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Shaq Shoots for the Net in Endorsements

May 27, 2000|GREG JOHNSON | TIMES STAFF WRITER

There's more on the line in Portland's Rose Garden this weekend than a simple basketball game for NBA star Shaquille O'Neal. With every rebound, dunk and blocked shot, the league's MVP hopes to further solidify his position near the top of the lucrative sports marketing pyramid.

During commercial breaks in the NBA's Western Conference finals, O'Neal is pitching an online retail start-up, a free Internet service provider and a Web-hosting service. The interactive Shaq Attack is the business equivalent of the triangle offense that Laker Coach Phil Jackson instituted to sate the talented but mercurial Los Angeles Lakers' hunger for an elusive NBA championship ring.

Gone are lucrative and high-profile endorsement deals with such familiar brands as Pepsi-Cola, Taco Bell and Reebok that pushed O'Neal's annual income to $25 million in the late 1990s. In their place are ownership deals and corporate alliances with a tech-heavy roster that includes SportsLine.com, Dunk.net, FreeInternet.com, Digex Inc. and Midway Games Inc.

Why the shift from colas, sneakers and tacos? "I wanted to do things that were different . . . and e-commerce and the Internet are picking up very, very nicely, both cash-wise and stock-wise," O'Neal said in an interview.

O'Neal isn't the only well-known athlete reacting to changes in how athletes are used in sports marketing campaigns. Endorsement dollars have dwindled dramatically as marketers--most notably shoe companies--have cut back. "There's still money to be made, but not like the gold rush mentality we saw in the '80s and early 1990s," said Brian Murphy, editor of the Sports Industry Daily, a Westport, Conn.-based sports marketing newsletter.

At the same time, athletes such as Michael Jordan, Wayne Gretzky and John Elway are recognizing that their names, faces and personalities are of increasing value in an interactive world. And they're increasingly likely to demand an ownership stake in projects that stand to reap financial gains.

Leonard Armato, the Santa Monica-based agent who has long represented O'Neal, knows that the center's high-tech game plan isn't a slam dunk. For starters, even 7-foot, 1-inch MVPs aren't immune to the high-tech investment world's dramatic mood swings.

Championship Rings Boost Marketability

The style of play that earned O'Neal a most valuable player award somewhat insulates him from criticism on rare opportunities when the talent-laden Lakers drop big games. Still, O'Neal recognizes the off-court leverage a championship ring brings: "It would make my plate full."

The ring also would comfort such business partners as Digex, a Beltsville, Md.-based Web site operator that broke an ad campaign featuring O'Neal the day after the Lakers lost a stunning 106-77 game to the Portland Trail Blazers.

And, as premier athletes move online, they're bumping up against sports leagues that hope to control online distribution of game-related content--such as video clips from the locker room. Athletes, broadcasters and leagues all want part of that potentially lucrative business.

The league undoubtedly will have something to say about O'Neal's innovative plan to stream proprietary online audio and video from the Dunk.net Web site immediately after Laker games.

"We've had a lot of success working with the players to grow the economic pie together," said Adam Silver, president of NBA Entertainment. "So the issue seems to be how to maximize these [online] rights for the good of everyone."

O'Neal's strategy is not without risk, if only because any ownership stake can be as dicey as O'Neal's foul shooting. O'Neal's 1996 decision to move the Shaq.com fan Web site from the Microsoft Network to the relatively unknown SportsLine.com is a case in point.

O'Neal "got zero cash" for making the move, said Michael Levy, founder and chairman of the Web site, now affiliated with CBS. O'Neal and Armato instead structured a seven-year stock option deal--a risky step because SportsLine had not yet made an initial public stock offering.

Armato didn't disclose O'Neal's interest in the Fort Lauderdale, Fla.-based company, which went public in 1997 at $8. But the risks are still evident: Company shares closed Friday at $10.69 after rocketing to $83.25 in December.

Deals such as SportsLine make it difficult to calculate O'Neal's income, but Forbes Magazine's annual listing of celebrities pegs his 2000 income, including salary, bonuses and endorsements, at $31 million. Among athletes, O'Neal--one of five NBA stars with $100-million-plus, multiyear contracts--trails Tiger Woods ($47 million) and Michael Jordan ($40 million).

Armato won't detail O'Neal's income, but he maintains that the star's current income is "close to what he was making" in 1998, when O'Neal earned a reported $25 million, including $13.9 million in salary.

"If you structure things properly, he has the opportunity to turn ordinary income into a capital gains opportunity," Armato said. "That gives you more value in the end."

The Big Technophile

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