The Business of Track & Field Athlete Contracts
By @WomenTalkSports on October 23, 2012
I have started this journal entry a dozen times with the themes of "Doors Open and Close", "The Roads Are Open", "A Different Path" and "A New Journey". Not one of those themes seemed to convey the thoughts and feelings I had regarding what transpired this past week. I want to note up front that this posting is not to bash on ANY of my previous sponsors. It is meant as a real world learning experience for future professional track & field athletes. It will give them a look at what to expect in this business. I also hope to give sponsors something to think about with future contracts.
To start with the positive, I have moved up to doing two workouts a week. The nerve damage in my ankle is completely healed and my Achilles is reacting well to the increased work load. This is the best my legs have felt all year. Next week, I will increase the work load even more since I passed the test this week. That news and the amazing weather in Oregon is cause enough for a happy dance. It also eases the blow of the events of this past week.
On to the recent life altering happenings, I was let go from Nike or in legal terms my contract was terminated. I have experience with this process because it is the third shoe company to let me go in 12 years. I understand the business and know that my lack of racing for a year is the reason behind the contract termination of the last two shoe companies. However, this termination was harder than the others.
With the current contract termination, I was not given any advance notice. Instead of a paycheck I received a termination letter. I also instantly lost access to the gym, pool, and track. The access to workout facilities can be replaced quickly. However, instant loss or reduction of expected income can’t be replaced. My contract was paid out in quarterly payments. (I will explain the issues with that later.) The contract does give the sponsor the right to terminate my contract after a period of inactivity. However, a clearer channel of communication would not make the termination as life changing.
Broken Contract Image via Shutterstock
To help you understand this process let me explain the business of sponsoring “professional” track & field athletes. This might be similar to other sports’ sponsorships but I don’t have knowledge of how they work. Below is a typical conversation with an inquisitive stranger (S).
S: “What do you do?”
A: “I am a professional distance runner. I run for Company X.”
S: “How does that work? Like Tiger Woods or Lebron James?”
A: “Yes, but the sponsorships are on a much smaller scale. Company X pays me to wear their gear, run races, and represent the company during all events related to running. I am the equivalent to a walking/running billboard for Company X. Unlike NBA players, we don’t get a salary from a team. The Company X sponsorship is usually the bulk of our annual income. Also, unlike cyclists or NASCAR drivers, track & field athletes are limited to the number and type of sponsors allowed. This limitation is due to both the sponsorship contracts and the IAAF which is the international governing body of track & field.”
S: “So you work for Company X?”
The answer gets complicated and long. If I don’t want to go into the details I say yes and they ask how many free shoes I get or if I can get them a pair. However, if they really want to know I explain that track & field athletes are contracted workers. The definition of a contracted worker according to eHow.com is:
“A contract worker is not an employee of a company. He is a self-employed person who operates his own business, usually as a sole proprietor. He is hired for a specific task or project, sets his own rates and pays his own income taxes.”
eHow.com goes on to explain the benefits of companies hiring contracted workers.
“By hiring a contract worker, a corporation will be able to save money because the worker, not the corporation, is responsible for his own payroll taxes, training, transportation, health insurance, and other benefits and costs. A company does not pay a contractor for holidays, sick time or other employee benefits.”
Track & field athletes are not employees of the shoe or apparel company. They are contracted walking, running, jumping, and throwing billboards for shoe companies; hired to perform better than anyone else. Better performances lead to more views of the products or mentions in the news. After a period of inactivity the billboard is viewed infrequently and not worth as much. Business wise, it does make sense to replace the billboard with a more visible one.
A typical question that inquisitive stranger might ask, “How do you get sponsored?”
I respond that there are two ways to go about it. Athletes can hire an agent to facilitate the deal and bargain with the shoe companies. Agents know the company’s contacts, market values of track performances, and the extra perks to ask for. This is the easiest route and probably the smartest choice. However, the athlete can contact the shoe companies by sending their resume and asking for sponsorship without an agent’s help.
Depending on the talent, age, and curb appeal of the athlete the sponsorship deals can vary greatly. The following is a very generic outline of sponsorship levels.
