Bloomberg News

Nadal Denies IMG Cut of Earnings as Career Resumes

February 04, 2013

Rafael Nadal is starting over with his tennis career, and his business affairs.

The 11-time Grand Slam champion, who returns to competition tomorrow in Chile after a seven-month hiatus because of injury, let his contract with management agency IMG Worldwide Inc. expire Dec. 31. He “wanted to set up his own company,” Fernando Soler, head of tennis at New York-based IMG, said in a telephone interview.

Agencies such as IMG typically take a cut of as much as 15 percent for arranging endorsement deals, according to Marc Ganis, president of Chicago-based consultancy Sportscorp Ltd. Nadal made $25 million in endorsements last year according to Forbes magazine, so he may be saving himself as much as $3.8 million. That’s about half of the prize money he made in 2011, his last full season on the men’s tour.

“Nadal doesn’t need to look for corporate sponsors any more, they will come to find him,” Ganis said.

Nadal and 17-time major singles champion Roger Federer, the sport’s top moneymaker with annual earnings in deals and prize money of $52.7 million who left IMG in June last year, are among the fewer than 10 athletes who are so well known they don’t need IMG’s 130-office global infrastructure to chase down deals around the world, Ganis said.

Carlos Costa, Nadal’s IMG handler for 12 years, is now managing him independently and has started a company with Nadal’s father, Sebastian, German newswire DPA reported Jan. 30.

Injuries

Nadal’s spokesman Benito Perez-Barbadillo declined to comment on the move and Costa didn’t return a message left on his mobile phone.

The 26-year-old has been suffering from a partial torn patella tendon and knee inflammation and hasn’t played since losing in the second round at Wimbledon last June. Nadal, the most dominant clay-courter of his generation with 36 titles including a men’s record seven French Open championships, is shunning hard courts for now.

Equipped with a new version of his old Babolat racket that will give him more power and spin, he’ll play doubles with Juan Monaco of Argentina tomorrow at a tournament in Vina del Mar, Chile, before making his singles return the following day, against a qualifier or 92nd-ranked Argentine Guido Pella. The former world No. 1, who missed the London Olympics, the U.S. Open and the Australian Open, will play in Brazil next week and in Mexico the week after that.

‘Weeks of Working’

Nadal told reporters in Chile yesterday he’s not set himself high expectations after the longest break in his career.

“I need weeks of working on the circuit,” said Nadal, who met with Chile President Sebastian Pinera shortly after his arrival in Santiago four days ago. “This is my first week and I don’t think the goals are the same that the ones I will have in two more months. I have to take it slowly and be humble to know that things won’t be as good as they were before my injury. I need to be patient.”

Staff at IMG’s office in Barcelona said Costa no longer works there and provided an e-mail address with a domain name of Goramendi. Goramendi Siglo XXI SL handles Nadal’s image rights among other business ventures such as real estate investments and his father’s glass business.

The company’s office is above a sports store that stocks Babolat rackets a short walk from Nadal’s home in Manacor, a town on the Spanish island of Majorca. According to its latest financial filing, Goramendi generated 39.8 million euros ($54.6 million) in revenue in 2009 and 2010.

Tax Inquiry

Nadal moved the company’s domicile from the northern city of San Sebastian in December 2011 after Spanish authorities opened an inquiry into why he was paying taxes in a region that allows companies to pay as little as 1 percent on income, El Pais newspaper reported in February 2012.

The player then told Television Espanola he hadn’t been paying 1 percent tax and had contributed some 40 million euros in taxes during his career. His father said in a 2009 interview that Nadal had companies domiciled in San Sebastian because his financial adviser was from there.

Even amid concerns about his knee injury and after dropping three spots to No. 5 for the first time in eight years while out of action, Nadal remains attractive for endorsements. His fame and his reputation for being helpful with sponsors “counts for a lot,” Ganis said. In Spain, Nadal’s character means he features in school text books about good citizenship.

Recovery Updates

Last year, Nadal added online gambling company PokerStars to a group of sponsors including Nike Inc. (NKE:US) and carmaker Kia Motors Corp. (000270)

During his time away from the tour, Nadal has been keeping his 11 million fans on Facebook up to date on his recovery almost on a daily basis, with pictures of him working out in the swimming pool, in the gym or on the tennis court.

“His positioning as a sporting superstar is confirmed and won’t change, he’s one of the all-time greats,” Nigel Currie, director of London-based sports marketing agency brandRapport said in an interview. “And there’s not been a bright new star that has come up in his absence.”

Costa, a former pro, took on 14-year-old Nadal as a client shortly after starting to work for IMG in 2001. He is so close to the player’s family that he stays at their house on Majorca when visiting, Nadal’s coach and uncle Toni Nadal said in a 2009 interview.

‘Disappointing’

Federer’s agent Tony Godsick left IMG last June to handle the Swiss player’s affairs independently. The departures of the two top moneymakers in men’s tennis are coincidental and “don’t mean anything in terms of our commitment to player management,” IMG’s Soler said. Tiger Woods, a 14-major winning golfer, left the agency in 2011 when his representative Mark Steinberg departed.

In December, IMG signed an agreement to represent top- ranked Novak Djokovic of Serbia and the company also manages 100 other tennis players including French Open winner Maria Sharapova of Russia, Soler said. He added he has no complaints with Nadal’s decision.

“We feel very fortunate we were with Nadal for 12 years,” Soler said.

“It must be disappointing for them,” Currie said. “Traditionally, IMG have been so massive in tennis that they always expected to have the top players in that sport. And if you’re working with the top players, their earning potential is absolutely massive. It’s a pretty lucrative area.”

To contact the reporters on this story: Alex Duff in Madrid at aduff4@bloomberg.net; Danielle Rossingh in London at drossingh@bloomberg.net.

To contact the editor responsible for this story: Christopher Elser at at celser@bloomberg.net


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