Regular visitors to Financial Career Options know we like to follow the investing trends of celebrities. We decided to look at a few athletes to see what financial moves they are making during their playing days and once they’ve said good bye to their fans.
The Athlete as a Brand
By some measures, former NBA superstar, Michael Jordan is as big as ever. Kids wait in line for days for new Air Jordan sneaker releases, spending as much as $650 for one pair.1 Ironically, a whole generation of customers that have never even seen him play during his career. Remember, Jordan played his last season in Chicago way back in 1998 after winning 6 NBA titles for the Bulls. The continued success of his ’Jumpman’ and ‘Air Jordan’ brands are testaments to this popularity
Team uniforms have long been the billboards of super heavyweight marketers like Nike and Under Armour. But this season, the University of Michigan’s football team will paste Jordan’s logo on its player’s jerseys. This shows how Jordan has transcended sports and has pioneered the athlete as a brand.
Today, Jordan earns significantly more money in retirement than he ever did from his basketball salary.
In fact, in 2014, Jordan pulled in $100 million in royalties from his shoe deals and Jumpman apparel line- more than he earned as a player over his entire career (which was either $91 or $94 million depending on who you ask)2.
Today, Michael Jordan enjoys being a member of the billionaire club, according to Forbes.3
Who will be the next mega-brand? There are plenty of contenders but the fame and the potential for big bucks comes temptations and nothing can harm a brand like a scandal.
The media circus that surrounds athletes today is something the likes of Jordan, Magic and Bird had to endure in their playing days. With everyone having a video camera at their fingertips (smartphones) and paparazzi from television shows like TMZ Sports, athletes must be on their guard 24/7 or their brand, and bucks, can get squashed very quickly.
There are plenty of athletes who’ve lost millions in endorsements from off the field indiscretions including alleged assaults, the use of performance enhancing drugs and DUIs. These include Tiger Woods, Ray Rice, Lance Armstrong, Kobe Bryant, Michael Phelps and Ryan Lochte. Some have been able to rehabilitate their brands image, in the case of Tiger, Kobe and Phelps.
Others, like football running back Ray Rice, cyclist Lance Armstrong, and Olympic swimmer Ryan Lochte are still in endorsement ‘Siberia’. Armstrong lost Oakley, his last sponsor, back in 2012.4 Rice lost his last, Nike, in 2014.5 And following his debacle at a Rio de Janeiro gas station, Lochte has reportedly lost all four of his sponsors including big names like Speedo and Polo Ralph Lauren.6
The parallel with the stock market is quite appropriate, as athletes can soar to fame and crash just as quickly.
As we reported earlier in the year, you can even speculate on this phenomenon by directly investing in an athletes future earnings via the Fandex exchange. NFL running back Arian Foster was one of the first to have his ‘stock’ traded on the exchange.
Investing with Athletes When their Career Ends
Now there is no mistaking that successful athletes have desirable character traits that translate well in the corporate world. Factors like drive, persistence and grit, coupled with a results-driven mindset often translates into success. Some athletes today are banking people will respond with this assessment and invest their money in the athlete’s deal making abilities.
If you can keep your brand untarnished, or rehabilitate it well enough, the sky’s the limit for future opportunities.
Recently, Kobe Bryant announced the launch of a $100 million venture capital (VC) fund with partner Jeff Stibel.7
Bryant actually co-founded Bryant Stibel, very quietly, back in 2013. The fund has a rather vague mission statement, but aims to make investments at the ‘nexus of technology, media and data.’8
In case you were scoffing at Bryant starting a venture capital fund-don’t. Bryant has VC experience and a good track record. The two already have 13 investments together including legal-services company LegalZoom, home-juicing company ‘Juicero’ and a pre-IPO investment in Alibaba, the Chinese ecommerce giant.9 Interested in investing in Bryant Siebel? You’ll have to wait because they aren’t seeking outside investors. The capital for the $100 million fund is coming from just these two partners-for now.
One of the firm’s most promising investments is the sports media website, ‘The Players Tribune’. This site offers original content written and shared by the athletes themselves. A quick glance at their home page shows articles from Golden State Warrior forward Harrison Barnes, Bayern Munich midfielder Joshua Kimmich and Founding Publisher, Derek Jeter.10
While the site certainly offers entertaining content, it is also a platform for the player’s various charities and foundations. Derek Jeter’s article on the Tribune talks about his Turn 2 foundation, which helps mentor youths while teaching leaderships skills.11
The Tribune provides a great platform for athletes to give back to communities in one way or another. This shines a light on a new trend we’re seeing-venture investing for social change.
Although the television show has not aired yet, LeBron James’ ‘Cleveland Hustles’ project appears to also align the interests of capitalism and social improvement. Cleveland entrepreneurs are using their resources to turn a profit while also helping improve their community by rebuilding run-down, dilapidated tenement buildings, for a profit.
The Ringing of a Bell?
We can’t help but draw some parallels between the growing number of athletes and celebrities currently investing in public and private equity.
The timing of these typically casual investors often correlates to stock market tops. Most notably Barbara Streisand stock-picking in 1999 and Gisele Bunchen’s currency picks in 2007.
Kobe Bryant’s foray into venture capital is joined by celebrities such as Ashton Kutcher and former baseball player and reality show star, Jose Canseco. But venture capital is risky and should only be explored by very sophisticated investors. You’re dealing with undeveloped businesses, often in their startup phases. Either these celebrities are significantly more careless with their money or they are truly sophisticated investors. We’ll have to check back in a few years to find out, but it’s an exciting area that we will be watching closely.