Banking on High School Ballplayers

            Even though he is currently recovering from a knee injury, Chicago Bulls point guard Derrick Rose has been working hard off the court. Rose appears in advertisements ranging from national television commercials for Adidas to local billboards for Chicago-based pizza chain Giordano’s. For his participation in these campaigns, Rose is compensated with a 14 year, $250 million deal by Adidas and has become an equity partner in Giordano’s.

            While Rose makes millions from sponsorship deals now, that was not always the case. As a star player at his high school, Simeon Career Academy in Chicago from 2004 to 2008, Rose provided significant increases in brand awareness, exposure, and perception by wearing a jersey made by Adidas rival Nike. Simeon’s deal with Nike has continued with the school receiving $26,000 per year in “gear” annually in large part because of its latest star player, Jabari Parker. Simeon’s senior small forward has committed to play at Duke University next year.  Parker’s skillset has landed him on the cover of Sports Illustrated and caused “300 people [to come] for the made-for-TV news conference announcing where Chicago's best high school basketball player since Derrick Rose will spend the nine months preceding the 2014 NBA draft.”

            The combination of this national attention combined with being both “articulate and charming” has made Parker an attractive company spokesman for brands focusing on the teenager and young adult demographics. In article posted yesterday entitled “Skullcandy gets the better end of Simeon sponsorship deal”, the Chicago Sun-Times examines the relationship between headphones manufacturer Skullcandy and Simeon. The Sun-Times claims that “terms of the contract essentially call for Parker and his teammates to be unofficial spokesmen for the company.” As a result, Simeon receives, “headphones for its media lab and $1,000 a year through its five-year contract. Additionally, the girls basketball team, which is without stars, has received headphones.”

            The Sun-Times is absolutely correct that this is a great sponsorship deal for Skullcandy, which has identified and taken advantage of a very valuable business opportunity.

While Parker may not (yet) be as famous as Rose, Parker (and Simeon) have high brand recognition among Skullcandy’s target demographic in Chicago. More importantly, the thousands that Skullcandy pays Simeon in cash and merchandise is far less than the hundreds of millions of dollars that Rose receives for his endorsement deals. Skullcandy recognized that inner city high schools, like Simeon, often struggle to provide the resources for its students and its athletes to be successful. As Simeon coach Robert Smith says, “We’re an inner-city school. We have to be thankful for whatever we can get.”

There is no financial reason that companies thinking of using athletes to target key demographics should not consider entering into contracts like Skullcandy has done with Simeon.

There is, however, an ethical dilemma.

Parker is clearly the primary reason that Skullcandy entered into the agreement. In fact, Parker already has appeared in a promotional video for the company. Yet, traditional high school and NCAA rules prevent Parker (or any of his teammates) from being paid by Skullcandy if he wants to compete as a high school or collegiate athlete. For years, compensating NCAA athletes has been a huge issue in collegiate sports. In addition to ESPN and the NBC Sports Network spending entire programs on this issue, numerous lawsuits have challenged whether players should receive compensation for the likeness and image being used to sell products such as video games.   

            Yet, collegiate athletes at least have the opportunity to receive scholarships for their participation in their chosen sports. At a private institution like Duke, tuition, room, and board would cost a non-athlete at least $200,000 for a four-year education. Because Simeon is a public high school, Parker does not need tuition assistance. While some private high schools provide athletic and merit-base aid to athletes, many high school athletes will receive little, if any, compensation. For example, Parker and his teammates expect to “keep the headphones customized with their jersey numbers” as their part of the compensation with this deal.”

            In many instances in the past B6A has demonstrated where the right ethical decision translates to the right financial decision.

For sponsorships involving high schools, however, this does not appear to be the case for athletes. The companies partnering with high schools, particularly inner-city schools such as Simeon, will receive tremendous amount of value for their sponsorship dollars. High schools will receive at least some amount of money and merchandise. The players, usually the primary drivers of high school sponsorships, will receive almost nothing in these deals given the current student-athlete environment.

The one recent development that may change this dynamic is a class action lawsuit against the NCAA lead by the former UCLA All-American basketball player Ed O'Bannon. If successful, former NCAA players would receive "billions of dollars in television revenues and licensing fees" for the NCAA using their likeness and image. This suit "could also force the development of a more equitable system in which the [student-athletes] who do the work get a decent share of the profits. All the profits." However, this case is not scheduled to go to trial until July 9, 2014. In addition, it is not clear how a favorable ruling for college players would impact high school students. Because the NCAA is currently not currently using the likeness or image of high school athletes in its products, it would appear that current high school students might not have legal standing to challenge the organization in this type of suit. And it would be unlikely to change this type of rule that allows high school athletes to receive compensation unless required to be law.    

