China: US$100M for Bolt

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Bolt offered US$100m Chinese contract
Published: Tuesday | September 22, 2009

Leighton Levy, Gleaner Writer

Usain Bolt

A five-year, multimillion-US-dollar deal reportedly offered to sprint sensation Usain Bolt by a Chinese company could also allow the athletics superstar to eventually spin off his own division of the firm.

The company in China is also reportedly willing to buy out any entity with which Usain might have agreements, and would supersede them in base salary while offering a licensing deal that Bolt currently does not have. If Bolt agrees to the deal, it could be signed in a matter of weeks.

Bolt is currently signed to sporting goods maker Puma AG, which reportedly pays the world record holder in the 100- and 200-metre sprints and triple World Championships gold-medallist about US$1.5 million a year. Puma CEO Jochen Zeitz recently disclosed that, after his success in Beijing in 2008, analysts estimated Bolt’s media market value to be about US$358 million. The media market value is equivalent to what the company would have to spend to get similar exposure from regular advertising.

A big change

The Chinese deal, which offers Bolt licensing rights inside China and exclusive distribution rights in markets outside that country, is being negotiated by Anza Marketing Group Inc, the exclusive marketing agent in China for the triple Olympic champion. Ajani Williams is the CEO of Anza.

“Anza, through its work over the past eight months, has received several offers, and most notably, two major offers, one of which would eventually change the landscape for Usain Bolt in terms of his sponsorship and endorsement market rate. It would change the landscape of track and field, it would change the outcome of his life, and probably even the direction of the country,” Williams said of the proposal on the table, adding that Anza had a counteroffer that could double the sum mentioned.

Shortly after Anza became Bolt’s agent in China, just under a year ago, it began talking to partners in the Chinese company about possible deals. This monster deal, however, came together about eight weeks ago, Williams revealed, adding that the negotiations were difficult given the worldwide economic downturn.

Tipping point

Bolt’s performance in Berlin, where he broke two world records and won three gold medals, was the tipping point, he said.

Williams was unable to disclose the name and nature of the company, citing the risk of compromising the integrity of the deal, but gave the assurance that if Bolt signed, then those details would be made known. He did reveal that conservative valuations show that Bolt could earn around US$115 million from the deal over five years, but there was the potential to exceed US$300 million, based on sales in China and the world market.

“China is the world’s largest market and these kinds of deals were not available to people like Michael Jordan 20 years ago,” Williams explained. “Usain now has the chance to be empowered and empower a new generation of track and field athletes and all athletes and become the CEO of his own empire.”

He said an athlete of Bolt’s calibre has to capitalise as much as possible on licensing deals, along with guaranteed base-salary endorsement deals. It also gives the triple Olympic gold medallist the opportunity to use this new deal to leverage similar deals, which would force companies to adjust their current market rates.

In recent times, Chinese sporting-goods companies have signed several major sporting stars, including basketball stars Shaquille O’Neal and Baron Davis. Just this year, Russian pole-vaulter Yelena Isinbayeva was signed by Chinese sporting goods company Li Ning to a deal worth about US$1.5 million a year.

Bolt is also being offered a deal worth between US$200,000 and US$400,000 a year from another company, sina.com, which Williams describes as the Chinese version of Yahoo. The site hosts one of the biggest sports blogs in China. Basketball stars like Kobe Bryant reportedly earn as much as US$400,000 a year just for posting blogs there, Williams said. He added that blogging on the site would help Bolt keep his brand relevant in the Chinese market, establish his value, and set him up for many more deals.

Anza has received several offers and most notably, two major offers, one of which would eventually change the landscape for Usain Bolt in terms of his sponsorship and endorsement market rate. It would change the landscape of track and field, it would change the outcome of his life, and probably even the direction of the country.

Ajani Williams

CEO of Anza

’

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Holy Cow!!! lol that is one hell of an offer!!

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You know what, it’s about damn time the world recognizes how much these guys are worth… Hopefully this will be the begining of a new era for T&F sprinters now maybe we can get some US football talent to come out for the $$$…

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Good publicity, but I hope you guys only a tiny % of this money would be guarantee and most of it through profit sharing (and some performance bonuses as well). I imagine it would be similar to other profit-sharing sort of endorsements, which have a wide-range of success (Michael Jordan’s endorsement with Nike ala Air Jordan being the most famous example),

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He should ask for 10% of that amount up front just to consider his options without obligation to sign. If all OK he should ask for further 40% up front when inking the contract. The rest over 5 yrs to be distributed from earnings, etc.

Only if becomes filthy rich the Queen will knight him, and that’s something he aspires to :slight_smile:

Well, interesting…the Chinese could help Bolt on his way to knighthood :slight_smile:

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He can ask for that but I’d be surprised if he received it particularly at the moment. $50m represents an enormous opportunity cost for any firm at any time let alone during a time of uncertainty on a risky investment. I agree with fogelson that they will allow Usain to bear a large portion of the risk by introducing a profit sharing component - this is the only way that I can see them being able to afford that much, the risk surrounding track and field athletes combined with the uncertainty in world output at the moment is simply too high to do otherwise.

