Bloomberg News

Armstrong Stands to Lose $30 Million as Sponsors Flee

October 18, 2012

Nike Ends Contract With Lance Armstrong Amid Doping Allegations

Nike Inc. said it would continue to support Livestrong initiatives to help people affected by cancer. Photographer: Kristian Dowling/Getty Images

Lance Armstrong’s loss of support from Nike Inc. (NKE:US) and other sponsors after the cyclist was tied to performance-enhancing drug use will cost him about $30 million in earning potential, according to a sports marketing agent.

“That would include current endorsement deals, future endorsement deals and corporate speaking,” said Steve Rosner, whose clients at 16W Marketing LLC in East Rutherford, New Jersey, include baseball’s Cal Ripken Jr., basketball’s Hakeem Olajuwon and football’s Howie Long, each retired and a member of his sport’s Hall of Fame.

Nike, the world’s largest sporting-goods maker who sponsored Armstrong since 1996, dropped the seven-time Tour de France winner yesterday because of “seemingly insurmountable evidence” that he doped and misled the company for more than a decade, it said in a statement.

Anheuser-Busch InBev NV (ABI) said later in a statement that it won’t renew its contract with the 41-year-old retired cyclist to endorse Michelob Ultra beer when the current deal expires at the end of 2012.

Trek Exits

Trek Bicycle Corp. then also terminated its relationship with Armstrong, while saying in a statement it will continue to back his cancer foundation.

“This ultimately ends the marketing storyline of Lance the brand,” Paul Swangard, managing director of the Warsaw Sports Marketing Center at the University of Oregon, said in a telephone interview. “He just simply won’t be able to rekindle and re-energize his Madison Avenue appeal, and Nike, as the one who stood by him through all of this, making the decision they did is about as much a career-crusher as anything I could ever imagine.”

A U.S. Anti-Doping Agency report last week said Armstrong’s career was “fueled from start to finish by doping.” Armstrong, who had his Tour titles stripped by the Colorado Springs, Colorado-based agency in August, used performance-enhancers and required teammates to use them or face dismissal from his squad, according to a 202-page summary of its case.

Armstrong has repeatedly denied doping, saying he has never failed a drug test. He said yesterday he was stepping down as chairman of Livestrong, the charity he started in 1996, to “spare the foundation any negative effects as a result of controversy surrounding my cycling career.”

Wealthiest Cyclist

Armstrong and Nike signed a five-year contract in 2010 to pay the Lance Armstrong Foundation at least $7.5 million annually from profits generated by Livestrong merchandise, according to Outside magazine. Nike said last week after release of the USADA report that it “plans to continue to support Lance.”

Armstrong earned $21 million in 2010, making him the 50th highest-paid athlete in the world and the wealthiest cyclist, according to an annual list released by Forbes magazine.

He also has an endorsement deal with Luxottica Group SpA (LUX)’s Oakley unit, which said in an e-mail yesterday that it would await a final decision on Armstrong’s sanctions from the International Cycling Union.

One energy-food company, FRS Co., which is part-owned by Palo Alto, California-based Oak Investment Partners, ended its business relationship with Armstrong, Chief Marketing Officer Matt Kohler said in a telephone interview yesterday.

Honey Stinger, another energy-food company in which Armstrong is a part owner, is “in the process of removing Lance Armstrong’s image and endorsement from our product packaging,” Len Zanni, marketing director of the Steamboat Springs, Colorado-based company, said in an e-mail yesterday.

‘No Obligations’

While RadioShack Corp. (RSH:US) is listed as a sponsor on Armstrong’s website, it “has no current obligations” with him, Eric Bruner, a spokesman for the company, said in an e-mail.

Nike will change the name of the Lance Armstrong Fitness Center on its corporate campus in Beaverton, Oregon, spokeswoman Mary Remuzzi said in an e-mail. The company also won’t be using him in marketing for its Livestrong line of apparel.

“To many Lance Armstrong was a superhero and now he appears to be a super fraud,” Scott Becher, managing director of Z Sports & Entertainment, a division of Fort Lauderdale, Florida-based Zimmerman Advertising, said in a telephone interview. “No marketer wants to associate with such a high- profile fall from grace.”

Past Cases

Nike ended contracts with quarterback Michael Vick following his conviction for crimes related to dog fighting and with sprinter Marion Jones after a doping confession. It maintained contracts with basketball player Kobe Bryant and golfer Tiger Woods following acknowledgments of adultery.

“You cannot compare Lance Armstrong to other people like Michael Vick and Tiger Woods because they were still active athletes,” Rosner said. “The book has not been written on them and they do have the upside of continuing to be successful on the field, which will give them the platform to become a positive in the public eye.”

Nike said it will continue to support Livestrong initiatives to help people affected by cancer. The charity, known for its yellow Livestrong bracelets, has raised more than $470 million since 1997, according to its website. Armstrong survived testicular cancer that spread to his lungs and brain before his first Tour de France victory.

‘Supporting Lance’

“There’s not a thing in the world that you can say, shy of him killing somebody, that will prevent this cancer survivor supporting Lance,” said Kevin Gallivan, a 47-year-old commercial-lending banker from Rochester, New York, who has had two operations to remove cancer from his tongue. “I wear a Livestrong band on my wrist, and I will until the day I die.”

Gallivan said in a telephone interview that he developed cancer in his mouth despite not being a tobacco user and that he lost both of his parents to the disease. He said he took strength from reading Armstrong’s book, “It’s Not About the Bike: My Journey Back to Life,” and that his anger over finding out Armstrong was untruthful isn’t enough to end his support.

“He can be a liar, and he is, but it’s not going to affect my life in any way other than cancer,” Gallivan said.

Armstrong’s resignation is likely to have a small effect on Livestrong, which has diversified its sources of income, partnerships and programs, said Leslie Lenkowsky, a clinical professor of public affairs and philanthropic studies at Indiana University.

“Livestrong has institutionalized itself so that it will be protected from Mr. Armstrong’s problems,” Lenkowsky said in a telephone interview. “The fact that he resigned -- or perhaps he was allowed to resign -- reflects the confidence the organization has in its ability to continue on without him.”

The support Armstrong received from many people also was a result of the marketing efforts of Nike, which had to act because his athletic achievements were directly tied to athletic transgressions, Swangard said.

“It speaks to how powerful a company like Nike, when they invest money behind an athlete, can make him or her appear iconic to the extent that they’re Teflon coated,” Swangard said.

To contact the reporters on this story: Mason Levinson in New York at mlevinson@bloomberg.net; Eben Novy-Williams in New York at enovywilliam@bloomberg.net

To contact the editor responsible for this story: Michael Sillup at msillup@bloomberg.net


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