Sebastian's Corner
By Jordan Carey
When one thinks of the Olympics, I’m sure the first thoughts are of specific athletes, team, or moments. People may also think of the symbols of the games such as the stadiums, cities, rings, medals, and flame. Shortly after these though, many will think of some of the sponsors that have for the most part become seamlessly ingrained with the games. Whether it be Morgan Freeman narrating Olympic commercials for Visa or Kobe Bryant releasing special Nike shoes for the Olympics, many corporate companies have become part of the games in the last twenty to thirty years.
One of the major corporate players involved with the Olympics since the 1976 Montreal Games is McDonald’s. McDonald’s has provided food for athletes and fans as well as having many Olympics-related contests and specials at their American restaurants. For the 2012 London games, McDonald’s has opened the biggest McDonald’s in the world in the Olympic Park. While many people seem to think this is a cool concept and will definitely bring a large amount of revenue to the London Games, the move has been met with some controversy and skepticism.
McDonald’s Flagship Olympic Restaurant in London (Photo: McDonalds/Flickr )
Jacques Rogge, the president of the International Olympic Committee, has questioned whether it is appropriate for the fast food giant to remain one of the Olympics biggest sponsors when there is a global obesity crisis. According to CNBC, in the four years leading up to the London Games, the IOC has made more than $950 million from its 11 global sponsors (which include both McDonald’s and Coca Cola). Mr. Rogge has expressed some satisfaction with McDonald’s introduction of many healthier options in the past decade. While the obesity epidemic is a major issue all over the globe, Rogge has pointed to monetary reasons as a major reason why McDonald’s will undoubtedly remain a global sponsor for the foreseeable future.
While McDonald’s is undoubtedly not the healthiest option anywhere, they have made strides in recent years to serve more than just a super size French fry and Big Mac. It also remains one of the fastest and cheapest options for food anywhere so it is understandable why the IOC would want to partner with such a well known brand. I personally can remember specials at McDonald’s that advertised the 1992 Dream Team. That is pretty good product recognition for a four year old and I’m sure this advertising has helped the Olympics appeal to many who are more interested in a Happy Meal than whether or not Andre Iguodala deserves a spot on the Men’s National Team (the answer is yes).
While in the past, McDonalds has given away cups featuring various athletes, this year they will be only giving away a free Coca Cola glass themed to various sports with the purchase of a value meal.
Jordan Carey is a rising 3L who will be starting his McDonald’s Olympic cup collection ASAP.
Do you have an opinion on the McDonald’s Olympic Sponsorship? Comment below.
Michael Vick has enjoyed a resurgence in endorsement opportunities of late. Our very own Michael Rubenstein spoke about Vick’s new opportunities in a previous post about the quarterback’s deal with Unequal Technologies. Last week saw Vick with more success only to be followed by some confusion and disappointment.
On July 20, two newswires were released announcing Vick’s new deals with MusclePharm Corporation and Fuse Science, Inc, a company owned by Double Eagle Holdings. MusclePharm signed Vick to a three year $1.55 million deal which could pay Vick more depending on his on-field performance. Fuse Science, Inc. signed Vick to a five year deal and made him an equity partner. Additionally, Fuse Science’s release stated that the deal was an “exclusive agreement for Vick in the sports nutrition and energy categories.” The press release can be found by clicking on the links below:
MusclePharm’s Press Release and Fuse Science’s Press Release
So, what went wrong? This week, Fuse Science ended their deal with Vick claiming that he had violated his exclusivity provision:
“Subsequent to our entering into and announcing the exclusive agreement, we learned that on or about July 20, 2011, Mr. Vick entered into an endorsement agreement with another company engaged in the same product categories, notwithstanding the exclusivity provisions of our agreement,” Aventura, Florida-based Double Eagle said today in a filing with the U.S. Securities and Exchange Commission. “This created an unacceptable conflict and, accordingly, on July 25, 2011, we terminated the agreement with Mr. Vick.”
Quote from Bloomberg.com’s article regarding the termination of the agreement.
Confusion had obviously started earlier than the termination as indicated by a press release by MusclePharm on July 22:
“We want to clarify that MusclePharm is the exclusive sports nutrition company of Mike Vick which is made clear by the executed agreement and current report Form 8-k filed today with the U.S. Securities Exchange Commission that discloses the contract terms between Mike Vick and MusclePharm,” said MusclePharm Chief Executive Officer Brad Pyatt.
Quote from MuslcePharm’s press release of July 22.
Exclusivity provisions are carefully drafted in many contracts from endorsement deals to retail leases in order to protect investments. For example, a Mexican restaurant leasing space in a shopping center may negotiate an exclusivity provision in their lease with the landlord providing that the landlord does not allow another Mexican restaurant into the shopping complex. The trick is knowing when the exclusivity provision is violated, and this determination is made based on the definition of the parties involved.
