The Top-Paid US athletes

Sports Illustrated released its annual listing of top-paid athletes today. For some, the findings are no surprise. For example, Tiger Woods holds on to the top spot, raking in more money than Phil Mickelson, LeBron James, and Floyd Mayweather Jr (ranked second, third, and fourth) combined. Also, NBA players made up 26 of the top earners (counting Amaré Stoudemire who was mistakenly listed as a baseball player).

However, the data leads to some interesting findings. Here are three observations:

The difference between low salary and high salary was small ($24.7 million, with a mean average of about $16.1 million and a standard deviation of $5.1 million) compared to the differences between endorsements (with a range of $104.9 million, a mean average of about $9 million and a standard deviation of $16.8 million). So while these top athletes’ salaries are relatively uniform, the amount of endorsement money they get is not.

This is illustrated more clearly in the following table.

The range in players’ endorsement money isn’t that surprising. What is more interesting is the relationship between race and endorsement. In a 1996 New York Times article David Falk, Michael Jordan’s agent, said “Very few companies call for athletes, and even fewer call for black athletes.” To see if that still held true, I divided the top 50 earners into two categories: Caucasian in appearance or not Caucasian (the second category includes Hispanic athletes like Alex Rodriguez). What I found was good news for those of us who hope for racial equality in sports: the mean salary for the Caucasian group was smaller than that of the non-Caucasian group. ($8.7 million vs $9.2 million). Moreover, when the top-sponsored athlete was removed from each category (Tiger Woods and Phil Mickelson) the sponsorship dollars still favored the non-Caucasian group ($5.9 million vs $6.1 million).

The above numbers seem to show that the business of sports has lost some of its racial baggage, since endorsements and salaries are higher for non-Caucasian athletes. But that’s not the whole story. If we start with the premise that salaries are a good indication of a player’s worth to a team, at least within his league (and I use “his” because a woman hasn’t yet broken the top 50 mark for earnings), then it should follow that the more talented athletes should rake in the greater share of endorsement dollars. But a closer look at the numbers shows that Caucasian and light-skinned athletes make more sponsorship money as a ratio of their salaries than non-Caucasians. Just look at the chart.

The ratio here is endorsements/salary, so a higher ratio indicates a greater amount of endorsement money over salary money. What we see is that, on average, a greater percentage of the Caucasian group’s total earnings come from endorsements. For an example of this, take two NBA players: Jason Kidd (white) and Jermaine O'Neal (black). Both make an identical salary, yet Kidd pulls in exactly twice as much money in endorsements.

Fifty data points is still a relatively small sample size, and the salary indicators point to an equal playing field, but these numbers should be a reminder to sponsors who use athletes in their marketing that the disparities that David Falk bemoaned may not have disappeared.

Negotiation Tips from a Sports Agent

Last week I sat down with a sports agent who represents top-level players from the NFL, NBA and MLB. In the midst of our conversation, he shared some outstanding tips on how to score big for a client, while also maintaining the personal relationships with leagues and owners that buttress his reputation.

1) Be prepared. “I happen to be in a business where you can persuade people. To do it right, we out-prepare anyone.”

2) Control as many aspects of the negotiation as you can. “Sometimes it’s just me, one-on-one at dinner. Sometimes I come with multiple people, guns blazing. You have to know who you’re dealing with and leverage the situation to your advantage.”

3) Know the other side’s priorities. “Lots of times, it’s cash. If you can give a little in one area, you can almost always gain a lot in another.”

4) Use time zones to your advantage. “If we’re on the West Coast talking to guys out East, we start late, order a pizza at 7 p.m., and beat the stamina out of ‘em. On the East Coast calling West, it’s all about the early morning negotiations.”

5) Know your opponent. “For a new negotiator, I’ll get them comfortable, bring them into my office, have my dog nuzzle up.”

6) Make them feel good in the end. “Let the other side win on the last point. You can kill ‘em in the war, let ‘em win the last battle.”

Sports Marketing in Second Life

About a year ago, Pat Coyle wrote an interesting article pushing for Lucas Oil Stadium (the soon-to-be home of the Indianapolis Colts) to go live on the Internet-based virtual world of Second Life. Recently, his article got me wondering what sports properties exist on Second Life, and how they function to support their brands. Below is a list of four major sports properties with significant presences in Second Life.

adidas AG

For $50 Linden Dollars (L$50—roughly $0.20) you can outfit your avatar with a3 Microride shoes from the adidas store, which allow the wearer to bounce around like a kid on a pogo stick. The shoes may not have permeated the Second Life market like adidas once hoped, but the move to open a retail outlet got some positive press back in 2006 and may have also made Second Lifers feel like an important demographic.

Reebok

Direct your avatar over to the Reebok island on Second Life and you’re in for a marketing treat. Unlike at the adidas Sim, at the Reebok store you can buy shoes AND customize them. Shell out L$50 for the initial white pair and before you know it you’ll be upgrading to a custom-color pair for only L$5 more. You can come back as often as you want to switch the color, and the cost is L$5 each time.

Major League Baseball

In July of 2006 Major League Baseball simulcasted its popular Home Run Derby on Second Life. Fans and their avatars paid L$1000 (about $3) to congregate at the virtual stadium on “Baseball Island” and watch the event on virtual screens. The event was criticized for adding very little interactivity to the experience, though the MLB marketing executives did set up chat rooms for fans to trash talk, and sold virtual MLB merchandise at the event and at in-world stores.

NBA

If the Major League Baseball foray into Second Life is a rim shot, then the NBA’s presence is a slam dunk. At the NBA headquarters that opened there in June 2007, sports-minded avatars can watch 3-D diagrams of games in real time while chatting with others, play HORSE and Crash The Boards at the NBA Jam Session area where basketballs are freely available, and buy NBA merchandise. Like the Reebok store, this virtual world is likely to attract repeat visitors.

One of the detractors to sports properties focusing their attention on Second Life is that some of the recent media has highlighted the adult nature of the virtual world. For a family-friendly brand like Major League Baseball, association with Second Life has its drawbacks. Just consider the recent articles decrying inappropriate behavior, FBI investigations, sexual harassment, and pornography. So while some sports properties are excited to be among the first in the industry to brand themselves in these virtual worlds, others are understandably worried.