Ruined Reputations

Last week LeBron James signed the most lucrative sponsorship contract in the history of sports. Nike signed a lifetime shoe deal with the basketball superstar worth more than $500M in total and more than $30m annually.

LeBron James is one of the “good guys” when talking about his public image and, based on the evidence so far, he will not cause them any controversy with his on and off the field actions.

Here we will take a look at the “bad guys” and how sponsors coped with their scandals and ruined reputations.

Sport is an entertainment business and as such, its celebrities – athletes, get involved in scandals that, due to the public nature of their lives, get exposed and as consequence their public image suffers a blow. Minor or major.

Recently several athletes were under the spotlight either for their trials or because of unmoral behaviour, while their employers had to react. By their employers I mean, of course, their clubs as well as their sponsors.

The Damage is Done

FIFA

What better place to start then with an organization whose public image is at an all time low, the organization that will have to work a lot to repair the damage and leave the „dark side“. I’m talking, of course, about FIFA.

I promise, Sepp Blatter’s rants will not be involved here. What will be involved is the role FIFA’s sponsors played in the fall of the man that seemed to be above any laws and the organization that surrounded him.

Media did call for sponsors to take action much sooner, because it was believed that without sponsors’ backing, Blatter will lose all of his power. Sponsors were seen as the last hope to take Blatter down, since he refused to step down even when the accusations became strong, simply because he seemingly had sponsors backing him up.

This was a very bad public image for FIFA’s sponsors and they had to react. When Coca-Cola, McDonald’s, Visa and Budweiser decided to turn their back on Blatter, he was forced to step down.

Even though the future of Blatter and FIFA is still unclear, nobody can deny a massive role sponsors had in his downfall, which now more than ever seems to be very likely.

Tiger Woods

No athlete suffered a bigger loss due to a scandal than Tiger Woods. He used to be a „good guy“, every sponsor’s dream, until 2009, when his affair surfaced and caused a shock among the public and unrest among his sponsors.

As the scandal grew and Woods’s image kept on taking hit after hit, some of his sponsors (Accenture, AT&T and Gatorade) decided to cut their ties with the former World #1. Their decisions made Woods’ annual income about $23M lighter.

Even though some of the sponsors left Tiger, big boys, EA Sports and Nike, decided to stand by him, but under new conditions. Nike cut his endorsement deal in half, and EA Sports eventually did replace him with Rory McIlroy, but only as late as 2013, and finally even removing his image from the game. Even with all those big loses, Woods is still among top 10 most payed athletes, thanks to his deals with Nike, Rolex, Kowa and All Custom Focus.

Michael Phelps

With 8 gold medals from the Beijing Olympics, Phelps became an athlete who won the most gold medals in the history of the Olympic games. One year after his 2008 record breaking feat, he found himself in the middle of a scandal, when a photograph of him smoking marijuana surfaced.

As a result, he was suspended from all competitions for 3 months and he lost his sponsoship deal with Kellogg, who decided not to sign new deal with him. Other brands (Speedo, Visa, Omega and Subway) stood by Phelps, and eventually accompanied with him on a ride during the 2012 Olympics, where he cemented his place in the history of sports.

His scandal was minor compared to other scandals mentioned here, but one brand, Kellogg, still decided to leave him. As a company whose primary consumers are kids, they didn’t see any other option but to distance themselves from Phelps.

In the end, Phelps, now a retired athlete, is estimated to earn $100M from his endorsement deals during his lifetime.

Kobe Bryant

When basketball superstar Kobe Bryant faced an accusation that he sexually assaulted a woman, he reached a settlement outside the court and most of his sponsors stood by him. His big endorsement deals with Sprite and Nike actually never eneded. McDonald’s decided not to sign another deal with the Lakers’ star after his old one expired (in 2013), but haven’t used Bryant in a commercial since the sex scandal (2009). His portolio of endorsement deals did suffer one immediate blow. The Italian giants Ferrero SpA decided to terminate their endorcement deal with Bryant. They were under the impression that Bryant’s public image will never be the same. As the time passed this scandal didn’t ruin Bryant’s public image, and lustrious deals with Nike, Sprite, Lenovo, and Turkish Airlines put him on the #3 spot of the richest athletes list in 2014.

