Sweating Gold

For better or worse, the era of big-dollar sports contracts for superstars promises to continue. Football players are now free to play out their options without suffering from the inhibitions of the Rozelle rule; baseball players for the first time have the same rights because of an arbitrator's ruling; hence, sports clubs will be paying more money to keep or attract the top talent. Another certainty is the complicated, arcane input of lawyers and accountants working with clubs and players' agents to embellish contracts.

As everyone has learned, today's superstars are often paid more money in special deals than in straight salary. In Catfish Hunter's five-year contract with the New York Yankees, his $150,000 annual salary represents only about one fourth of the money promised by the club. Deferred bonuses, salary and life insurance increased the package to over $3,000,000. But agents disagree over the benefits of such a contract.

Some players' representatives, such as Irwin Weiner, negotiate for up-front money. As long as the maximum tax imposed by the IRS is only 50 percent, Weiner sees no reason for athletes in the top bracket to defer their money. Weiner, who represents top basketball (continued on page 112)Sweating Gold(continued from page 107) talent such as Walt Frazier, Julius Erving and George McGinnis, argues against deferred compensation, because the team has the athlete's money. Hence, it earns no interest and depreciates in value.

Agent Ed Keating will take deferred money under two strict conditions: The club must be secure financially and the deferred money must earn compound interest to keep its value at the same dollar level or better. Keating became a celebrity of sorts when he negotiated the signing of Larry Csonka, Paul Warfield and Jim Kiick with the World Football League three years ago. He says it is a philosophical decision: "Do you accept an offer of $150,000 now or a $225,000 deal with $125,000 of it deferred? Usually, I'll take the cash and work with it myself. That's the financial management we can offer a player."

One who believes in deferred compensation is Boston agent Bob Woolf. Of the more than 1000 contracts he has negotiated, he estimates that 50 percent involve deferred money. He assumes that inflation is figured into the market value of the contract. Moreover, he says, some clubs will compound interest for the player. Woolf worries most about turning large sums of money loose to the "get-rich-quick guys" who flock around susceptible athletes. For a client such as John Havlicek, who can chew gum and handle his own affairs, Woolf did not arrange for deferred compensation.

Loans are another part of the negotiation game. Athletes ask for loans from the club to make major investments or to embark on business ventures. Another purpose is to use the club's money to invest in tax-free bonds. An athlete in a high tax bracket can write off half of the six percent interest on a loan and invest the loan money at ten percent. He nets nearly seven percent from that arrangement.

Unlike loans, which benefit a player, offers that include an insurance policy are frowned upon by most agents. Says Woolf: "It's for the ego of an athlete so he can say he's got a $1,000,000 contract. It's also good from the club's point of view, because insurance is in lieu of cash." Keating agrees: "There's nothing wrong with being paid cash. You can buy your own insurance."

Baseball

Nowhere was the skill of the agent, lawyer and accountant better tested in 1976 than in our so-called national pastime. The structure of professional baseball changed drastically, and the result was a harvest of plenty for those players in the right place at the right time.

Keep in mind that before the 1975 arbitration ruling--which gave pitcher Andy Messersmith and all other players the right to play out their options and then sign with any other team--the average baseball player's salary was $48,000. Then consider that of the 15 quality players who became free agents in 1976, only one failed to sign (by a scant $45,000) at least a million-dollar contract.

(Under an agreement between management and players, there will be one more round of free-agent bidding following the 1977 season for players who choose to let their current contracts lapse. After this year, only those players with at least six years' service will be able to play out their options.)

Thirteen of the 15 lucky free agents will have a greater annual salary than the player who two years earlier had singlehandedly set the standard for free agents, Catfish Hunter. But none of their contracts can match Hunter's in total benefits.

Jim Hunter. A free agent in 1974 because of a violated contract with the Oakland A's, Catfish signed a $3,500,000 deal to pitch for five years with the New York Yankees. In addition to his $150,000 annual salary, Hunter received $1,000,000 as the face value of a life-insurance policy and a deferred bonus of $1,750,000, to be spread over 15 years, beginning after the contract period ends in 1979.

