History of Pay Increases for Pro Athletes

The average sports fan often asks the question, “Are athletes being overpaid?” This question has been asked since the days of Lou Gehrig and Babe Ruth, demonstrating that overpaid athletes are part of American society. Let’s take a look at some of the overpaid professional athletes salaries throughout history to the present day in order to answer the question, “Are athletes overpaid?”

Babe Ruth

Legendary baseball player George “Babe” Ruth is perhaps the first overpaid athlete in American sports. The former Red Sox® and Yankees® slugger was the first professional baseball player to get $50,000 per year, receiving that amount starting in 1922. Ruth’s salary ballooned from $600 in his first professional season in Baltimore to $10,000 with Boston in 1919 to $80,000 with New York in 1930. Yankees fans that followed Babe Ruth probably did not consider him an overpaid athlete since his popularity and earning power was enough to fill the seats in the new Yankees Stadium in 1923.

Babe Ruth’s considerable wealth was bolstered by dozens of endorsements that played on his larger-than-life personality. His name was attached to the Baby Ruth® candy bar, Babe Ruth underwear and other products that sold simply because of his name. The Bambino’s image was used on Wheaties® boxes and soap containers to tie the product’s quality to the player’s considerable skills. Ruth was similar to modern athletes like Michael Jordan and David Beckham because his endorsement deals exceeded his player salary several times over.

Pele

The name Pele is synonymous with world-class soccer to millions of fans around the world even three decades after this last game. Pele won three World Cups with the Brazilian national team before becoming the centerpiece of the North American Soccer League (NASL) in the 1970s. The iconic soccer player was popular enough to warrant an exorbitant $1 million per year salary in 1974 when he played for the NASL’s New York Cosmos. In the context of soccer’s relative obscurity in the United States, the fact that Pele was able to keep the NASL alive for a decade showed his universal appeal.

Pele has been able to make millions of dollars every four years with advertisements geared to World Cup® fans. The 2002 World Cup® represented a huge windfall for Pele who earned several million dollars with advertisements for MasterCard©, Pfizer©, Petrobas© and Nokia©. The numbers from Pele’s 2002 World Cup® ad push are astounding. Pele appeared in 20 million mailings, 100 World Cup® promotions, 2 million MasterCard© cards and a dozen TV ads in the lead up to soccer’s biggest event. While some may think Pele is an overpaid athlete given his age, millions of soccer fans worldwide enjoy seeing his image on advertisements every four years.

Examples of Endorsements for Professional Athletes

The 1980s and 1990s offered an assortment of overpaid athletes and sports figures getting endorsement figures. “Mean Joe” Greene of the Pittsburgh Steelers was part of one of the most memorable ad campaigns, tossing his jersey to a young child in a Coca-Cola® commercial in 1980. Long-time Milwaukee Brewers® announcer Bob Uecker played on his sense of humor with a series of ads for Miller Lite© in the 1980s. Nike® has been active in the past two decades in tying their products to the most popular athletes of the day. The shoe company has used a wide variety of athletes including John McEnroe in the 1970s, Bo Jackson on the 1980s and Michael Jordan in the 1990s to reach sports fans. While these endorsement deals netted various amounts of money for athletes and sports figures, the popularity of these brands meant big paydays for overpaid athletes.

Today’s Overpaid Athletes

Sports Illustrated©

(http://sportsillustrated.cnn.com/more/specials/fortunate50/2008/index.html) has been publishing a list of the 50 highest-earning athletes in the United States since 2003. In the 2008 edition of this list, Sports Illustrated pointed out the importance of endorsement deals to the fortunes of the top 10.  The indications set in the later article suggest clearly address the question: “are pro athletes overpaid?”   While top earner Tiger Woods earned more than $22 million on the PGA Tour®, his endorsement deals with Nike® and Cadillac® helped him earn $127 million in 2007. Woods more than doubled the runner up on this list, fellow golfer Phil Mickelson ($62 million), and left overpaid athletes like LeBron James and boxer Floyd Mayweather Jr. in the dust. The list is dominated by New York Yankees® (Alex Rodriguez at #6 and Derek Jeter at #10) as well as NBA® players (James, Kobe Bryant, Shaquille O’Neal and Kevin Garnett) due to great marketing efforts by their teams and leagues.

Comparing Athlete Pay Yesterday and Today

The salaries and endorsements given to athletes today differ from previous generations for several reasons. In the days of Babe Ruth, players and their agents were more responsible for marketing than teams and leagues. Babe Ruth’s business manager and agent sought out endorsements while the team sought simply to fill the seats for upcoming games. The NASL learned the lessons of other leagues in the 1970s by pumping up Pele as the main attraction for soccer fans. The NFL®, NASCAR® and other sports leagues possess licensing rights for star players, allowing league officials to control the advertisements using player likenesses. Professional teams have taken to marketing matchups with popular players on opposing teams in an effort to reach new fans. The result is higher revenue for the leagues and teams which is passed to the players in the forms of higher salary caps and salaries.

Another difference between overpaid athletes in the past and present is the multiple platforms used to advertise endorsed products. Babe Ruth’s image and endorsements were relegated to print until the late 1920s when radio stations used advertisements to pay the bills. Modern athletes like LeBron James, Peyton Manning and Danica Patrick are able to reach millions of consumers daily through multiple media. Peyton Manning’s frequent TV commercials, Danica Patrick’s endorsement of GoDaddy.com© and the use of LeBron James for online and print advertisements for Nike® offer more value to advertisers.

The final difference between athlete endorsements yesterday and today is the number of products available for endorsement. While this difference can be written off as the natural evolution of the market, the impact of an athletic endorsement can vault a little-known company to prominence. If an athlete uses an iPod® with aftermarket accessories, the makers of those accessories benefit from the public’s affection for that athlete. The proliferation of electronics accessories, video game systems and car accessories alone has given more opportunities to advertisers interested in athlete endorsements.