1. Gear contract: The company provides the athlete with gear to train and compete in.
a. During my time with three different sponsors the gear contracts varied. One company provided unlimited gear to me and my family. They wanted anyone at my competitions in the company’s gear as well. Another company had me choose what I wanted a couple times a year from the catalog. An upper limit dollar amount was set for each order. Another company would send a set shipment to all the athletes. Some of the higher paid athletes were also given a gear stipend to buy more products for themselves, family or friends.
2. Gear and bonus contract: The company provides the athlete with gear as outlined above. They also sign a bonus-only contract that pays the athlete for achieving certain marks, places or rankings. This part of the contract varied even more between companies.
3. Gear, bonus and travel stipend contract: Everything above is included plus a set stipend for travel or medical expenses. The athlete pays the travel or medical bills and submits them for reimbursement until the stipend limit has been reached. This amount was very similar between the companies except some only allow travel whereas others allowed medical and travel.
4. Full contract: Everything above is included plus an annual stipend or salary. The amount depends on the talent or achievement of the athlete. Every company has their standard contract that is adjusted slightly for each athlete. Throughout my 12 year career I have had various contracts with any or all of the following components:
a. Paid monthly or quarterly.
b. Multiply bonuses listed and paid for set marks in an event. That means if I hit the easiest time bonus in the 10,000m and then hit the next fastest one the next week, I would get paid both bonuses. This applied to all events negotiated. Distance runners are lucky that we have a lot of options with distances. The better range you have the more bonus opportunities.
c. One bonus paid per event per year. This means I would not get each bonus marker achieved in the 10,000m. I would only get the highest one achieved by the end of the year. However, I could also get the highest one achieved in other events.
d. Roll-over bonus is an amount added to next year’s contract. It is usually tied to records, wins, rankings or making an Olympic or World Championship team.
e. Reduction clauses represent the real business aspect of any contract. Companies use these to save them from paying for performances below what they contracted for. Reductions can range from 10% to 50%. They can be tied to lack of performances, lack of appearances, not being ranked in the USA or World in your event, not making a team, criminal activity or drug use. The higher paid contracts have the harshest reductions.
f. Suspension clauses help the company recover lost time of visibility of the athlete and their performances due to injury and yes, pregnancy.
g. Termination clause. This can be tied to injury, breach of contract, criminal activity or drug use. Breach of contract can include wearing competitors’ gear or apparel or bashing the company.
Athlete contracts with shoe or apparel companies usually run through the sports marketing budget. Like any business, they need to stay under budget. The way current contracts are written turns budgeting into a guessing game. The annual salaries are set but how many athletes will earn bonuses? How many will hit the big bonuses or earn roll-overs for next year? The companies have been doing this for a long time and have a pretty good system. However, when the bonuses are higher than expected you can expect them to comb the contracts for any reductions to be taken on other athletes. The harsh reality of business and budgets is there is only so much money to go around. In order to fulfill certain contract obligations, money has to be taken from somewhere or someone else. That is the bottom line.
Above, I mentioned how the contracts are paid either monthly or quarterly depending on the company or the size of the contract. The reductions can be made at any time throughout the year if a part of the contract was not fulfilled, like making a team or not placing in the top 10 at nationals. However, reductions are not always taken or can be taken in smaller percentages than listed. I have had companies do both, but in a few instances I had reductions taken retroactively. I had not been notified of the reduction and thought it was an accounting error. Later, I received a lovely letter that went something like this:
We forgot to inform you that we are taking reduction # from section # starting with the 3rd quarterly payment. We have taken both the 3rd quarter reduction and the 4th quarter reduction from the 4th quarter payment.
Also, we are reducing next year’s payment by X% due to paragraph # section #.
Thank you for your commitment to this company.
That retroactive reduction made my last paycheck of the year half of the expected amount and I was going to be receiving less the following year. Receiving half of your paycheck, with no notice, causes a lot of stress. Changes have to be made instantly to both lifestyle and training. The same applies to terminations. Athletes are contracted workers and do not get severance packages or qualify for unemployment.
In this economy, many people have faced this or worse in their jobs. It is bottom-line business practices. I do understand the business model and know that shoe companies help support track & field athletes and the sport in general. I have been grateful for the opportunities given to me by all 3 companies. However, I think there is a better way to make a track & field athlete’s salary more stable. I will expand on that in the next posting. I hope I have given insight to the next generation of athletes of what to expect with track & field sponsorship contracts.
By WTS Blogger Amy Begley, Long Distance Track Athlete & Olympian
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