The deferred payments limited Hunter's ready cash, so last year he filmed a fat-cheeked television commercial for Red Man chewing tobacco, for which he received a quick $7500. Catfish says he actually needed the money. He also says he had to borrow $50,000 from Planter's National Bank in Hertford, North Carolina, to pay his 1975 taxes. This is what one lawyer called a problem of "liquidity balance" in Hunter's contract. He over-extended himself with investments and ran out of spending money.

Reggie Jackson. The prime catch of the 1976 free agents, Jackson now joins his former A's teammate on the Yankees. The Yanks are paying the heavy hitter (91 R.B.I.s in 1976) $2,900,000 for the rendezvous. Jackson will receive $2,000,000 in salary over five years and a bonus of $900,000--some of both deferred for up to ten years. Reggie passed up an extra $1,000,000 offered by the Montreal Expos in order to play for the Yankees. One reason: to be close to his other employer, ABC Sports, whom he serves as a commentator. Another reason: One company suggested naming a candy bar after him--the ultimate accolade in the land of the Baby Ruth--if he played in New York City. No doubt Jackson also expects to improve on the land deals and automobile franchises set up in his prior life on the West Coast.

Wayne Garland. Unaccustomed to this tax bracket, Garland is the first player to achieve superstar status because he played out his option. The Baltimore Orioles paid this surprising pitcher a mere $23,000 to win 20 games last year. The Cleveland Indians thought he was worth $2,150,000--they will pay him $215,000 annually for ten years.

Joe Rudi. The California Angels' star left fielder signed for five years for $2,090,000. He'll receive a salary of $200,000 for each of the first three years, then $240,000 for the fourth and $250,000 for the fifth. The Angels also gave him a $1,000,000 bonus.

Gary Matthews. Agent Ed Keating chose deferred compensation with compound interest in negotiating the deal for outfielder Matthews with the Atlanta Braves. Matthews will be paid only (only?) $100,000 a year for five years, but he also receives a $125,000 bonus; a $250,000 investment account; $200,000 to pay Keating; an off-season job for five years at $50,000 a year; and, after Matthews retires, he gets deferred payments of $450,000, compounded quarterly at five-percent interest, payable over 15 years. With the interest protecting Matthews' flank against inflation, his package will be worth more than $2,000,000.

Tom Seaver. Although the New York Mets' star pitcher doesn't have the million-dollar package of the 15 leading free agents, he has the distinction of being baseball's highest paid player who was not a free agent. Seaver opted to sign again with the New York Mets rather than play out his option in 1976. He has a three-year contract at a base salary of $230,000 a year, with several incentive clauses, such as an extra $5000 for each pitching start after he reaches 19 wins in a season. A poor year can diminish the value of the contract.

Football

Professional football, with 43-man teams, has a history of low-paid players. But millions of dollars in television money and short-lived league rivalries changed all that, raising the average 1976 salary in the N.F.L. to $42,000. Now, the opportunity to play out an option (without having to worry about market-deflating compensation rules) has given (continued on page 238)Sweating Gold(continued from page 112) the game's superstars--mostly quarterbacks and running backs--a higher market value than ever before.

O. J. Simpson. The Juice had his contract with the Buffalo Bills renegotiated last summer after threatening to quit the game if he wasn't traded to the West Coast. He finally signed for $2,000,000 over three years to become the highest salaried player in the game. Simpson's off-season earnings in motion pictures, at ABC Sports and as chief pitchman for Hertz Rent-A-Car may exceed his annual salary with the Bills.

