This piece was originally posted on www.sportsandtaxation.com.
By Laura Donnellan, School of Law, University of Limerick, Ireland
Modern sport is a multi-billion dollar global business.
Sport has become increasingly commercialised with the bulk of the revenue generated from sport being sourced from sponsorship and broadcasting deals and not from the traditional medium of gate receipts and prize money. Sponsorship provides the most cost effective alternative to tradition media.
The recently announced sponsorship agreement between Godolphin and Under Armour is the first of its kind. The partnership brings together an international equestrian organisation and a global sports clothing manufacturer. Under Armour is a Baltimore-based sports’ clothing, footwear and equipment company that has signed an agreement with Godolphin to provide bespoke clothing which will be worn in training and in competition by jockeys, trainers and members of Team Godolphin in the UK, Ireland, Australia, the United States, France and Dubai. See www.godolphin.com). The apparel includes a tailored jacket which uses cutting-edge technology and allows for as much movement as possible for a jockey while riding.
Under Armour have a number of sponsorship deals in place with individual sports’ persons and teams, including NBA player Stephen Curry; NFL player Tom Brady; Tennis player Andy Murray; and English Premier League teams, including Tottenham Hotspur, Aston Villa and Southampton. Southampton has signed a seven year partnership which will begin at the start of the 2016/2017 season.
While sponsorship of teams and individual sports persons can yield lucrative returns for a sponsor in the form of fans purchasing replica kits and singlets, it is difficult to see how anyone other than those involved in Godolphin will purchase bespoke apparel.
Stephen Curry was a major coup for Under Armour; however, this was largely due to errors by Nike. Nike is said to sponsor three-quarters of NBA players (Jeff Haden, “The $14 Billion Man: Why Nike Lost NBA Superstar Stephen Curry to Under Armour”, 28 March 2016). At a pitch meeting, Nike mispronounced Curry’s forename and in a PowerPoint presentation Kevin Durant’s name was on the slide and not Curry’s. After parting ways, Curry signed with Under Armour for $4 million per year. In 2015, the contract was extended until 2024 for an undisclosed amount and Curry was endowed with an equity stake in the company. Sales of Curry’s signature basketball shoe are up 350% since the start of 2016, higher than the sales of any of Nike’s signature shoes with the exception of Nike Jordan (Bob Byran, “MORGAN STANLEY: Stephen Curry could be worth $14 billion to Under Armour”, 6 March 2016). It is predicated that by 2025, Under Armour will be worth $25 billion; in 2015, it was worth just under $4 billion (Hayley Peterson, “Under Armour is on pace to be one of the fastest growing sports brands in history”, 13 October 2015). By 2030, Under Armour is expected to be the third largest global sports apparel company (Nike and Adidas being first and second respectively). Analysts have suggested that it could usurp Adidas of its place by 2030 (Peterson, “Under Armour is on pace to be one of the fastest growing sports brands in history”).
While the partnership with Godolphin may seem incongruous, Under Armour sponsored a ballerina, Misty Copeland in 2014. While the terms of the contract were not disclosed, Copeland has been quoted as saying it pays her more than her yearly salary of $100,000 as a ballerina. Under Armour’s motivations are not so altruistic as Copeland is heavily involved in promoting diversity in ballet by encouraging the participation of more African-American ballerinas; she has been the subject of a Netflix documentary and she also published two bestselling books. In the words of one analysist, the association with Copeland has made Under Armour “look hip” (Daniel Roberts, “Under Armour is on an insane endorsement deal hot-streak”, 25 March 2016). Recently, Copeland has become the face of Under Armour athletic wear. The partnership, while mutually beneficial, is adding kudos to the Under Armour brand for a relatively small fee.
In returning to the Godolphin and Under Armour deal, the exact terms of the contract have not been disclosed. The main benefit that has been highlighted by both sides is that of synergy between two “prestigious global sporting brands…who are natural partners”. John Ferguson, Chief Executive Officer and Racing Manager for Godolphin, proffered that “[t]he vision and values of Godolphin directly mirror Under Armour’s brand mission to help all athletes perform at their best, through the relentless pursuit of innovation and excellence” (www.godolphin.com). Peter Murray, Vice President of Global Sports Marketing for Under Armour, asserted: “At Under Armour, we like to partner with those who lead their field. Godolphin has a proud heritage as one of the most successful international racing stables, having amassed more than 230 wins at the world’s most prestigious races across 12 different countries and four continents” (www.godolphin.com).
As part of the deal, Under Armour will provide over 1,500 members of the Godolphin Horse Racing Team with a uniform, which was launched at The Craven Meeting in Newmarket on 12 April, 2016.
It is highly probable that Under Armour will have included a so-called ‘morality clause’ in the sponsorship contract; especially given Godolphin’s doping scandals in the past. Sponsorship contracts are atypical as there is no standard contract that can be used for all types of sponsorship agreements. There are no particular formalities prescribed for a sponsorship contract. In general, the sponsor would not be entitled to damages but would be permitted to terminate the contract. In using the example of Tom Brady and the aftermath of “Deflategate”, Under Armour did not terminate the contract. This is largely due to the fact that it is not a family centred company and more latitude seems to be given to sports persons and teams by luxury and fashion companies (Cari Grieb, “Tom Brady’s Endorsement Value Takes Significant hit from Deflategate”, 12 August 2015).
Although the terms of the sponsorship contract have not been made public, it will be interesting to see if more information is provided to the media over the next few weeks. It is no doubt a lucrative partnership for both parties and will make Under Armour, through its association with the Godolphin Horse Racing Team, a household name in the other four continents of the world!