The Strategist

The State of Sharapova: How Much The Sports Business Queen May Lose

03/08/2016 - 10:04

If advertisers break contracts with the Russian tennis player, Maria Sharapova will find herself in danger of losing tens of millions of dollars of secure income.

Valentina Alemanno,
Valentina Alemanno,
"I made a terrible mistake. I let down the fans. I let down the whole sport, "- said Maria Sharapova on March 7 at an emergency press conference in Los Angeles. The tennis player and her PR-team from IMG sports agency decided to give public confession without waiting for formal charges. The athlete introduced her version of what happened. For the last ten years, she has been using meldonium, included in the list of banned drugs since January 1, 2016, due to health problems, and supposedly just missed the news of the change of the substance’s status.

According to the rules of the World Anti-Doping Agency, the tennis player may face suspension for four years in the worst case. In April, Sharapova will celebrate 29 years – such a long exclusion from participation in the International Tennis Federation’s tournaments can mean the end of the athlete's career.

According to Bloomberg, Sharapova may soon lose $ 298 thousand. She received the same amount as a prize for her participation in the Australian Open, where she reached the quarterfinals, losing to Serena Williams.

However, Sharapova earns on advertising much more than on the court. According to Forbes’s estimates, Sharapova is the world’s highest paid athlete. She has been holding this status for 11 consecutive years. In 2015, her annual income was estimated at $ 29.7 million.

It’s clear that not all advertisers will want to share Sharapova’s reputational risks: a few hours after the press conference, Nike company announced that it has suspended the contract with the tennis player.

"We are saddened and surprised by the news of Maria Sharapova. We have decided to suspend relations with her until the investigation is completed. We continue to monitor the situation ", - said Nike in a statement (on CNBC’s quote).  

This is a serious blow to Sharapova’s business since Nike brand has become the key to the tennis player’s commercial success. The company with revenues of $ 31 billion was Sharapova’s technical sponsor when she was just a junior. With the growing popularity, Nike entrusted the athlete with her own line of clothing and footwear - ballet flats from Sharapova at some point become a top seller of Cole Haan sub-company. The shoes brought millions of dollars in revenue to the manufacturer. In 2013, Cole Haan was sold, but the cooperation with Nike went on until the last row, because the parties entered into a ten-year contract worth $ 70 million in 2010.

This was probably the biggest Sharapova’s agreement: for comparison, the partnership with Porsche and Head, according to unofficial information, bring her about $ 2 million a year. The amounts of the remaining contracts were not disclosed.

David Schwab, an analyst at marketing firm Octagon said to Forbes that all advertisers working with the Russian woman will at least once more examine the advisability of continuing cooperation with the disgraced star. It will happen even if the tennis player manage to convince everyone that she used the illicit drug inadvertently: "In the Twitter era, people read the headlines on that Sharapova failed a doping test, but few of them delve into the details," - says the expert. According to Schwab, the largest brand will hardly see the athlete’s justifications as convincing.

However, Sharapova’s personal business empire still can withstand the current strike, writes Bloomberg referring to Paul Swangard, former head of the Center for the Study of sports marketing at the University of Oregon. "Maria has a very large margin of safety that is called goodwill (goodwill), and also the demand for marketing, so it is unlikely that she will share the fate of champions from other sports, broken down by reputational scandals. In the end, a power serve has never been a major source of income for her"- said the expert.

In 2015, the advertising contracts brought $ 23 million to Sharapova. Her total advertising revenue exceeded $ 200 million for the years of career, reported Forbes. For comparison, participation in the tournament has brought $ 6 million to her in 2015, and $ 36.6 million during the whole career. Not only Nike, but a manufacturer of rackets Prince has also made its bet on the Russian woman. After the victory of 17-year-old Maris at Wimbledon in 2004, the interest of advertisers had grown dramatically: Nike re-signed the contract with the tennis player to twice more favorable conditions for her, and Canon, Motorola, Colgate-Palmolive and others became new partners of the rising star. Just a year after the first resounding victory, Sharapova earned $ 18 million. Later, the pool of advertisers, cooperating with the Russian, welcomed giants such as Land Rover, PepsiCo, Samsung, Tiffany & Co. and Sony.

Among her current partners are payment system American Express (two-year agreement signed in 2015), Avon (Sharapova is brand face of ‘Luck’ perfume in 2014), Evian (she has been cooperating with the mineral water producer for more than ten years), Head (the rackets manufacturer lured Sharapova away from Prince in 2011), Tag Heuer (one of the oldest of her partners, watch manufacturer trusts to the Russian since 2004), Porsche (Sharapova became the Ambassador of the German car brands in 2013, the agreement is for three years).

A manufacturer of chewing gum ‘Sugarpova’, the tennis player’s own business, is under threat, too. Maria launched the brand in 2012 with the support of her agent Max Eisenbud. The athlete invested $ 500 thousand in the promotion. She wanted to turn Sugarpova in lifestyle-brand, and eventually get outside of the confectionery segment. In January 2016, on the eve of the fateful tournament Australian Open, Eisenbud once again confirmed the ambitious plans: the company expects to triple revenues to $ 20 million by launching a chocolate line by the end of the year.