It is no secret that professional golf can be extremely lucrative for its star players. Not only do the tour golfers make substantial income from the golf tournaments in which they do well, but they can also make exponentially more money from endorsement or royalty deals. As all sports, especially professional golf, gain international popularity, how income is allocated becomes increasingly important. If a professional golfer makes the majority of his money in the United States, but lives in a foreign country, how much of the income should be attributable to his activities here in the United States?
Specifically, the Spanish born and aptly named “El Nino,” entered into an endorsement agreement with TaylorMade. Under the seven year agreement that commenced in 2002, TaylorMade received the rights to use the Swiss resident’s likeness, image, signature, voice, and any other symbol to promote its products. El Nino had to also exclusively wear and use TaylorMade golf products and “associated brands,” which were Adidas and Maxfli. Regardless of your personal beliefs TaylorMade apparently signed the young golf star because it believed he would add a “cool, athletic, and competitive” element to the TaylorMade brand, which would appeal to the “fun” side of young golfers. The tour pro had to wear the brand on and off the golf course, play in at least 20 professional golf events per year, and had to fulfill several other obligations of TaylorMade.
Although the deal seemed one sided, it wasn’t all bad for El Nino. In 2003 through 2005 his base royalty fees from TaylorMade were $7 million. From 2005 on, his income was performance driven and would range from $3 million (if he finished ranked below 21st) to $9 million (if he finished ranked #1). In addition, he could earn bonuses depending on the events he won in a given year. For the golf fans out there, there was also an apparent disagreement between the then rising star and TaylorMade that led to several contract amendments because the golf pro refused to use the MaxFli ball.