Roger Federer's Next Multi-Million-Dollar Payday
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Nike had a loaded roster of professional tennis players in 2018. There were established superstars like Serena Williams, Rafael Nadal, and Maria Sharapova, along with a group of rising stars like Nick Kyrgios, Denis Shapovalov, and Amanda Anisimova.
A talented roster of athletes is a good thing, of course. These athletes tend to be the lifeblood of a global brand, driving sales and convincing consumers that the company is culturally relevant. But having too many of them can also make for a tough decision.
Roger Federer was the most accomplished tennis player in the world — his 20 Grand Slam wins are still the most all-time — and he wanted to continue his lucrative relationship with Nike that was currently paying him $10 million annually and been in place since 1994.
But there is an unwritten rule in the world of sponsorships — you don’t spend more than 10% of overall revenue on athlete sponsorship deals.
So, as a result, Nike had a decision to make. Do you let a 36-year-old aging superstar walk to protect the margins on your $350 million tennis business — that’s less than 1% of Nike’s total $45 billion in revenue — or do you succumb to his demands and finish out one of the most legendary athlete-brand relationships in sports history?
Ultimately, Nike chose the former, with Roger Federer shocking the sports world by announcing a massive 10-year, $300 million deal with Uniqlo.
The craziest part? Without a retirement clause, the agreement is guaranteed to pay Roger Federer $30 million annually even if he never picks up a tennis racquet again.
Looking back, this move made sense for all parties involved.
At $30 million annually, that would’ve eaten up nearly all of Nike’s annual athlete sponsorship money, and despite Roger Federer not winning a single Grand Slam since the agreement was signed, he has provided Uniqlo with a global reach that they didn’t necessarily have before.
As for Federer himself, well, he’ll receive a $30 million check from Uniqlo when he is 46-years-old, long after he has retired as one of the greatest tennis players ever. For context, that’s 3x the $10 million annual fee that Nike paid Federer in his prime.
2021 Forbes Highest-Paid Athletes Off-The-Field
Conor McGregor: $158 million
Roger Federer: $90 million
LeBron James: $65 million
Tiger Woods: $60 million
Naomi Osaka: $55 million
But there is one part of the Nike-to-Uniqlo deal that typically gets forgotten.
The $300 million agreement that Roger Federer signed with Uniqlo in 2018 only covered apparel, so Federer continued to wear Nike shoes in competition without receiving compensation for doing so.
That lasted a year or two, but after discovering footwear brand On Running while training, Federer eventually ditched Nike again, signing a deal to become an investor, designer, and global ambassador for the Swiss footwear brand.
The financial details of his investment are not public — On co-founder David Allemann described it as “very meaningful” — but with On filing for an IPO this week, Federer might be in for an even bigger financial windfall than his Uniqlo deal.
Riding a strong tailwind that increased demand as more people turned to running during the pandemic, On, the parent company of On Running, has filed for a U.S. stock market listing in a deal that values the business at about $5 billion.
On Running was founded in 2010 by running enthusiasts Olivier Bernhard, David Allemann, and Caspar Coppetti, and its products are now available at more than 8,000 retailers across 50+ countries.
The business still draws more than 35% of its revenue from e-commerce channels, and the company has aggressively started to steal market share in the ultra-competitive specialty-running retail market.
Impressive Stat: On says that 43% of their “e-commerce customers have already purchased two or more items, a number that keeps increasing.”
We’ll eventually get a sense of how much of the company Roger Federer owns, but On reportedly raised money at a $2 billion valuation around the time he invested. So that means he’s already up 2.5x since his initial investment two years ago.
There’s nuance to this, of course, you have to consider valuation discounts, dilution, and more, but I imagine Roger Federer ended up owning a somewhat meaningful portion of the company — we’ll call that between 1% and 5%.
To be clear, this is just a guess at this point. I don’t have any more information on the investment than what has already been disclosed publicly.
But think of it this way — Federer is an ambassador for the company, which is obviously worth a lot considering Uniqlo is paying him $300 million over 10 years, but he’s also a billionaire.
At a reported $2 billion valuation when he invested, would it really be that surprising to find out Federer invested $20 million of his own money in the company? I don’t think so, and it honestly wouldn’t surprise me if he acquired more than that.
Remember, Federer now makes $20 million more annually from his endorsement deal with Uniqlo than when he was with Nike.
The going market rate for using his IP was set at $30 million annually through the Uniqlo deal, so whether On Running ended up paying him an ambassador fee or just gave him a discount in company shares, that definitely played an important role financially.
Only time will tell how much money Roger Federer ends up making off the On Running deal, but with $300 million in income and an equity stake in a $5 billion company, it’s hard to argue leaving Nike wasn’t the right move.
I hope you all have a great weekend. I’ll talk to everyone on Monday.
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