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If Chinese were not ready to pay up, they would not have been chasing him. Been dealing with China for many years…crunch them and they give in. You just need to know how.

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I think that is one of the grossest generalisations I have ever read. China must be real soft, just ask Stern Hu.

Aside from your dealings, how familiar with China’s negotiating culture? Your feelings certainly aren’t consistent with the experiences of friends and family that have had extensive dealings with the Chinese.

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Who is Hu? A man of integrity
JOHN GARNAUT
July 10, 2009
A YEAR ago, after Stern Hu had survived 20-odd rounds of negotiations and won Rio Tinto and Australia an extraordinary 87 per cent price increase for its iron ore contracts, I asked him if he was being too aggressive.

He said he had no qualms with driving as hard a bargain as he could on price. But he had misgivings about whether Rio Tinto should risk its integrity in China by claiming “force majeure” to wriggle out of long-term contracts to chase higher prices elsewhere.

“We acted in accordance with the letter of the contracts, but not the spirit,” he said.

One of the ironies and tragedies of Mr Hu’s incarceration, together with his senior staff, is that he is widely known in China and at Rio Tinto for his integrity and quietly spoken good judgment.

He is reputed to know exactly how far to push China without breaking the relationship.

He is said to understand how relationships work, the importance of face, and almost everything that is worth knowing about the Chinese steel industry and the government and industry bureaucracy that tries to manage it.

It was notable that Chinese steel managers spoke up for Mr Hu yesterday even though he stands accused of one of the most serious crimes.

“He’s relatively easy to get along with,” wrote the 21st Century Business Herald, quoting a steelworks manager who had known Mr Hu for a decade. “The top Rio Tinto management all want to act tough but he would always listen to both sides.”

Rio recognised these talents and appointed him to manage their Beijing sales operations in the mid-1990s and then transferred him to the sales hub, Shanghai, in 2001.

The man whom he replaced, iron ore consultant Philip Kirchlechner, explained how the Chinese “legal” system works. “China is one of the freest countries in the world, except in some circumstances,” he said.

“In this case, a serious commercial dispute, they can get you for small irregularities that are usually overlooked.”

The criminal system can be fiercely arbitrary, turning on people without warning, and providing them with little cause for redress.

And almost everyone who watches business in China says it is impossible to separate politics and vested interests from this sort of criminal investigation.

“My sense is it’s part of the very complicated context of the Chinalco deal, the iron ore negotiations, the Rio-BHP Billiton deal,” said John Frankenstein, a China business watcher at the City University of New York.

Mr Hu grew up in Tianjin and met his wife at the prestigious Peking University.

He is fiercely proud of his son, who wants to work in hotel management and has just spent a year studying in Europe and the US.

Both Mr Hu’s wife and son are in Shanghai and struggling to come to terms with his disappearance. And they want to defend their privacy.

Some detainees, like the American-Chinese professor Song Yongyi, have been sucked into China’s state security system and been released after little more than a month, following pressure from the US Government.

But this case is the exception.

No one, it seems, expects Mr Hu to be released soon.

The international context of Mr Hu’s detention suggests to many observers that his case has already received some sort of tick from Beijing.

The fact that the Shanghai State Security Bureau acknowledged his detention and that the Ministry of Foreign Affairs said it had evidence to support the investigation suggests they do believe in their case.

And even if they change their minds, the public nature of their comments means they will be greatly reluctant to back down.

Even if Mr Hu is released and cleared of every allegation, close observers say it will be difficult for him to work effectively in China again.

“He’s already ruined,” said a family friend of Mr Hu.

The outlook for Mr Hu’s Chinese colleagues is even more pessimistic.

Whatever leverage the Rudd Government has over Mr Hu is unlikely to extend to Chinese passport holders.

Source: The Sydney Morning Herald

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I think you don’t know what you’re talking about. No athlete receives even close to that kind of money, even the biggest stars in the world, without a profit sharing component. Hell, many people’s actual sporting contracts are in part profit sharing via ticket/television revenues (boxers and other fighters are a good example of this).

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Let’s just say the money would need to be that big to lock him in that way- and to pay out of existing contracts. Look at what Puma has admitted re logo exposures- 358mil. That figure sounds pretty accurate to me based on what I remember was going on in the old days.
It is also interesting to look at the IAAF website as an example. Largely in anticipation of what Bolt might do, they scored 300,000+ unique visitors per day. The next year it was above a million. These are big value numbers!
Perhaps this will lead to an extension/renegotation of his Puma deal, which would be kept out of the rest of the negotiations.

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Was that what Puma said (re exposure)? From the article I read, that was just one outside person’s estimate.

With that said, it makes you wonder why Puma hasn’t been pushing running shoes or spikes in the US. Spikes don’t make that much money, but running shoes should be good for something. I don’t see many Puma ads on TV ever really.

