giving an emotional boost to the sport.

The one thing the pandemic did impact was participation in running. With gyms closed and people working from home, many people embraced the sport. “The interest in running is higher than ever before,” he said. And it’s appealing to not only those who were competitive before, but also those hoping to reap the health benefits.

To reach both, Brooks is balancing its content to appeal to “runners we knew before, and new runners,” Weiss said.

Although Weiss said Brooks has been pondering whether to associate the brand with influencers outside of the sports world, it doesn’t do that now. “We have a lot of discussions about who the right person would be to partner with outside our core world,” Weiss said. But for now, its influencer circle is centered around coaches and trainers in the running community. “We may sign some other people, but for the next six to 12 months, we won’t change our approach,” he said.

Televised coverage remains an important part of the endorsement deal equation, according to Columbia Sportswear president and ceo Tim Boyle. “If those athletes are exposed on TV and to the general public in a very broad way, they’re probably still going to be popular and looked up to. But the absence of that will make it more challenging.”

Under Armour also puts most of its energy into working with athletes. Although it does have a line with actor Dwayne “The Rock” Johnson and had worked with rapper A$AP Rocky, nearly all of its endorsers are either current or former athletes who compete in everything from basketball (Stephen Curry), skiing (Lindsey Vonn) and soccer (Kelley O’Hara) to swimming (Michael Phelps) and ballet (Misty Copeland).

The brand remains “laser focused” on “making all athletes better,” the company said. “While life and sport may not return to ‘normal’ for a while, we will rise to the occasion through community, competition and confidence.”

In its second-quarter earnings call on July 31, ceo Patrik Frisk said the company expects to continue to stick with its athletic roster, but didn’t rule out tightening it a bit. “As we think about how our marketing will evolve going forward, we’re committed to the majority of the contractual agreements we have out there. But we’ve also talked about the fact that as part of our restructuring, we continue to look at things that make sense and may not make sense for us in that journey going forward and we’re making decisions accordingly,” he said.

Frisk also pointed to the success of its Connected Fitness platform. Under Armour has worked to engage consumers during the pandemic by focusing on virtual workouts, encouraging participation on its Map My Fitness and MyFitnessPal apps and even creating a breathable, washable performance face mask for customers to use to work out in during the pandemic.

Nike has been a leader of collaborating with athletes who have moved well beyond their sports roots to become style leaders: James, Simone Biles, Cristiano Ronaldo, Serena Williams, Odell Beckham Jr., Russell Wilson, Megan Rapinoe and others. Jordan, whose Jordan collection is owned and produced by Nike, has made a reported $1.3 billion from the partnership that dates back to 1983.

Although not a sports brand, Foot Locker, which instead sells sporting goods, recently launched a campaign and brand platform in Europe — “Shoes Don’t Change the World. You Do” — intended to better connect the company to its core Gen Z consumer base. The campaign features a diverse cast of what the retailer calls “influential changemakers who are creating and inspiring change within their community.” They include Ashton Attzs, a London-based queer, nonbinary artist; Jade Pearl, an abstract artist, illustrator and model; Marvin Bonheur, a French photographer; David Blank, a self-described “fierce, Black, fearless, queer and feminist” artist, and Muriel Elisa De Gennaro, a leader in the Italian LGBTQ community.

Carmen Seman, vice president of marketing for Foot Locker Europe, said the division “is rooted in sneaker and youth culture, with a focus on the passion points that matter most to our audience. So that’s everything from music and the culture of sports to fashion and gaming.

“Sneakers have the power to enable self-expression, freedom and belonging,” she added. “At a time where youth feel isolated and threatened, sneakers have the power to unite a community with a common ideology.”