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Aug 21

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Lochte Likely Loses Much More Than His Wallet in Olympics Debacle

After the last Olympics, Ryan Lochte enjoyed a nice run of endorsements deals, reportedly enjoying over $2 million from a host of well known brands.  However, after the highly publicized recent Olympic debacle in which he allegedly destroyed property and then claimed to have been robbed, it is likely that he will not enjoy a repeat performance.

Athletes often benefit financially from the goodwill surrounding an Olympic appearance. Endorsement deals can be highly lucrative, as brands scramble to associate themselves with the positive qualities embodied by these elite athletes. But negative publicity can destroy such opportunities if an athlete’s bad acts overshadow their accomplishments.

So what does this mean for Mr. Locte’s earning potential? Well, as is often the case, there are many things to consider when making such an assessment.  Here are some suggestions:

  1. Sometimes negative publicity can raise a celebrities’ profile and actually attract an entirely different type of deal. Historically Mr. Lochte has embraced what some may consider less than flattering options in order to stay in the spotlight.
  2. As with most marketing, buyer segmentation matters a lot.  Purchases of many products may think less of Mr. Lochte and be alienated, while others may simply not care.  For example, certain users of a product, such as fellow athletes, may care primarily about the actual use and success with a product; they may care little about the endorser’s personal reputation.
  3. The character of the product being endorsed is also a factor.  Some products are endorsed based on the ‘heroic’ qualities of the endorser.  In such cases, reputation matters more.  Companies who historically endorsed Mr. Lochte (such as Procter and Gamble) might be slower to embrace him unless they see other indicators of his public acceptance.
  4. Similarly, for certain advertisers subsequent performance matters more than reputation outside the sport.  In those industries, reputational damage may not be permanent.  The caveat for an Olympic athlete compared to other sports figures is that there is a relatively shorter window in which they enjoy a high profile and can publicly rebuild their reputation.
  5. The economic impact time for reputational damage may be shorter when the allegations do not directly relate to the ability to perform the task which generates the endorsement income.

People often expect easy answers to these complex matters.  In most cases, a proper analysis requires customized analysis that considers the items listed above (and perhaps others).

About the author

Renee Howdeshell

Renee Howdeshell is a founding member of Fulcrum Inquiry, an accounting, finance and economic consulting firm that performs damage analyses for commercial litigation, forensic accountings, royalty & distribution audits, financial investigations, and business valuations. Ms. Howdeshell holds a degree in Finance and Marketing from the University of Virginia's McIntire School of Commerce and is a Certified Public Accountant (CPA) and a Certified Fraud Examiner (CFE). She has testified as an expert witness in federal court, CA state court and arbitration regarding the results of her work. She can be reached at (213) 787-4112 and her resume is available at www.fulcrum.com.

Permanent link to this article: http://betweenthenumbers.net/2016/08/lochte-likely-loses-much-more-than-his-wallet-in-olympics-debacle/

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