Wayne Rooney

After his alleged affair with prostitutes during his wife’s pregnancy, Manchester United’s striker Wayne Rooney faced a PR disaster when Coca Cola’s chairman even publicly said he was „disgusted“ by Rooney’s actions.

One doesn’t need to be psychic to know Coca-Cola was not Rooney’s sponsor for much longer. They didn’t cut ties with him, true, but they simply refused to offer him a new deal.

At about the same time the Asian beer brand Tiger also cut ties with Rooney. Same as in Woods’ case, Nike and EA Sports stood by English striker.

Lance Armstrong

Lance Armstrong fall was maybe the most shocking. As a world known role model, both for fighting the deadly disease and for coming back stronger than ever after being cured, his „never-give-up“ attitude made him a perfect model for any brand.

Since he built so much of his reputation on honesty and courage, it was not a surprise that his performance-enhancing drug use scandal, did not only lose him his 7 Tour de France titles, but also his sponsorship deals with Anheuser-Busch InBev, Trek Bike Corp, MRS, Stinger and Nike.

In Armstrong’s case no company wasted their time with their decision, and in less than a week’s time they all cut ties with former role model. Armstrong’s public image suffered a massive blow and from then on nobody remebers him as champion, but as cheater.

Michael Vick

A list of players who lost their endorsements from Nike continues with Michael Vick. Nike doesn’t seem to consider athletes’ personals issues as that big of a deal, but sexual assualts, physical violence against women and children, performance-enhancing drug use and illegal dog fights can’t be defended by any rational human being, so sponsors are morally obliged to take action.

Illegal dog fighting was, at the time Atlanta Falcons’, quarterback’s „passion project“. Just two days after he was accused of this crime, Nike stopped selling Vick’s sneakers, but they did not pull the existing items from their shelves. In the following 10 days, Reebok, Rawlings, Donruss and AirTran Airways all ended their endorsement deals with Vick. NFL’s commissioner Roger Goodell, known for his PR gaffes, had no choice but to suspend Vick.

After serving his prison sentence Vick returned to the NFL, and Nike saluted his improvement saying that he learned from his own mistakes and as a result they offered him a new contract.

Ray Rice

Speaking of Roger Goodell’s PR gaffes, let me introduce maybe his biggest one to date,the Ray Rice scandal. The first video of Rice and his, at the time, fiancee emerged in February of 2014. In that video Rice drags her unconcious body from the elevator.

In June of the same year another video surfaced, showing the beating she suffered inside the elevator, which caused her to get unconsious. Even though many reports say Goodell saw both of these videos in February, he refused to act on it, until that 2nd video was made public.

Then, he was once again as in Vick’s case, pretty much forced to act and suspend Rice. Vertimax was the first company to end their contract with Rice. Dick’s Sporting Goods and Modell refused to sell Rice’s shirts.

Nike teared up their contract with Rice and EA Sports removed him from Baltimore Ravens’ roster in their Madden NFL 15. At this moment Rice is deservedly sponsor free, contract free, career free and public image free, while Goodell’s mishandling of the situation, caused a massive blow to both NFL’s and his own public image.

Good and Bad Damage Control

As you have probably noticed from the previous examples, Nike tends to stand by their clients during scandals when they think that the damage can be repaired and when their moral compass allows them to do so.

A study conducted by Carnegie Mellon University took place in an attempt to measure Nike’s loyalty through the allmighty dollar.

Pittsburgh Steelers’ quarterback Ben Roethlisberger reached his third Super Bowl in the same season when he was suspended for the 4 games after he was accused of raping a student. Nike stood by Roethlisberger, as they did when Kobe Bryant was accused of raping his wife and as they did when Tiger Woods had his massive scandal.

