A corporate attorney with experience in endorsement contract negotiation takes us behind the curtain of what is expected of celebrity endorsements
As of today, July 1st, 2021, college athletes have been cleared to profit off of their name, image, and likeness. Not only does this open a new financial avenue for the hardworking athletes who have helped elevate college sports to the level of popularity that it is at today, it also creates a new, legitimate advertising avenue for businesses, local and national, to tie their brand to some of the most popular college athletes of the day.
But what does this mean for the college athlete? What sorts of stipulations are businesses going to tie to these endorsement deals? What new requirements are going to be demanded of them in order to maintain the endorsement deals that they are offered? And what kinds of opportunities are going to be presented?
For that, I turned to someone who has actual experience in handling these sorts of deals: a corporate attorney who has negotiated endorsement contracts with Olympic athletes, Grammy-award winning artists, Hollywood stars, and social media influencers. She’s one of the smartest people I know…and we also happen to be married. Today, Ashley Edwards will give a brief tour on the contractual side of celebrity endorsements, how they’re negotiated, and what college athletes can expect as they journey into the world of hawkin’ products and services.
Q: What is your role when negotiating endorsement/influencer contracts?
A: I help my clients negotiate the business terms of an endorsement or sponsorship arrangement, then draft the legal documents to reflect those business terms.
Q: How much “homework” do companies do when vetting a potential spokesperson/influencer? Do they try to find someone who fits their brand or just go with someone who is willing say yes?
A: When hiring someone to endorse a company or product, companies are paying for something that they perceive to have value – association with a particular person or organization. A company typically won’t pay for someone with no name recognition (either individually or as a member of a group or team) to endorse a product because that association adds no value and brings the company no commercial advantage. For college athletes, there are many college athletes who are recognizable names and faces, but some companies might also be interested in lesser known athletes solely because they are at a particular university.
Q: How many demands/requests can an entity reasonably make of a person in order to represent their company or product?
A: In addition to the services which the company is contracting the endorser to perform (e.g. social media posts), there are typically some restrictions on the endorser so the company can protect its investment in the relationship. If a company is paying money to someone to represent the company or a product, the company wants to ensure that it is receiving the value of that endorsement. One common restriction is an exclusivity clause – the endorser cannot endorse a competitor or a competing product. However, these provisions can be broader than simply not endorsing a competitor’s product. Especially with bigger names, many contracts stipulate that the endorser cannot be photographed (even in their private life) with a competitor’s product, or cannot stand next to a sign with a competitor’s name on it when out in public. Another common provision is a morals clause, which we discuss more below. These provisions might seem simple at the time an athlete is signing a contract, but these can be tricky. For example, with respect to exclusivity, if a university has an existing sponsorship agreement with Nike, an athlete might run into trouble if they agree to endorse Adidas. Wearing a Nike-branded jersey during the game might violate the athlete’s Adidas contract, but the athlete wearing Adidas in public might violate the university’s contract.
Q: What are some typical requirements made of the spokesperson/influencer as far as frequency, content, and type of endorsements they need to fulfill?
A: Well written contracts which involve social media posts are highly specific about the posts: 3 Instagram posts (including 1 Instagram story) to be posted between X and Y dates, 2 TikTok videos of at least :30, etc. Content is usually mutually agreed upon by the parties to ensure the messaging is what the company wants, though not always. There are also FTC regulations which govern endorsements made on social media: endorsers need to prominently disclose their relationship with the brand, endorsers need to have tried the product they are endorsing and give their honest assessment, and endorsers cannot make claims about products which require proof the endorser doesn’t have (like claiming that a product can treat a certain health condition).
Q: Tell me more about morality clauses; how much more important are they now than they were 20 years ago and how have the types of moral behavior accepted evolved?
A: Morality clauses, or morals clauses, are common in any type of endorsement agreement, from the biggest celebrities to much less well known influencers. These clauses give the company the right to terminate the relationship with the endorser if the endorser does something ‘bad,’ which can vary significantly depending on the fame of the endorser and the industry of the company. Companies want the flexibility to immediately sever a relationship if a particular individual’s ‘brand’ becomes toxic due to scandal or wrongdoing. Arrests and convictions are the traditional triggers, but many companies are equally sensitive to allegations of certain crimes, and most will also include some generic catch-all of anything which could damage the company’s reputation. In the age of social media and smart phones, it is significantly more likely that someone can be caught doing something bad than in the past. Also, in the wake of #MeToo, Black Lives Matter, other social justice movements, and an increased focus on ESG by many companies, companies are drafting morals clauses to reflect a wider variety of potential triggers.
Q: What’s the best piece of advice you would give an athlete who is approached to monetize their social media or endorse a particular product/company?
A: Check with the university about the rules – each school will have different policies, procedures and considerations when it comes to athlete endorsements. Many states have passed laws related to this issue as well. The NCAA has issued interim guidance, the NAIA has passed legislation, and the conferences may weigh in soon, too. For example, university names and logos may or may not be acceptable to include as part of the endorsement, depending on the school and the state. That patchwork of applicable rules means this is a rapidly changing area, so athletes need to make sure they are in compliance.