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Building an Indie Business in the center of venture capital i am Alex Edmonds also known as supremerumham on the internet and this is the building and indie business podcast okay so today we're going to be talking about athletes and the reason why is because for me the real support season is when they start signing contracts it's the interesting part so we're gonna go over the contracts um what factors go into a contract um and how the different ways a a an athlete can make money okay and then i'm gonna give my opinion about some things all right so let's get into it all right so you know the contract um there's there's many different factors in a contract so there's a there's your guaranteed money so let's say step steph curry's contract is worth 200 um and one million dollars i believe and um not all of that is like guaranteed money so there's incentives that are built into this and um there's a signing bonus and then there's there's different stipulations so let's go into incentives um what are incentives they're like they're money that's in the contract but he won't necessarily earn unless he reaches like a goal that they that the team wants so um let's say the incentive is uh winning the championship right so he will only get that 10 million dollars if um he wins the championship but that's that's in his 200 million dollar contract so um actually his contract is worth 190 assuming that that's the only um guarantee so he might be guaranteed 50 million dollars so that's that's how much he's guaranteed to get no matter what but he may earn 150 million if um he he reaches all the goals that they have in the contract and then he doesn't get 50 million over time it it's gonna be over at least five years so it's ten million dollars ten million dollars ten million dollars ten million dollars um in sports they have a thing called salary cap and this is how much a player can make depending on certain factors and those certain factors are how long you've been playing with the team um how long you've been playing for so someone that's been playing for 10 years has the opportunity to make more than a rookie right uh there are other factors like um being traded that factors in so basically a contract a sports contract between a player and a team is just essentially a an employment contract and when a player gets traded the they're trading the contract technically so there's this thing called the larry bird law well that's not what it's called i i that's what i call it um and when you a player gets traded um after three years or no when a player has been playing for one team for three years um they don't need to use salary cap to um pay players so like steph curry's max might be max contract might be five years 20 million dollars so um when they when they sign him again they don't need to use their salary cap to pay him that money so they can use the salary cap to sign different players to help him out during the season so max contract is five years and then you can sign a max contract that includes all the money that you could potentially make um until you're 35. so after after you turn 36 um you know they're like oh you're gonna turn 41 at the end of the contract and in sports a player usually retires at 40 so no one really wants to sign a 36 year old to a five-year contract and so if you end your last contract at 36 you take a pay cut um because you don't have a five-year contract right okay so that's one thing that they can do to make or that's one way um athletes make money there's also licensing which is like autographs you sign things and then you sell them on the internet or anywhere i guess it doesn't matter um there's also naming rights so a company comes to you and they say hey um we'd like to use your name to sell our product one example of this is the george foreman grill um yeah so george foreman didn't actually invent the grill someone came to him and said hey can we use your name to sell this grill and george foreman probably gets a percentage of the sales or ownership rights and that's why he's in the commercials for the grill because he has incentive to get the grill and usually a licensing deal is like one or two percent of the sales or ownership of the company it's not very lucrative but it's very it's easy right you just let them use your name so you're not doing a lot of the work and that's why you don't get a lot of the sales okay so there's endorsement deals and i think for some athletes at least like the superstars this might be more lucrative than their actual contract because there's no cap on how much you can make right so you might have five your contract might be worth 20 million dollars but you have five endorsement deals worth six million dollars so you're making 30 on your endorsements and five or on your five deals and you're making 20 on your contract so you can have multiple deals and i think i i know for a fact actually your endorsements are less work than your your your training for whatever sport you play um because like in the nba going up against chloe bryant or michael jordan takes a lot of it takes a lot of uh training right you're in the gym for eight hours a day uh six days a week and for your commercial or not for your endorsement you shoot a commercial you show up to one of them and they pay you like a million dollars for that event given that you have certain things you have to meet and then you're only doing a couple things for your endorsement you're shooting the commercial you're showing up to an event which is a lot simpler than playing against michael jordan or training to play michael jordan right yeah and so the things that the products that you're selling for the companies are like sports related products so like shoes food i've seen people promote banks and then the good thing about endorsement deals for the athletes is that it continues after your retirement so you see retired players in commercials for different products like maybe some type of cream that helps them recover from all their training okay so um another uh revenue stream for them is investments so they can do normal investments stocks bonds uh other types of investments and then they can also become a vc right so they can easily become accredited um and then they invest in startups or early stage companies another option for them is to start their own company so steph curry has a production company where he starts tv shows and he puts them on air and he produces them right so that's another option and then what they can do is they hire management to run all these things and then they go play so yeah another option for um players is to do appearances they can do movies and get paid that way or they can do corporate gigs and i think this is really good for athletes that are in a small market they can promote the local sporting goods store and this is a way for players in a small market to make more money and become well known in the local community and the reason why i think small time players need to become known in the local community is because a the average player's career is like five years so you need something to do after you retire and becoming known in your small time community is another way you can make money you can become the local news anchor for sports and that way you have another job as soon as you retire i think that players are overpaid but they still make pennies compared to like the owners or the people um in the league that set up the league right because why would the owners be willing to make 100 to give an athlete 100 million dollars if they want to be getting a huge roi in that investment right so for the athletes though the real money is endorsements but the problem with that is you have to maintain a certain image if the public hates you then hits you as an athlete then companies will not be coming to you to um have you be the face of their product so also these small-time um athletes they won't be getting these huge contracts that will exceed their contract or their mba contract right or their their league contract right so that's another thing i think the players for that reason need to have a revenue share agreement with the leaks that they're in because like the owners are still making money during covid and how about the players are they making money they probably are from the league because they're they're their employees but uh they aren't they probably aren't making as much so i think one way to get more revenue is to have more um teams in any league but that would mean to travel more because my idea to get more teams is to merge with um current leagues in different countries so you know um merge with someone in brazil brazil's league or merge with the chinese league in china but then the players in the nba right now they would have to um fly to china all the time and while they could uh raise the cost of the tickets and make more money that means you're flying 18 hours at least from china to the us every couple of weeks so that's a lot of fatigue and i think that will lower the quality of their um playing and that might hurt the league because the quality is low right um expansion could lead to issues as well you need places or you need the infrastructure right so the nhl needs to have the the arena with ice and so there are some places that won't have an arena that they could use for hockey so they need to create that infrastructure themselves right so that's another thing um eventually all the athletes will be replaced by robots and it'll be interesting to watch because you think of the greatest moment in sports and you can imagine that a robot's head is flying off in that situation so like a flying knee to the head the head of the robot flies off when um you know the ball gets passed to them and it's a little rough they they just the limbs are flying everywhere of the robot right so and then my content will become irrelevant which is unfortunate okay conclusion the contract and everything uh it depends on how much value you bring to the league or the team that's why the atlanta hawks are making they're not making as much money as the warriors because they're in atlanta um and the mortgage and the bay area which makes you wonder why ohio had two nfl teams and la didn't have any in the early 2000s so yeah all right that's all i have thank you for listening have a nice day bye