Even if high school students ultimately are allowed to receive compensation, however, it will likely take years for this occur. The professionalization of amateur athletes, particularly at the high school level, is understandably tough to stomach for many people. However, it is clear companies and organizations are already monetarily benefitting from these teenagers. As deals like Skullcandy’s with Simeon continue to grow in number, playing professionally instead of attending college would make it much easier for high school athletes to be fairly compensated for their sponsorship value.   

Professional Amateur Athletes

            It is hard to think of a sporting event that has been more monetized than the Olympics. Corporate partners spend upwards of tens of millions dollars to become an official Olympic sponsor. Host countries and cities spend billions of dollars on building new stadiums, venues, stores, and roads for the two-week event. That does not count the millions of dollars that goes into other countries making a bid to host the games. Fans from around the world also spend large sums of money to on travel, tickets, hotel, food, and other accommodations during the Olympics.

            The only part of the Olympics where money is not supposed to be involved is with the athletes. CNN’s Bob Green colorfully described what made the Olympics special as compared to most other sporting events when he said, “The one firm rule that always governed the Olympic Games was that amateur athletes were permitted to compete. Professional athletes were not.” Starting with the 1972 Olympics, however, that began to change. While professional athletes became more commonplace at the Olympics after the games in Munich, the real sea change occurred with the “Dream Team” of NBA basketball players from America in 1992. Since then, swimmers, gymnasts, and track & field stars have earned millions of dollars in endorsements deals and prize money while still competing as Olympic athletes.

            The perception still largely exists, however, that most Olympic athletes are still “amateurs”. One of the biggest draws of the Olympics is that most competitors in the games toil in obscurity for four-years for one (or a few chances) to compete on an international stage.  Whether it comes to obscure sports such as the modern pentathlon or biathlon to more well known sports such as wrestling or rowing, the ultimate reward is being able to win a medal and bring honor to one’s country.

            While that may be the case, all Olympic athletes have an opportunity to also make a lot of money. In the ultimate pay-for-performance compensation structure, countries reward their athletes for winning medals. In the United States, athletes receive $25,000 for a gold medal, $15,000 for a silver medal, and $10,000 for a bronze medal. While that may seem like a nice chunk of change, athletes in other countries make significantly more money. In Russia, athletes win $135,000 per gold medal, $82,000 per silver medal, and $54,000 per bronze medal. In Uganda, the gold-medalist in the men’s marathon received $80,000 and a pledge by President Yoweri Museveni that his parents would be built a new home by the national government.

            While the United States Olympic Committee (USOC) receives most of its money through corporate sponsorship / donations, many other nations’ government directly subsidize and pay prize money to athletes. In addition, some nations have used the promise of large cash rewards to encourage athletes from other countries to become citizens of that nation. For example, Feng Tianwei was born in China and became a successful table tennis player. Despite being ranked eighth in the world, Feng would not be good enough to make the Chinese table tennis team. Instead of trying to compete for China, Tianwei was one of three players who “were spotted by Singaporean scouts and enticed to emigrate under the country’s Foreign Sports Talent Scheme.” Feng received fast tracked Singaporean citizenship (which is not available to non-athletes) and ultimately earned over $400,000 for her two bronze medals at the games.

            To be clear, we are not criticizing athletes for trying to make money nor countries trying to enticing athletes to become citizens and compete for a nation in Olympics. These are literally and metaphorically the rules of the game and both athletes and countries should take advantage of these rules. These practices, however, appear to counter the ethos of the Olympic Games as they were originally created - especially in the minds of fans, media, and sponsors. Athletic tourism, as with Tianwei, calls into question the idea that amateur athletes are competing for their country or if they are professionals using the guise of nationalism to make money.

            These payment schemes for Olympic also bring up a myriad of other questions that cannot be contained in a single blog post. For example, should countries spend millions of dollars on athletes who usually only gain an international spotlight once every four years? If the “amateur” athletes in Olympics are being paid so much money, shouldn’t the “amateur” athletes at the collegiate level in the United States get paid as well? These are all interesting questions that can and should be examined in more detail. However, there is little question that there no longer any “amateur” athletes competing in the Olympics.