Outstanding athletic skills can equate to multi-million dollar endorsement deals and the creation of a brand. Major companies gravitate toward sport stars with unique, stellar talent and a clean-cut image that will help sell their product. Damage to the image via a human misstep, self-inflicted or not, can initiate crisis mode among sponsors. Contracts are downgraded or reneged and millions of dollars are lost. Here's a look at the financial repercussions of five sports stars' dishonorable moments, and whether they were able to rebuild their brand.
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Pepsi Cola's (NYSE: PEP) Gatorade became the latest major company to end its sponsorship with star golfer Tiger Woods. When revelations of Woods' admitted infidelities were initially made known to the public, telecommunications giant AT&T (NYSE: T), and Accenture (NYSE: ACN), a global consulting firm, backed out of their endorsements. In addition to those that dropped out of endorsements, Gillette and Swiss watchmaker Tag Heuer downgraded his image.
Woods, who has made more than $100 million a year in endorsement deals, offered a public apology for his sexual indiscretions, took accountability, and laid out a course of action for a remedy in a televised event. Nike Inc. (NYSE: NKE) and Electronic Arts Inc (Nasdaq: ERTS), which have made hundreds of millions of dollars around the golfer, supported him, claiming Woods' historic athleticism as the focus of their long-standing partnership. (Read more about Tiger's financial mishaps in The Tiger Woods Effect - $12 Billion Wiped.)
Tennis star Serena Williams' cursing tirade last summer barely rattled her sponsors though her wallet still took a hit. William's unsportsmanlike verbal lashing occurred at the U.S. Open during the singles semifinal against Kim Clijsters. When a line judge called Williams out for a foot fault on a second serve, an angered William's unleashed a verbal attack while wielding her tennis racket. In Williams' statement, she indicated her behavior was inappropriate stating she was a "very prideful," " intense" and "emotional" individual.
Major sponsor Nike stood behind Williams. In 2004, Williams inked a $40 million five-year endorsement deal with the sportswear maker and has been among the highest paid female athletes in the world. Kraft Foods and most recent sponsor, Tampax, also continued their endorsements. In spite of their support, Williams was still required to pay a maximum fine of $10,000 for her threatening language and gestures and another $500 for racket abuse. (Learn more about what happens when fame goes wrong. Read Stars Behaving Badly: Disastrous Celebrity Hirings.)
Olympic swimmer Michael Phelps racked up numerous endorsements following his record winning of eight gold medals in the 2008 Beijing Olympics. However, these endorsements were endangered by a misstep caught on camera. A photo showing Phelps inhaling from a marijuana pipe was published by a British tabloid and soon circulated on the internet. Phelps admitted his actions were "regrettable" and demonstrated "bad judgment." Speedo, a sportswear company, and Omega watches considered it a non-issue, while Subway condoned the behavior. The U.S. Anti-Doping Agency, which has athletes prove they compete drug-free, had second thoughts and will evaluate its future relationships with Phelps.
The majority of former Atlanta Falcons star quarterback Michael Vick's sponsors fled when he was convicted for participating in a dog-fighting operation in 2007. The reported atrocities committed against underperforming dogs sent the once highest paid football player to prison for 18 months. Nike first suspended then terminated its contract with the football star after he pleaded guilty. Upper Deck removed autographed memorabilia and Reebok stopped sales of Vick's #7 Jersey. Vick was extended offers to play for the Cincinnati Bengals and the Philadelphia Eagles upon leaving prison. However, it was the Eagles that awarded him the second chance and a $1.6 million one-year deal with a team option for the second year at $5.2 million. Sponsors of the team voiced concern, indicating that they would have preferred advance notice in order to inform their customers.
L.A. Lakers star Kobe Bryant's sexual assault charges in 2003 scared off sponsors. The charges were dismissed and the woman agreed to an out-of-court settlement in a civil suit. McDonald's (NYSE: MCD), Sprite and Nutella all terminated or did not renew contracts with the NBA basketball player; Bryant lost $6 million in deals. Nike, which had made an endorsement deal with Bryant worth $40 million, scaled down his image but resurrected it three years later in a Nike commercial.
A celebrity sports stars' brand can be damaged when their image is scarred by human error. Some sports stars begin hemmorhaging endorsement deals while others have their sponsors' full support. Either way, as long as sports stars apologize and take responsibility for their mistakes, their star power and cash flow can be resurrected. (These stars were able to save their endorsements, but it's not always so easy. Read about it in 7 Costly Pro Athlete Screw-Ups.)