Wharton’s Americus Reed and Abraham J. Wyner explain how athletes’ endorsement contracts might be more relevant than their sports performance, and how all are at stake when allegations of misconduct arise.
During the U.S. Open last month, an ad for Rolex ran throughout commercial breaks showing a montage of top-ranked tennis players. One player featured was 24-year-old Alexander (Sascha) Zverev, a German player ranked fourth in the world. To some, Zverev’s role as one of Rolex’s brand ambassadors is controversial. In 2020, Zverev was publicly accused of domestic assault by his then-girlfriend, Olya Sharypova, throughout 2019 that included both physical and emotional abuse. Sharypova came forward with her story as a warning to other people with abusive partners, and hopeful that the Association of Tennis Professionals (ATP) would address the issue.
According to Wharton’s Abraham J. Wyner, chair of the undergraduate program in statistics at the Wharton School and faculty lead for the Wharton Sports Analytics and Business Initiative, professional sports and players’ private lives have a complicated history. And for brands that have contracts with athletes, there is a playbook to protect the brand. Americus Reed, the Whitney M. Young Jr. Professor of Marketing, reveals how brands address the damage caused when an athlete’s bad behavior is exposed.
“Before the 1970s, there was an unspoken rule that you never talk about the players’ world off the field. That all collapsed in the 1970s,” says Wyner. What broke the rules, Wyner explains, was a tell-all published in 1970 called “Ball Four.” “The book exposed baseball players’ infidelities, indiscretions, and substance abuse. It was transformative, because it marked a sea change where you stop thinking about our sports heroes as somehow magically special.” he says.
Historically, the world of professional sports was not a lucrative field. “In the 1950s, players made almost nothing, their unions had no power, they had to take whatever was offered,” says Wyner. “Joe DiMaggio and Babe Ruth were the first players who made money through endorsements and appearances.”
Professional tennis players ranked outside the top 100 and even the top 50 in both the ATP and the Women’s Tennis Association (WTA) rarely make any profit on the tennis circuit after factoring travel, coaching, and expenses. While major tournaments reward handsomely for winners and runners-up, players knocked out in earlier rounds are awarded a minuscule amount of the total purse winnings for that tournament. Without consistent wins, many players who are visible enough and ranked high enough welcome endorsement deals.
“The idea that athletes only make money by playing is preposterous,” and the higher ranked the athlete, the better the endorsement deal. This has a cumulative effect on the sport itself. “One of the reasons we analysts believe people like [Roger] Federer, [Rafael] Nadal, and Serena [Williams] can play well into their 30s is because they make so much money off the court they can cut back on the number of tournaments they play. They don’t travel as much, their bodies get less wear and tear,” Wyner says.
Product endorsements by a popular sports figure are a boon to both player and product. But any endorsement contract comes with strings attached. “These athletes and celebrities are influencers—they live in a fishbowl essentially. So the contract will say ‘if you do something unbecoming to the brand, we will drop you,” says Reed. Popular sports figures like Federer work to maintain a near-spotless public persona and reputation, as they know their roles as brand ambassadors require it. Other players, like Colin Kaepernick and Naomi Osaka, have used their visibility on and off the field to speak out for social justice and equality. Kaepernick was arguably shut out of the NFL. Conversely, Osaka is currently the highest paid female athlete.
Reed explains sports figures with product endorsements are part of a relationship between them, the brand, and the consumer, forming a triangle. “What a celebrity sponsorship is meant to do is to take links and drive marketplace reactions—we call this the purchase funnel. How do we get people to put down money for things like a Rolex? First there is brand awareness, consideration, liking or having a reaction to the brand. Then comes intention to buy, purchase, then post-purchase loyalty. Rolex doesn’t necessarily think we are going to sell more watches because of this one brand ambassador, it’s part of the first, second, or third order effect of creating relevancy in the consumers’ mind,” says Reed.
