Pay-To-Not-Play: Apparel Companies Get Creative in Their Endorsement Deals with Young Athletes

1433898973_19548950_ver1.0_640_480

By: Dalvin Yarbrough

Since 2005, high school NBA prospects were required to wait one year before being drafted and realizing their dreams of becoming household names. The “one and done” rule, as it has been aptly named, was implemented by the NBA to protect young players but has caused headaches for many of them. Athletes have a few options during their year before NBA eligibility to – play college basketball, play overseas, or take the year off to train privately. Once that one year is up, not only can these kids join professional teams and play for pay; they can sign lucrative endorsement deals with companies looking to find a transcendent athlete they can build their brand around. But the year-long wait to fame and fortune may no longer be necessary for some athletes – sort of.

In recent weeks, several developments have challenged the future of the “one and done” rule. One of these developments is a rule change instituted by the NBA that allows certain elite high school players to join the G-League (essentially a minor league for the NBA) for contracts of $125,000 apiece. The idea behind the change is to give players an alternative to playing college basketball, where the vast majority of prospects spend their one year before, potentially, making the jump to the NBA. This paid alternative gives athletes two benefits: first, they can get the satisfaction of playing for a salary—albeit a modest paycheck compared to what they could make upon signing with an NBA team; second, they get a year to develop in the G-League with NBA-caliber talent.

However, some pundits believe that this route will not become the normal route of athletes any time soon.

Picture1

It appears “Woj” might be correct.

New Balance Breaks New Ground

Insert Darius Bazley, a former 5-star recruit out of Cincinnati, Ohio, who decommitted from Syracuse University opting instead to play a year in the G-League under the NBA’s new rule. He then decommitted from the G-League upon signing an endorsement deal with New Balance. However, Bazley’s deal is not like many others, or any ever for that matter.

Bazley, with the help of his super-agent Rich Paul, struck a groundbreaking deal with New Balance that may set a trend for other apparel companies to follow. The endorsement deal pays Bazley one million dollars with incentives that can reach up to $14 million and provides him an internship with New Balance’s marketing and apparel design teams. New Balance is hedging its bets that Bazley is every bit the budding superstar that his NBA prospect status suggests, and that a year away from competitive basketball to train and learn about the apparel business will not impact his future earnings. Other apparel companies may be inclined to follow suit.

Companies Should Rethink the Risks They Take Signing Young Athletes

Apparel companies covet high school stars so much that they will risk criminal penalty to bring athletes within their spheres of influence.  While the NCAA still institutes an antiquated amateur model for its member schools, this has not stopped players and companies from bending the rules. For instance, former Adidas executive James Gatto, a consultant and an aspiring agent were recently found guilty for their involvement in a pay-to-play scheme. The trio of defendants funneled money from Adidas down to an elite high school recruit’s family in exchange for his commitment to play basketball for the University of Louisville, an Adidas-sponsored athletic program.

Why would a powerful brand like Adidas risk its credibility in such a scandal? The outdated “one and done” rule encourages this type of behavior, and, traditionally, the only parties to be penalized have been the athletes themselves. However, now that federal prosecutors have successfully argued that agents and executives can be criminally liable for engaging in these activities, the model for signing young athletes to endorsement deals must change.

Endorsement Internships Are (For Now) The Way to Go

Arrangements like the one between Bazley and New Balance might help sweeten deals by giving apparel companies and athletes alike a bit more security for relatively low amounts of extra time or capital. The athlete receives the multi-year endorsement of their dreams and above all, will get paid something upfront regardless of what happens once they reach the pros; they can use the money to help their families, hire trainers and wealth advisors, and intern in a business they have genuine interest in. The apparel company gets an athlete they hope will become a high-level player on the court and one of the faces of their brand. The company would also get help in brand development through the internship and, most importantly, would have a legal contract with the player that they can tout to other athletes seeking deals.

While deals exactly like Bazley’s will not be viable for long because NBA commissioner Adam Silver has said the “one and done” rule may be done as early as 2022 – the idea of integrating young athletes directly into a company’s business should not be abandoned. High school phenoms often grapple with the trade-off between earning vast amounts of wealth and their education upon graduation. This is why they often risk their own amateur statuses to receive illegal payment while playing college basketball for a year. Many players that choose the college route rarely attend class, let alone learn anything of substance.

Whereas the average player in the NBA lasts less than five years  and has significant earnings potential, apparel companies would benefit from offering “endorsement internships” as a way of helping secure their investments in the athletes that they sign. This way, even if the athlete does not last as long as certain big-name players, at least the company has a skilled individual knowledgeable about their business and hopefully well-connected with other athletes around them.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s