In Vick’s case, MusclePharm and Fuse Science carefully drafted language describing their company and their products in the respective endorsement contracts. Based on these descriptions, the companies, in their respective deals, most likely included language claiming that Vick would not be able to sign an endorsement with a company in a similar space. If we turn back to our Mexican restaurant and create a very simply example, the restaurant may describe itself as an establishment that sells tacos, burritos, nachos, and margaritas. If the landlord leases space to a company selling the same items, there would be a penalty.
We don’t know the exact language that was in Vick’s contracts, but we can look to the press releases to see how MusclePharm and Fuse Science describe themselves to the public:
Headquartered in Denver, Colorado, MusclePharm is a healthy life-style company that develops and manufactures a full line of National Science Foundation approved nutritional supplements that are 100% free of banned substances. Based on years of research, MusclePharm products are created through an advanced six-stage research protocol involving the expertise of top nutritional scientists and field tested by more than one hundred elite professional athletes from various professional sports leagues including the National Football League, Mixed Martial Arts, and Major League Baseball. The Company’s products address all categories of an active lifestyle, including muscle building, weight loss and maintaining general fitness through a daily nutritional supplement regimen. MusclePharm is sold in over 120 countries and available in over 5,000 U.S. retail outlets, including GNC and Vitamin Shoppe. MusclePharm products are also sold in over 100 online stores, including bodybuilding.com, Amazon.com and Vitacost.com. For more information, please visit www.musclepharm.com.
MusclePharm’s description from the July 20 press release.
Double Eagle Holdings (OTCQB: DEGH) is an innovative consumer products holding company and the parent company of Fuse Science, Inc. Based in Aventura, Florida, Fuse Science is the developer of patent-pending conveyance technologies poised to redefine how consumers receive energy, medicines, vitamins and minerals, delivering their benefits faster and more effectively than ever before. Information about Fuse Science is available online at www.fusescience.com or by calling 305-503-FUSE (3873).
Fuse Science’s description from the July 20 press release.
The contractual language is most likely different with more specific descriptions of the products made by the companies. Still, it’s easy to see that there is an overlap between the two businesses, and thus, Fuse Science ended their relationship with Vick. Their exclusivity provision most likely allowed them to do this.
As a final note about endorsement contracts for athletes, David Schwab of Octagon First Call had an interesting observation when he heard about the news:
- Jason
While watching CNBC last Thursday morning, I was surprised to see the name of the show’s guest speaker. The shock was caused by a number of reasons. First, the guest was not involved with finance, economics, or politics, but rather sports. In fact, he happened to be the quarterback of my favorite NFL team. Next, the guest was very controversial and shunned by many. Just two years ago, he was in prison for illegal dog fighting. You may have already guessed who the guest was, but, if not, then the next hint, the brand he was promoting, probably won’t give him away. He was on the show promoting a new brand of shock-blocking sports products called Unequal Technologies, and specifically, their EXOskeleton line. Now, you may be asking yourself, why would any brand choose a former felon to promote their product. Well, when that former felon is, Michael Vick, one of the most famous and talented NFL players of all-time, a new brand trying to make a name for itself should certainly take its chances.
After getting out of prison, Michael Vick was signed by the Philadelphia Eagles, in what was expected to be an uneventful second half of his career. However, after the Eagles traded Donovan McNabb and an injury forced Kevin Kolb to the sideline, Vick got his chance to play, and he took advantage of it. He was the Vick of old, but a better passer and with better decision-making. Then, after three stellar performances, he took a vicious shot to the ribs and was out for four weeks. This misfortune turned into the start of Vick’s, so far very successful, relationship with Unequal Technology.
The hit caused Vick to reevaluate his protection and pads. Vick wanted pads that were light enough to allow mobility and speed, but strong enough to protect him from getting injured while enduring many hits. Unequal Technologies introduced Vick to EXOskeleton, which was originally produced for the military. Vick has taken many hits since, but has yet to get injured. Vick stated, “I’m thrilled to be a part of the Unequal team. I’ve been wearing Unequal chest protectors, shoulder pads, and thigh pads for much of the late and post-season — resulting in pain-free playing. The Unequal technology is a part of my game now and I won’t play without my Unequal. Unequal’s protective power gives me a whole new level of confidence in my game. It makes me feel invincible.”
This seemed like a perfect fit. Vick got injured and needed a new product, and Unequal provided the product which has worked out perfectly. However, there were the illegal dog fighting issues. Vick has been the subject of much controversy and hatred. However, the President of Unequal Technologies, Rob Vito, seemed unfazed by this. ”In considering this deal there were several factors. As a dog owner, I know the love of a pet and the tremendous loss we felt when she died of cancer. But as a Christian, I believe that people can repent and deserve a second chance. I share President Obama’s support for Michael Vick and believe America is truly the land of second chances. I commend the NFL and the Eagles for granting Vick the opportunity to make a better life for him and his family. Vick’s performance on the field this season was unequaled and his passion for the game is in lock-step with our vision.” Vito was willing to give Vick a second chance, and Vick has responded by doing and saying all of the right things, while also playing the best football of his life.
I agree with both Presidents’ take on Vick, and Vito’s take on the other “several factors” he mentioned at the beginning of his quote. This was not a good move by Unequal Technologies; this was a great move. Michael Vick, despite his issues, is still one of the biggest and most talked about names in sports. Not many other athletes get the type of attention that he gets. Much of this is negative, but it still get’s his name and the brand’s name out to the public. His name recognition alone, for better or worse, is up with the likes of Peyton Manning and Tom Brady. Unequal would never have gotten the chance to sign another player of this popularity, and I would not be writing this article had they signed any other player that was within their capabilities. As a matter of fact, I’m not sure if I would even know that Unequal Technologies existed. Lastly, and equally as important, Vick is one of the best athletes, not only to ever play quarterback, but also to ever lace up his shoes and play football. He can do things that other players can’t. He can throw like the best quarterbacks, and run like the best running backs. He is unparalleled athletically, and extremely versatile as well. This is what Unequal wants to be known for and aligned with; it’s ability to allow athletes to be quick, light, and versatile. This is what the people who buy Unequal’s products will think about – not dog fighting. The Unequal brand will be more synonymous with Vick’s unequaled talent, and not his off the field issues. Ultimately, Unequal Technologies was able to take a chance on Vick, just like the Philadelphia Eagles, and it will pay off for both of them in a big way.
- Michael
A lot of the talk in the music business these days focuses on new revenue streams and marketing strategies, since the digital age has diminished the returns on recorded music. We need not look further than Britney Spears’ new video, “Hold it Against Me,” or Radiohead’s release of its new album, “The King of Limbs,” for proof. Spears’ new video made headlines for allegedly earning her $500,000 through product placement. Radiohead, on the other hand, continues its pioneering spirit towards album marketing by releasing its new album for download on their website in several formats. The headlines show how two starkly different types of artists are approaching the new digital music world. I may be a bit jaded on the pop stars of our day, but I think that here, Spears basically represents how the major record labels and corporations are tackling the problem, in contrast to Radiohead, who is the shining example for a lot of independent artists, and I assume has a lot more input in their promotional and marketing decisions.
In case you want to see product placement in action, here’s one source’s list of the cameos in “Hold it Against Me”:
0:39 – Britney is handed a bottle of perfume, which she sprays on herself, followed by a close-up shot of Radiance logo
0:47 – Make Up Forever eyeshadow appears in shot, followed by a shot in which Britney applies the eyeshadow
1:27 – First shot of Plenty of Fish screen
1:30 – Britney clicks on Plenty of Fish logo
1:32 – Britney clicks on Plenty of Fish logo again
1:34 – Shot of Sony logo
1:35 – Plenty of Fish logo appears prominently in shot
1:36 – Shot of Plenty of Fish profile page
2:40 – Close shot of Sony logo
2:41 – Shot of Britney performing on Sony TV
Anyways, the product placement is blatant and only makes a bad video worse. What Britney is doing floating 30 feet up in the Architect’s room from “The Matrix” in a wedding dress is beyond me. The whole thing reminds me of a (dork alert!) Final Fantasy VII fight scene. But, the point is, that the [former] pop queen took down $500,000. Now, I imagine that the majority of that went to various companies, but it’s clear that Vevo, and in a larger sense, music videos, are being tested out by the music business for potential revenue. As an added bonus, music videos can go on the internet as well as music TV stations (MTV, MTV2, Palladia, etc.).
The video perspective serves as a nice segue into a discussion of Radiohead, since Thom Yorke’s dance for the new song “Lotus Flower” has gone viral (over 5 million hits at this time). IMHO, Yorke completely outdances Spears and it’s not really that close. To get back on point though, Radiohead has gone away from the pay-as-much-as-you-want pre-release of their last album, “In Rainbows,” and is offering their new album in a variety of formats and with bonus items for the more expensive purchases. For $10, you can buy the low-quality (mp3) version of the album, a high-end (wav) version for $15, or get the wav version plus artwork for ~$50. I’m sure they did some research about price points, but at first blush it seems that the low end isn’t low enough (personally, I’d be much more inclined to download an album I kiiiind of want at $5-6) and the high end is too high ($35 for artwork???). I do like the progressive pricing scheme, though, but really, when you’ve reached the point Radiohead has, you’re tweaking with a product that is probably going to sell regardless. I’d like to expand on this, but that’s going to require its own post, which is hopefully coming soon.
In the meantime, I’m fascinated by the way artists (and companies) are going at the money making problem in modern music. The major pop stars of our day have the power of large corporations still behind them and we see that influence in their “360 deals,” agreements which involve the artists relinquishing their rights to everything, but their souls (although I’m not sure Bieber ever had one). Spears’ corporate backers saw an opportunity to recoup some of their costs and make revenue on this video, which they were probably going to make anyways. In contrast, independent artists, like Radiohead, are trying to give their fans more choice. It’s a microcosm of how both genres are heard–pop music being blasted into people’s ears from every which way, while indies appeal for the attention of a smaller group of listeners by giving them different and unique options.
-Lenny