Zverev was made a brand ambassador for Rolex in June, joining other top-ranked tennis players like Federer, Dominic Thiem, and Garbiñe Muguruza. Some people tweeted disappointment and even outrage when Rolex appointed Zverev a brand ambassador, but the outrage did not gain much traction.
“When you introduce a transgression—a celebrity allegedly beats his wife, or has a drunken car crash like Tiger Woods, the brand asks, ‘what do we do?’ Brands try to see if the consumer can disassociate the transgression from the performance. That’s the basic question the brand tries to answer. There’s a rationalizing that happens called moral decoupling, where someone can argue ‘I’m going to ignore it,’ or, ‘I think it’s wrong but it doesn’t affect his tennis or golf game.’ If it’s easy to morally decouple, the brand can continue to support the celebrity. People could morally decouple Tiger Woods the golfer from Tiger Woods the husband. But Lance Armstrong’s cheating was directly related to biking, so Nike dropped him. You can’t continue the cognitive trickery in your mind as a consumer. The brand is in jeopardy.”
With Zverev, the exposure of his alleged abuse did not go unnoticed, but it did not have the sweeping presence in the news media like Tiger Woods and Lance Armstrong. Some people did express disappointment at the ATP for its lack of response, however. Renowned tennis announcer Mary Carillo resigned from her role presenting at the Laver Cup tournament in September, and remarked she felt uncomfortable commentating on Zverev’s matches during the U.S. Open. Multiple players in the ATP spoke publicly about the need for the organization to address the allegations and change its policies about domestic abuse allegations.
“In the big four professional sports in the U.S., if there is a domestic assault accusation made against a player, the leagues have started their own investigations, because the justice department moves slowly. The MLB and the NFL have suspended players while an internal investigation is happening,” Wyner explains.
On Oct. 4, the ATP announced it is investigating the allegations of domestic abuse made by Zverev’s former girlfriend, but he has not been suspended from playing in upcoming tournaments. As reported in The New York Times, the ATP issued a statement that said, “it fully condemned any form of violence or abuse and would investigate such allegations related to conduct at an ATP member tournament.”
In regards to his brand ambassadorship, Rolex has not removed Zverev from its webpage. “When a company has a brand crisis, after they consider the transgression and moral decoupling, it considers how much the crisis is getting oxygen. With Zverev, you are walking a fine line because there is an allegation, there has to be due process, so the brand will wait and get facts,” says Reed.
“Lawyers say ‘don’t say anything, it could cost you money’. Companies say ‘don’t stay silent,’ because consumer vigilantes will fill that silence,” Reed says. “We need to deliver an action plan and get control of the narrative. Showing concern is not same as saying we are wrong. It is a statement that we need more facts, but we still denounce the nature of the transgression.”
Brands recognize that celebrity endorsements leave them exposed to suffer the market consequences of these individuals’ bad behavior. “Brands are putting in their contracts that they have the right to pull the endorsement if you do something. It’s not cancel culture, it’s capitalism. As a brand, we make the decision of who we want to associate with. And we pay you. We can get rid of you,” says Reed. “There is a lot of careful protection of brands—that’s why it’s hard when lawyers come in and say ‘don’t say anything, it might cost us.’ The marketers will say, ‘but our brand is at risk’. That could also mean millions of dollars at stake as well. The company waits to see if it will blow over. And sometimes the company leadership will say we have zero tolerance for this. We will let the courts decide, but we are still cutting ties.”
If the ATP were to suspend Zverev from playing tournaments, his rankings would drop. This is relevant in the business world.
“In tennis specifically, brands use their ranking as a proxy for their value. The more cachet they have, there is a different set of expectations for that player because of the value proposition. Brands expect a squeaky clean public persona,” says Reed. “The fact that Rolex didn’t make a public statement is a mistake. A lot of these crises are smoldering crises. The company can get out ahead of it before it grows, or not act on it.” He adds, “their silence is a liability at this point.”