When Serena Williams took Centre Court at Wimbledon on July 3, 2004, few gave her opponent, 17-year-old Russian star Maria Sharapova, much of a chance. But Sharapova took the Ladies' Singles championship in straight sets, catapulting her into superstardom in the worlds of both tennis and sports marketing.
"That day, Maria's life changed forever, and so did mine," says Max Eisenbud, her agent at sports agency IMG, as quoted in the recent Harvard Business School case "Maria Sharapova: Marketing a Champion."
From a marketing perspective, star athletes can be made or broken over a course of a career or in the flash of an eye—just ask Atlanta Falcons quarterback Michael Vick, who was a top endorsement target of clients such as Coca-Cola until he was disgraced earlier this year in a dogfighting scandal.
Superstars throughout the entertainment world are of particular interest to Harvard Business School professor Anita Elberse, be they a movie legend or a third baseman. She wrote the Sharapova case with Margarita Golod (HBS MBA '07) to study and frame classroom discussions on a favorite field of research: the value created and captured by superstars.
With the baseball World Series just completed with a Boston Red Sox sweep of the Colorado Rockies, we asked Elberse to discuss the business of sports marketing and the unique case of Maria Sharapova.
Sarah Jane Gilbert: What is the growth rate of the sports marketing industry? Is it primarily in the United States, or is it a global business?
Anita Elberse: The sports marketing industry, covering everything from television rights to endorsements, sponsorships, and merchandising, is an important sector and growing rapidly. In its Global Entertainment and Media Outlook, PricewaterhouseCoopers estimated that the sports industry accounted for around $50 billion in revenues in the United States in 2007, up from just under $35 billion in 2001. On a global scale, total revenues are expected to be nearly $100 billion this year, compared with $70 billion in 2001.
As far as endorsements are concerned, marketers increasingly turn to athletes to promote their products. The marketing executives I spoke with told me they value these endorsements especially because it is getting more and more difficult to reach a wide group of consumers using traditional ways of advertising such as television commercials, and harder to gain credibility with commercial messages.
"The sports marketing industry is a global business."
As a result, many of the highest-paid athletes now make more money from endorsements and other commercial activities than from salary and winnings. The majority of top-paid athletes is American or, like Maria Sharapova, based in America. The list includes golfer Tiger Woods, basketball players Shaquille O'Neal and LeBron James, baseball players Derek Jeter and Alex Rodriguez, football quarterback Peyton Manning, and soccer player David Beckham.
However, the sports marketing industry is a global business, with international stars such as soccer players Ronaldinho and Thierry Henry as well as tennis star Roger Federer being particularly sought-after endorsers.
Q: What was the evolution of using athletes to promote commercial products? Was there a pioneer in sports promotion?
A: Mark McCormack, the founder of leading sports agency IMG, which counts Maria Sharapova as one of its clients, is widely seen as the catalyst behind what has become the sports marketing industry. Legend has it that in 1960, McCormack, a lawyer, approached Arnold Palmer, then a young golfer, and told him that he saw potential in sports endorsements in the television age. McCormack informed Palmer that he was planning to start up a business revolving around personal business managers or "agents" handling professional golfers' affairs. Palmer agreed to be his first client and to pay a commission on his marketing endorsements in...