Tom Brady's Reputation, and Under Armour's
Both the NFL and Tom Brady seem determined to stretch out Deflategate for as long as possible, doing nobody involved in this mess any favors. But while Brady himself might believe he's doing what's best for his long-term reputation and legacy, he might be hurting his long-term sponsorship opportunities.
To wit: Brady doesn't need endorsement dollars. He's earned nearly $150 million to date just from his contracts, and the money he pulls in from endorsement deals is a relatively paltry $7 million a year. His most notable sponsors are Under Armour, Movado and UGG, none of which have addressed the NFL's decision to uphold Brady's four-game suspension. The general consensus among marketing experts is that Deflategate might not affect Brady's current deals, but the fallout from it could deter other companies from signing him in the future. Last month, Under Armour chief executive officer Kevin Plank stressed his support for Brady, calling him "as honest as the day is long" and "one of my favorite people on earth."
It will be interesting to see if Plank and Under Armour maintain their love for Brady now that he's suing the league (along withe players' union). By now, the actual merits of the case are meaningless: Did Tom Brady cheat? Maybe. Is due process in the NFL a farce? Definitely. Instead, the legal fight going forward is about both sides preserving their image. Brady is maintaining his innocence to ensure his legacy and marketability post-retirement, which could come sooner than you think. But he might have hurt his prospects by choosing not to just come out in the beginning and apologize for whatever happened to those footballs, or accepting the NFL's offer to cut his suspension by two games if he publicly admitted guilt.
Now, he's suing the league, and Under Armour could have a choice on their hands in a few years. The equipment and apparel maker has had a spectacular year, riding its shift toward sneakers and athletic gear to $783.6 million in sales. On the company's earnings call last week, Plank credited this bump largely to three marquee athlete endorsers: Stephen Curry, Jordan Spieth and Misty Copeland. It's interesting that he'd leave out Brady just a few weeks after professing his love for him, but it's more interesting to look at where he plans on taking the company next. Under Armour is expected to make a push to break into the major North American sports leagues, and the NFL would certainly be the white whale of exclusive apparel deals.
The most immediate opportunity would be with the NHL, whose deal with Reebok runs through 2016-17. Adidas, which Under Armour overtook this year to become the second-largest domestic athletic apparel brand, is rumored to be interested as well. The NBA and Nike just signed an eight-year deal beginning in the 2017-18 season, putting basketball off the market for the next decade. Meanwhile, MLB and Majestic Athletic extended their partnership through 2019 back in March.
The NFL will also have an opening in 2019, having just added another three years to its unusually short five-year deal with Nike. Under Armour already lost out on the bidding for the NBA contract, so there has been much talk among sport-business experts of it making a major play on the football field. Nike does seem somewhat concerned about Under Armour crowding into its space; according to Sports Business Journal, the NFL extension blocks Under Armour from the partnership. For now, Under Armour is battling at the margins: it outfits the players for the NFL combine and has a $90 million contract with Notre Dame, the largest ever in college football.
If and when Under Armour does make its much-speculated attempt at the NFL, continuing to have on its payroll a player who has sued the league could throw a wrench into that plan. Then again, if the NFL continues to have legal success, the courtroom fight might be a short one, giving us all the more time to forget about Brady's indiscretions.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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