Sports equipment and clothing manufacturers

Endorsement from high profile sports teams and players can drive sales of sports equipment and clothing. There is often then a strong correlation between the on-field success of those stars and the value created for the products they use and endorse.

However, the benefits of success to the manufacturer, such as increased sales volumes and the ability to charge a premium price for products used by a particular star, accrue over time and cannot be estimated with any certainty, whereas bonuses are a certain, immediate cash cost. By hedging bonuses with SportingWins, manufacturers can fix the cost side of their budget and focus on driving sales. Furthermore, companies can plan for success such that when their stars win there are funds available to publicise and build on their association.

For example:

• A tennis racquet manufacturer has a portfolio of players on the WTA Tour whose contracts provide for a $1 million bonus for each Grand Slam that they win. In addition, in the event of success they want to run a targeted marketing campaign that will cost $500,000.
• SportingWins prices an agreement to cover a payment if any one of these players wins a particular Slam at 14%.
• For an annual consideration of $840,000 (14% of $1.5 million for each of the four Slams) a Hedging Agreement pays out $1.5m for each Slam that one of the nominated players wins.
• The $1.5 million payment from SportingWins covers the $1 million bonus to the player and adds $500,000 to the marketing budget to exploit the success.

The racquet manufacturer therefore knows with certainty how much player contracts will cost and also has provision to undertake significant additional marketing when its players win.