Ronaldo Who? The Impact of COVID-19 on Athletes’ Brands
Ronaldo Who? The Impact of COVID-19 on Athletes’ Brands
The value of professional athletes’ rights of publicity could be negatively affected by COVID-19. What are these athletes doing to mitigate the damage?
While we cannot provide an escape from reality by analyzing “last night’s game,” we can perhaps carve out some temporary relief by analyzing the intellectual property (IP) implications of the game’s absence. (We know. It’s not exactly Tiger’s shot to cement the 2005 Masters, but perhaps it’s better than power washing the sidewalk for the third time this week.)
Unless you have been hanging out in a cornfield waiting for an Iowa farmer with unresolved paternal issues to build a baseball diamond, you are probably aware that professional baseball – and all other sporting events – have either been canceled or postponed due to COVID-19. June (which is this month for those still keeping track) is typically one of the best months of the year to be a sports fan – a time when we are spoiled with the NBA Finals, the Stanley Cup Finals, golf’s U.S. Open, the UEFA Champions League final, the NBA draft, and the start of Wimbledon – but this year, all bets are off. To add insult to injury, this year the typical sports desert that is the month of July was supposed to get a lift from the Summer Olympics – now it’s just Jelle’s Marble Runs. (If you are not aware of Jelle’s Marble Runs yet, you are not as bad off as you think.)
With the absence of sports, there has been considerable attention devoted to reductions in player salaries and tournament winnings. However, for many professional athletes, a substantial portion of their annual income results not from multi-million-dollar salaries but from the monetization of their IP rights: the right of publicity.
The right of publicity is generally defined as an individual’s right to control and profit from the commercial use of their name, image, and likeness. Athletes can monetize their name and popularity through avenues such as endorsements, appearances, video games, and even tattoos.
For example, at least 90% of the $1.4 billion Tiger Woods has earned since his pro debut in 1996 has come from endorsements. His primary benefactor, Nike, spends on average one-tenth of its revenues ($3.9 billion in 2019) on so-called demand-creation costs, which consist of advertising expenses and endorsement deals. Many Olympians have trained their entire lives for the chance to win Olympic gold and to end up on a Wheaties box (literally or figuratively). Graduating NCAA athletes who may have led their teams to a national championship would typically have a lot of endorsement opportunities right away, and beginning in 2021 the NCAA is allowing student athletes to earn endorsement money while in school prior to going pro.
How the Right of Publicity Differs From Other IP
While the right of publicity is a legally recognized form of IP, like patents and trade secrets, there are important differences in the value drivers between the right of publicity and these more well-known forms of IP. These differences have become even more apparent since the onset of the pandemic.
Like a patent or trade secret, the value of the right of publicity is largely associated with its ability to drive additional purchases or command a price premium. However, unlike a patent or trade secret, the value of the right of publicity is driven by the positive association drawn by consumers from the competitive success of the athlete – which for the professional athlete may hinge on their performance in their most recent season, match, or race. By comparison, the value of patents and trade secrets is not so intimately tied to an ongoing positive relationship with the average consumer. In fact, for many high-value patents and trade secrets the average consumer is likely not aware they exist.
The right of publicity in many states has a longer statutory protection period than patents and other forms of IP. Patents are protected at a federal level for 20 years. In contrast, the right of publicity in California, for example – where we know celebrity is the main form of currency – the state statutory protection period of the right of publicity exists for the person’s life plus 70 years from the date of death. Some states have even longer statutory protection periods; Oklahoma’s, for example, is the length of the person’s life plus 100 years. One of the main reasons for the disparity in the protection periods for these different form of IP is that heirs to these rights have generally succeeded at the state level in establishing the right of publicity as transferrable property rooted in the right of privacy (both of which are sacrosanct under U.S. law) against mostly commercial interests that advocate for public use of a famous person’s image and likeness on First Amendment grounds.
