Lionel Messi's Game-Changing Contract

Redefining How Sports Personalities Monetize Human Capital

June 16, 2023

In a monumental shift that has reverberated through the sports world, Lionel Messi, widely recognised as the greatest football player of all time, recently made headlines with his ground-breaking contract decision. Turning down a billion-dollar-plus offer from the Saudis, Messi opted for a move to Inter Miami, and it is the innovative structure of this contract that we believe will redefine future sports agreements worldwide.By joining Major League Soccer (MLS), the professional football league in the US, Messi is set to revolutionise the landscape of football in the United States, potentially altering everything from viewership and fan support to revenue streams, training facilities, and grassroots programs. The impact on the game in a country like the United States cannot be overstated.

Let's delve into the details of Messi's contract:

1.      Two-Year Deal with Extension: Messi signed a two-year contract with a one-year extension, entailing an annual salary ranging between $50 million and $60 million.

2.     Revenue Share from Apple TV and Adidas: Messi stands to benefit from a percentage of Apple TV's revenues in the MLS, as Apple serves as the official broadcasting partner of the league. Additionally, he will receive a portion of the revenues generated by Adidas, the corporate sponsor and sportswear/merchandise producer for the MLS and its teams.

3.     Ownership Option: The contract includes an option for Messi to become a partial owner of Inter Miami or another MLS team, offering him a stake in the club's fortunes when his own career comes to an end.

However, what truly sets this deal apart is the profound impact it will have on the future of sports contracts. The implications are clear:

He monetized his human capital by accepting an equity stake in an uncertain future revenue stream, rather than settling for a fixed monetary sum.

In essence, he has become an owner of distribution channels that, whilst uncertain, offers significantly greater upside potential, transforming his human capital into equity-like financial capital. This represents a departure from the traditional practice of athletes simply selling their talent for money, rather than exchanging it for ownership in uncertain profit streams.

Professional sports have been around for well over a century. Notable instances date back to the 18th century in English cricket with the formation of the ‘All England Eleven’; or the formation of the Cincinnati Red Stockings in 1869 as the first professional baseball team in the US.

Billie Jean King, an American former world No. 1 tennis player and her breakthrough sponsorship deal with FILA in 1971 paved the way for yet another transformation in how the era of professional sports operate. Since her landmark deal, there have been several monumental sponsorship deals, including:

The iconic endorsement partnership between Nike and basketball legend Michael Jordan, signed in 1984, became one of the most successful in sports history. While the initial contract was valued at $2.5 million per year, it grew exponentially over time, with the Air Jordan Brand now generating billions of dollars annually.

Portuguese soccer superstar Cristiano Ronaldo has enjoyed a long-standing relationship with Nike. In 2016, he signed a lifetime contract estimated to be worth over $1 billion, solidifying it as one of the most lucrative deals ever inked by an individual athlete.

Golfer Tiger Woods secured a $40 million contract over five years with Nike in 1996, becoming the face of Nike Golf and playing a pivotal role in elevating the brand's standing in the sport.

Chart 1: More than two decades after Michael Jordan announced himself as the best basketball player…ever...the revenue stream from his Nike-collaboration is still growing!

Source: Nike, 2021

Looking ahead, it is likely that more stars across sports like NBA, NFL, golf, rugby, tennis – even e-sports in a virtual world! – will follow Messi's lead and accept equity stakes in ventures tied to uncertain future revenue streams, rather than settling for arguably smaller, fixed-money contracts. This shift might carry significant implications for publishing platforms and media channels.

All considered, a final point to ponder: has Apple yet again recognised a yet unimagined opportunity to capitalise on? Picture yourself wearing ski-goggles during your flight to Miami, enjoying an exclusive Apple TV+ original, 4-part docu-series about Lionel Messi, and later witnessing him play at Miami Freedom Park thanks to your annual MLS pass. Apple stands to profit from every aspect of this experience…and now Lionel Messi will potentially have a share in that revenue stream as well.

As an investment management specialist for US-connected persons, I cannot help but secretly hope that LeifBridge will feature in this exciting future!

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