Carnegie Mellon’s Timothy Derdenger analyzed wheather it was smart for Nike to stand by Woods.

He decided to only look into Nike’s sales of golf balls and concluded that Nike lost about 105.000 customers due to Woods’ scandal. That sums up to 1,1m golf balls less sold or about $1,3M in profit.

It would seem like Nike made a bad call, but it is acually not the case, as Timothy Derdenger explains:

“No, we found that Nike was very smart in their decisions to stand by Tiger after the scandal.”

According to his research, Nike would have lost another $1,6m in profits if they had decided to stop their business relationship with Woods. Dr. Lynn Lashbrook, a sports agent who runs a Portland-based online school, explains:

“Their decision to stand by Tiger Woods was a profitable decision. I think people in sports enjoy, when they crash – the comeback.“

He continues to give his two cents on Nike’s business module:

“I think that it creates a following, a loyalty, and as you can see in the study, they’ve benefited from that, so I think that they stand by it because the frailties of an athlete are a reflection of a society, and I think sometimes, Michael Vick included, the message is we’re all going to make mistakes and fall, and the comeback is as big a story as the success before the tragedy.”

Sport fans tend to be more forgiving than other customers, and Nike realizes that, so they decide to ignore the public outcry to cut some athletes loose during their scadals. They explore their market and they know their customers as Derdenger concludes:

„There’s a prestige effect of playing the same brand that Tiger Woods plays, and that effect will get larger as people start to forgive Tiger Woods or as Tiger Woods starts to play better.“

Minnesota Vikings

Adrian Peterson’s scandal proves to be a perfect segway to continue.

Same as in Ray Rice’s case, Minnesota Vikings’ running back Adrian Peterson’s scandal slowly developed and it took his sponsors some time to decide what their moves will be. Peterson was accused of child abuse on Friday, the 12th of September. Just 30 minutes later his team had to make a decision wheather to include him in the team for the Sunday’s game.They included him in the team, but soon enough they went back on that decision.

That same night another case of Peterson’s child abuse surfaced. Team’s sponsor Radisson hotels, whose logo was in the background when the team announced their decision to reinstate Peterson, decided to cut their ties with the Vikings’ franchise. As the main reason for terminating the deal with the Vikings, Radisson hotel management said in official statement that their company “takes this matter very seriously, particularly in light of our long-standing commitment to the protection of children”.

In the next few days Peterson himself lost Castrol, Nike and Mylan as his sponsors while Wheaties removed Peterson’s image from their boxes, claiming this scandal has nothing to do with their action.

As in Ray Rice’s case, when the NFL sponsors decided to avoid Baltimore Ravens’ games, this time they also decided to avoid Minnesota Vikings’ games.

Verizon was one of the sponsors that stood by Vikings’ side, even though their CEO announced he was worried about the problems the NFL was facing.

This is just one of the cases when the team lost their sponsors because of mishandling a scandal one of their players was involved into.

Anelka’s contoversial gesture

French football player Nicolas Anelka is another athlete whose scandal caused his club, West Bromwich Albion, lose a sponsor.

The trouble begun when he used a controvesial „quenelle“ gesture to celebrate a goal he scored for for his team.

The gesture is controversial because it is a symbol of anti-semitism in Anelka’s native France. In his defence Anelka stated that his gesture was neither racist, antisemitic or nazistic, but rather an anti-establishment statement and an homage to his friend, French comedian Dieudonné M’Bala M’Bala.

But this friend of his, who uses this symbol as a sort of his trademark, is also well known for his anti-semitic statements and actions which caused several scandals in the past and got him punished.

West Bromwich Albion didn’t react to Anelka’s scandal, and their sponsors Zoopla were not impressed with the club’s handling of the issue. Soon enough they officially announced they will not renew their two year deal with the club. The contract was at the time still in place, but it was about to expire at the end of the season.

