
How Athletes Started Making Exorbitant Amounts of Cash
In 1971, Roger Staubach made $25,000 as the starting quarterback of the Dallas Cowboys, Matthew Futterman observes at the start of his new book Players: The Story of Sports and Money, and the Visionaries Who Fought to Create a Revolution (Simon & Schuster). Today, current Cowboys QB Tony Romo is playing under a six-year contract that will pay him $108 million, which does not include an estimated $5 million annually in endorsements. Futterman, a senior sportswriter at the Wall Street Journal, explores the reasons for the stunning increase in the compensation elite athletes earn in a brisk, engaging narrative.
The story begins with Mark McCormack, an excellent amateur golfer who as a young lawyer came up with the idea of representing pro golfers on their appearances and endorsement deals. McCormack landed the greatest - and most charismatic - golfer of his generation: Arnold Palmer, who at the time was making $10,000 a year from Wilson Sporting Goods Co., for whom Palmer endorsed golf clubs.
Palmer agreed to the deal when he turned pro in 1954, and the contract, Futterman writes, "was undoubtedly among the worst deals any athlete of Palmer's caliber has ever signed." In 1962, for example, Wilson sold $1.4 million in Palmer merchandise; the golfer's share of that came to $23,585. Not only was Palmer's pay paltry; Wilson had the right to renew the deal upon its expiration. McCormack worked for months to get Palmer better terms, but the golfer told him to take a Wilson offer that included some deferred compensation and a $300,000 life insurance policy. When Wilson revoked the offer and canceled the contract, Palmer launched Arnold Palmer Golf Co., which within three years was selling 100,000 clubs annually.
That launched Palmer on his way to becoming a very wealthy man, while McCormack became one of the most powerful figures in sports. Not only did his company International Management Group develop a deep roster of stars in several sports; he formed a related television production company and came to represent Wimbledon, the British Open golf tournament and a range of pro sports leagues. Wimbledon has television highlights contracts work about $75,000 in 1967, the year before McCormack started advising the tennis tournament; today, it's one of the most valuable brands in sports. After McCormack died in 2001, his family sold IMG to buyout maven Ted Forstmann for $750 million, which made Palmer's 10% stake worth $75 million.
Palmer's story recurs over and over. Futterman tells the story of the 1973 boycott of Wimbledon by most of the top players in tennis, who were protesting the exclusion of Nikola Pilic from the men's draw. The prospect of another ho-hum draw terrified tennis tournament organizers, who finally accepted that the players were the draw. In the decade thereafter, tennis boomed in popularity, and everyone associated with the sport profited, from the players to the sport's governing bodies to the television networks that paid for long-term broadcasting deals to Nick Bollettieri, whose Florida tennis academy boomed because of the money that the sport's top players could make.
The same thing happened to the Olympics, a bastion of amateurism that by the 1970s was so financially unappealing to prospective host cities that only Lake Placid, N.Y. bid to host the 1980 Winter Games and only Los Angeles and Moscow bid for the summer games.(When Moscow won, L.A. was the only city to bid for the '84 games.) But as American athletes led by hurdler Edwin Moses successfully agitated to be able to keep endorsement money, the product on the field and in the pool improved dramatically, attracting more viewers and making broadcast rights more valuable.
In professional baseball, basketball and football, the story involved players' unions, and as in golf it was accompanied by the greatly increased ability to sell gear and merchandise, a possibility exploited most successfully by Nike Inc., which as of last year had $6.2 billion in future endorsement obligations to players, teams, leagues and colleges. The money supporting the rise of a class of elite athletes came from television and advertisers, and while Futterman mentions TV frequently, he focusses on it only in the book's last chapter, which details the rise of ESPN and the 2001 creation of the YES Network, which broadcasts programming related to the New York Yankees, the Brooklyn Nets and Major League Soccer's New York City FC. A little more context would have been helpful. Palmer certainly was a trailblazer, but a quick comparison of footage of his 1960 U.S. Open win with Jack Nicklaus's 1980 win and Tiger Woods's in 2000 shows how much television quality has improved. Even as cable TV has destroyed the hegemony of ABC, CBS and NBC and print journalism has been devastated, advertisers have still been to reach adult men via sports.
ESPN, YES and many other sports networks have benefitted from rising cable fees over the last 15 years, but that tide has started to turn as cable distributors have pushed back against price increases, and many younger consumers don't even get cable. Futterman notes that the audience for sports is aging; the average viewer of the Major League Baseball playoffs in 2009 was 50 and had jumped to 55 in 2014. Since older viewers are less valuable to advertisers, a continued increase in that number will lead to lower ad revenues.
If revenue from broadcast rights and advertisers declines, sports as a business may come to look more like music, where live performances have become a primary source of revenue with the decline in record sales and the fragmentation of the market for music among a plethora of genres.
Marginal players, teams and leagues may make less money as counterparts with a national and even global brand become even more valuable.
However the business of sports evolves, superstar athletes will remain at its core, the position into which Mark McCormack maneuvered them.