His contract with Puma supposedly ends in 2010, so I imagine his contract after all of this will be massive, but $100m is still a crack pipe number unless he has a profit sharing portion in some sort of spin-off/sub-label/etc. (think about the fact Michael Jordan wasn’t getting 1/3 of that in guaranteed money–all in profit sharing based on how the spin-off brand did).

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All shoe companies and other major sponsors hire specialist firms to track logo exposures- in other words, what it would cost to get the same exposure in print, TV, internet etc that their sponsored athlete generates for their product if they had to buy it as advertising. On top of that, however good an ad appears to go over to the public, you cannot directly establish a sporting product as capable of supporting top performance without placing it on the top performer. You don’t see many Puma ads on TV precisely because it’s FAR cheaper to get exposure via Bolt.
358mil vs perhaps as little as 4.5mil so far.
The 4.5 mil figure would be a low ball for several reasons:
1: He would have massive bonuses on top of his base.
2: Most well negotiated contracts have a roll-over clause, meaning that, for example, 50% of the bonus money earned in year one would be rolled over into base pay for year two, etc. This is fairly easy to negotiate because, by making bonus’s hard to reach, bonus earning performances make the spread between payout and benefit far greater in favor of the company.
I can only give the one example from memory of Ben’s Diadora contract 21 years ago;
1 million/yr base in year one plus 300,000 for each indoor and 1 million for each outdoor WR plus bonuses for breaking 9.80 and then 9.70 etc, not to mention the 1 million bonuses for Olympics and WCs.
If nothing adverse had happened in Seoul, you just need to look at the splits to see how many WIRs over 50y 50m 60y 60m etc he could have gotten as well as outdoor records based on how much he shut down. He could have rolled up millions, half of which would go into the next years base on top of the first payout.
Another example would be a milk contract he had- 80,000 up front, plus 10,000 after each race where they were responsible to take a picture of him sipping their milk, plus a 1 million bonus for the Olympic win.
With all the media contracts in various countries for exclusives and other ads, you can see how fast money could pile up even then. You would need to multiply all these figures by at least two to give present comparative dollar buying power today.

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Do you remember if Diadora had specified which indoor records they would pay for? 50y/50m/60y aren’t very common.

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all were in there.

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In further developments, Bolt’s overall management has disavowed any involvement with the claims by the Chinese agent group (top athletes often have sub agents in key areas to maximise income) and have stated they have no intention of braching the Puma contract and further stated that they felt this agent group had basically done little since Beijing.
That said, don’t downgrade the possibilities coming up.

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Be skeptical of that $358m Puma figure - analysis of value through media exposure has been discredited for several reasons. For starters it usually only takes in to consideration the amount of time a logo appears on screen for and extrapolates value on the basis of the cost that the same duration of advertising. This does not weight the value of size, position , position to relative to competition, sentiment towards the athlete etc, in essence does it give the sponsor control over the marketing message or brand position. Nor does it say anything about the relative value of the exposure - as the prices for the advertising in the particular time that the event took place this is highly distorted, and says nothing about how much other athletes exposure was worth etc. It is akin to saying that some woman in a D&G shirt on at the Superbowl, and gets 10 seconds on TV because a camera man and producer happen to be momentarily fascinated with her breasts, is worth $1m to Dolce and Gabbana .

One other objection I have to this method in this particular situation is that nothing is said about how much of it is attributable to Bolt being sponsored by Puma - the only thing that bolt had on that was a result of his sponsorship was a pair of shoes, much of the exposure would likely have come through the sponsorship of the Jamaican Olympic uniforms and would have been received if he had been sponsored by any one.

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fogelson

I would not have a clue what I am talking about…just spinning some crap. It is you who knows what/how Bolt is going to sign :slight_smile:

Dazed

Aside from your dealings, how familiar with China’s negotiating culture? Your feelings certainly aren’t consistent with the experiences of friends and family that have had extensive dealings with the Chinese.

How familiar am I? Very familiar. Obviously your friends and family members have not been dealing with Chinese successfully therefore bad experiences. However, I have and majority of my dealings with Chinese has been very profitable and successful.

Currently, we are operating two businesses from China - HK, and Shenzhen. Quite familiar.

And I would agree with CF;

Let’s just say the money would need to be that big to lock him in that way- and to pay out of existing contracts.

Chinese would be prepared to pay UP FRONT and in CASH!

Why would they be otherwise chasing Bolt? LOL…What, to offer him a 5 yr contract? And Puma would say, yeah sure :slight_smile:

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They had very fruitful deals actually, however they also came away with a great deal more respect for the Chinese as tough negotiators than you exhibit. One of the things the Chinese are reputed for in negotiations is their art of deception and comfortable opening margins in negotiation … I’m just wondering if your operations could have been even more profitable if your attitude had not bee to “crunch them”.

I grew up with a friend who’s uncle was a Chinese business man and diplomat, he was amazed at the rents that western businessmen would leave on the table because they thought they were getting a good deal early in the negotiation process.

What line of business are you in BTW?

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Dazed

Three of my closest business partners are Chinese… enough said.

The rest is verbal crap.

What line of business are you in BTW?

JB Speed balls, of course :slight_smile: