The Sports Professor Rick Horrow, in conjunction with promotional partner Northern Trust, examines the business of sports agency and the marketing challenges facing the team sports athlete – keyed to this week's agent firing by Cleveland Cavaliers phenom LeBron James.
Maybe LeBron James has been following the HBO hit series "Entourage" a little too closely. In a startling moment on Monday, the NBA superstar fired his agent of two years Aaron Goodwin – who negotiated more than $135 million in endorsement deals for the 20-year-old phenom, including a $90 million deal with Nike. James is reportedly turning over representation duties to three longtime friends, who together call themselves the "Four Horsemen."
As in "Entourage," which follows the trajectory of a rising 20-something movie star and the three buddies from Queens who oversee his career, the odd man out is the agent. As life imitates art, so does sport imitate Hollywood.
Witness the recent NFL draft: Will quarterback Alex Smith remind San Francisco 49ers fans of Joe Montana and Steve Young? Will running back Ronnie Brown make Miami Dolphins fans forget Ricky Williams? Will Detroit Lions wide receiver Mike Williams shine despite his signing with an agent and sitting out last year? Will Green Bay Packers backup quarterback Aaron Rogers be the endorsement darling for "dashed expectations" after sliding to 24th in this year's draft? Will controversial Ohio State runner Maurice Clarett become the next in the long line of Denver Broncos running back superstars; or will some other free agent become the endorsement story of this next NFL season?
The success of these players in their tough new world also depends on the business savvy and guidance provided by their respective agents, who serve as core advisors, tutors, yentas, stylists, dieticians, and confessors.
A traditional knock on sports agency used to be that any schlump off the street could be an agent. In fact, the only qualification for someone to be a sports agent was that he had some sort of athlete who referred to him as such!
Clearly, as contracts and endorsement deals get richer, sports agents continue to go to greater and greater lengths to win clients. Last year, the National Football League Players Association reported that there were more than 1,600 certified agents – and 300 more have applied for certification since.
The week before this year's draft, the NFL signed television deals guaranteeing that more than $3.735 billion annually would be added to NFL coffers for the next 6-8 years. That big number represents more national TV money than is being spent on the NBA, Major League Baseball, NASCAR, PGA TOUR, NCAA basketball, and the Olympics combined. Star struck agents see at least two-thirds of that money going to players…and 2-5 percent of it to their representation.
While "Jerry Maguire" and "Arli$$" popularized the profession, the National Football League, the courts, the federal government and some states have attempted to regulate it. However, while the American Bar Association regulates lawyers and the American Medical Association sets standards for doctors, there is no direct control on entering the sports agency business. As a result, three major challenges remain clear.
CHALLENGE ONE: PROTECT THE PROFESSIONAL ATHLETE'S INTEREST WHILE NEGOTIATING TOP DOLLAR OVER THE LONG HAUL
Contracts have obviously become more lucrative, and they will only increase in the future. Total compensation for NFL players exceeded $2.5 billion in 2004, up 20 percent since 2002. Two years ago, the Cincinnati Bengals paid top draft pick Carson Palmer a $10 million signing bonus and a $4 million option bonus. Agent David Dunn's take from the Palmer bonuses alone exceeded $420,000. Compare that to the 1983 signing of first draft pick John Elway – where agent Marv Demoff received $40,000 for Elway's $1 million bonus.
The SportsBusiness Journal characterizes agents as "naturally aggressive people" – and the higher stakes likely compound that personality trait exponentially.