“Zoopla has been reviewing its position over the past few weeks in light of the actions of striker, Nicolas Anelka, during the match against West Ham over the Christmas period and has decided to focus its attention on other marketing activities after this season”

This way the deal between Zoopla and West Bromwich Albion, that the club in 2012 announced as “the most comprehensive deal in the club’s history”, came to an end.

Some other French athletes, like Tony Parker, Samir Nasri and Mamadou Sakho also used the „quanelle“ gesture during their careers, but they did not face the controversy.

West Bromwich Albion asked Anelka not to repeat the gesture, but it was too little to late to keep their biggest sponsor.

Wigan’s PR own goal

Similar situation happened at another English football club, Wigan, when they lost their back-of-the-shirt sponsor. Premier Range publically stated that the club put them in an „unsustainable position“ when they decided to hire Malky Mackay as their new manager.

At the time Mackay was under investigation by the English Football Association, the FA, for racist, homophobic and sexist text messages. Not long after Premier Range cut their ties with Wigan Athletic, their other sponsor iPro Sport did the same.

Both Premier Range and iPro Sports released their statements. Premier Range officially stated:

„The company has been a supporter of the team and fan base at Wigan FC and had looked forward to a long and fruitful relationship with the club as its hydration partner. However, the recent decision to appoint Malky Mackay as the club’s new manager in the light of the Football Association’s investigation into racist, sexist and homophobic text messages that he apparently sent while manager at Cardiff City, is at odds with the company’s business ethics and commitment to best practice.“

While iPro Sport stated:

„iPro Sport actively encourages positive working relationships that are not based on colour, race, nationality, religious belief, sexual orientation or age and cannot condone racism, sexism or homophobia. As a result, it is with deep regret that iPro Sport will be severing its relationship with Wigan Athletic Football Club.“

Mackey didn’t deny these actions, but he did apologise for them before his appointment :

„I would ask people to judge me when they see me. I’ve apologised for my mistakes. I’ve studied diversity and that’s something that’s ongoing. It has been a difficult period and I have made mistakes. I hope that in my time at Wigan, the people of Wigan and the supporters see who I am and see that I’m someone that desperately wants the club to do well.“

Even though Wigan Athletic was warned by their sponsors and by even the local MP Lisa Nandy not to hire Mackey they went against their wishes. As consequence the lost their sponsors and intentionally caused a dent to their public image. The only way they protected themselves is that they put a clause in Mackey’s contract where actions could be taken regarding the outcome of the FA investigation. Their actions sent a negative message about their respect towards their own sponsors.

Conclusion

In the world of sports sponsors have always been important part of clubs’ business plan. And as such they are involved in clubs public appearance. So it is very confusing to understand how and why certain clubs decided to act on their own during scandals or even conciously acted against wishes of their sponsors. Those actions had no chance to have any different outcome than sponsorship termination. It is important that the club consults its sponsors in attempt to find a common ground during scandals and possibly even make a joint statement when a certain scandal breaks out, to prevent any additional damage to their image.

It also works both ways. German football St.Pauli has a cult status among football fans all over Europe because of the club’s fan-inclusion and refusal to follow all the rules dictated by financial part of the game. As any other club they still do need kits to play their games in, so this summer they signed a new deal with Under Armour, which caused an uproar among their fans. St. Pauli fans didn’t like that Under Armour has a deal with the US military and that the brand shares hunting photos on their Under Armour Hunt social media pages. Since St. Pauli fans are strongly against these activities, the Baltimore based company announced they will try to find a common ground with the German club, because they see them, due to their cult status, as a big window to European football market.

When a certain athlete’s actions cause a scandal every individual will make their own decision wheather they will condone those actions or they will not find those actions as a big deal. Brands need to be very careful whether they will stand by an athlete during scandals, since some scandals can lose them a great deal of business, because their customer and fan base can be disgusted by their actions and their support for that athlete.