While the right of publicity in many cases has a longer protection period than other forms of IP, for the professional athlete, with a few exceptions, the opportunity to build up that value is relatively short. For example, the average NFL career is about three years, and most Olympic athletes get only one or two chances to make a name for themselves and monetize that short-lived notoriety. For example, Olympic sprinter, Usain Bolt, has earned over $200 million in endorsements since 2008. That’s approximately $1.2 million per second (and counting) for the 161 seconds of Olympic medal races he competed in. However, for many Olympic athletes, whose training had them peaking now, that opportunity to compete has evaporated, and with it, the chance to enhance the value of their right of publicity. If the rules proposed by the NCAA are adopted, college athletes that do not go pro will also be rushed to make the most of their four-year stint on the national stage. These extremely narrow time constraints to establish and extract value are not as acute with other forms of IP.
How COVID-19 May Affect the Right of Publicity
The value of right of publicity is particularly vulnerable during the COVID-19 pandemic.
For many athletes, COVID-19 is preventing them from extracting any newly acquired brand value earned from winning events just prior to the start of, or during, the pandemic. On this point, one sports agent we interviewed for this article said that, for her sport, golf, late winter and spring is when she begins shopping her athletes to prospective brand partners. Under normal circumstances, that process involves the agent and athlete having multiple in-person meetings with potential sponsors. For obvious reasons, those meetings are just not happening. The whole process has come to a halt. She added that many companies are taking a wait-and-see approach with respect to new deals given there is still so much uncertainty surrounding the future of spectator sports. In addition, given the stay-at-home orders and increasingly limited disposable incomes of consumers, potential sponsors are spending their marketing budgets on meeting payroll rather than paying athletes to endorse products that no one can afford – or are physically prevented from buying. Accordingly, athletes that planned to ink high-dollar endorsement deals on the heels of, say, a recent golf tournament win (see Xander Schauffele), a come-from-behind Super Bowl victory (see Travis Kelce), or a clutch World Series-winning performance (see Juan Soto) may be found wanting.
As leagues figure out how to proceed without fans, professional athletes are also weighing the health risks posed by COVID-19 versus the financial risks to their right of publicity. For example, Tommy Fleetwood, Nike-endorsed golfer from the United Kingdom has stated outright that traveling to the U.S. in order to compete is “not a consideration.” And five-time NBA All-Star Damian Lillard also does not plan to return to action once the season resumes, citing the lack of reward for the risk of getting sick or worse. The long-term nature of brand building and endorsement deals may insulate some players from the loss of endorsements if they choose to sit out one season but these players also risk being replaced for the long term by those athletes that are willing to play now.
For athletes like LeBron, Tiger, or Ronaldo, who have single-name monikers and whose images and likenesses transcend sports altogether, COVID-19 is not likely to have a significant impact on the value of their right to publicity. However, athletes that are not trans-generational household names fear losing brand momentum because their profile cannot be reinforced through widely viewed performances. As such, they are currently trying to maintain the value of their right of publicity by other means.
For example, one sports agent we spoke with said that many athletes are trying to maintain good relations with their sponsors by making themselves available via the web, hosting exclusive online chats or training sessions for top customers. Nike for example has been working with many of its athletes to create fitness-focused content while they are not competing. Other athletes are getting involved in causes related to COVID-19 relief to remain in the public eye while making a positive impact. And many athletes are relying more heavily on social media to maintain their profile. COVID-19 has even forced some athletes who have avoided social media in the past to establish an online presence. For example, one of the most notable recent additions to Twitter, Eli Manning, was welcomed by Tom Brady who tweeted “Welcome @EliManning, In typical fashion, you never showed up until the 4th quarter anyway.”
While it does not appear people will be saying “Ronaldo who?” anytime soon, if COVID-19 keeps professional athletes on the sidelines long enough, Nike’s next shoe line might be the “Air Fauci’s” as the value Dr. Anthony Fauci’s right of publicity seems to be sky-high – no tweets necessary.
Stout’s Intellectual Property Valuation practice regularly values patents, trademarks, trade secrets, copyrights, and the right of publicity for a variety of purposes including transaction negotiations, estate planning and tax compliance, other regulatory tax issues, litigation, financial reporting, capital raising, and many others.
Also contributing to this article:
Associate – Intellectual Property Practice