Joe Namath. Namath was the original athlete in team sports who was able to earn more off the field than on it. Following the final year of a $450,000 two-year contract, Namath at this point hardly needs to play football with the New York Jets--or anybody else. He has a contract with Fabergé, Inc., at $250,000 a year for eight years, plus two six-year options. He has a six-figure deal with Arrow shirts, as well as lucrative arrangements with Hamilton Beach and La-Z-Boy chairs, among others.

Larry Csonka. The big fullback has a $1,200,000 four-year pact with the New York Giants. That figure may actually turn out to be higher because of options to renew the contract and penalties if the options (for two more years) are not picked up by the Giants. Csonka was the first superstar to be unencumbered by the Rozelle rule as he shopped around for a team. Last spring, the Miami Dolphins turned down a chance to re-sign him because he had asked for too much, they said. Csonka had wanted $250,000 annually for four years; a $50,000 initial bonus, plus a $15,000 annual bonus for each of the following years; a 20-year loan for $125,000; an expense account; a public-relations job; eight first-class air tickets from Miami to Pittsburgh or Cleveland (near his Ohio farm); a town-house apartment; and a car. Hello, New York.

Fran Tarkenton. Although the biggest record holder in N.F.L. quarterbacking history makes about $300,000 a year with the Minnesota Vikings, Tarkenton's total income is probably thrice that amount. He has a budding commentary career with NBC Sports and is head of Behavioral Systems, Inc., whose staff of 60 teaches executives how to motivate employees. Tarkenton estimates his net worth at $7,000,000.

Basketball

With only 12 men on a team, basketball players get more money than athletes in other team sports. At least 20 of the N.B.A.'s 264 players earn more than $200,000 a year. The average salary exceeds $110,000. Although last year's merger of the two leagues has ended the bidding war for new talent, salaries will remain high for the superstars. According to an agreement between owners and players, players will have freedom of movement from team to team after 1981, subject only to a "right of first refusal." So if a team wants to keep its best players, it will have to match the price of any competing offer.

Julius Erving. Dr. J. has whirled through his six-year professional career with a dazzling assortment of aerobatic slam dunks and seven-figure deals. After his junior year at the University of Massachusetts, he turned pro with the Virginia Squires in 1970 for $125,000 a year. In 1973, he was dealt to the New York Nets, who paid $500,000 to the Squires and $1,000,000 to satisfy the Atlanta Hawks, who held his N.B.A. draft rights.

After the Doctor led the Nets to the A.B.A.'s final championship in 1976, he thought he had been promised adjustments in his seven-year contract, which still had four years to run. That contract called for a $230,000 annual salary, plus incentive clauses that could have earned Erving another $67,000 a year. But Nets owner Roy Boe refused to renegotiate. Instead, he sold Erving to the Philadelphia 76ers for $3,000,000. The Sixers had already agreed to pay Erving $3,500,000 for six years.

George McGinnis. In 1975, McGinnis left the Indiana Pacers of the A.B.A., where he had averaged nearly 25 points a game, to sign a lucrative deal with the N.B.A.'s New York Knicks. Unfortunately for the Knicks, they didn't have the N.B.A. draft rights to Big Mac; Philadelphia did. N.B.A. commissioner Larry O'Brien negated the Knicks deal and McGinnis wound up in Philadelphia with a salary of $3,200,000 over six years. Like Julius Erving, McGinnis has for his agent Irwin Weiner, who believes staunchly in money paid up front. (When discussing how not to write a contract, Weiner cites the case of Marvin Barnes, a forward now with the Detroit Pistons, who signed a million-dollar pact three years ago with the A.B.A's Spirits of St. Louis. "Barnes," says Weiner sadly, "is deferred through the nose.")

Kareem Abdul-Jabbar. When basketball's best offensive center was traded by the Milwaukee Bucks before the 1975--76 season, he happily ended up in the warmth of Southern California, where he had played college ball at UCLA, and in the warm embrace of Los Angeles Lakers owner Jack Kent Cooke. Cooke is paying Jabbar $2,500,000 for five years--double his Bucks salary.

David Thompson. Drafted number one by the N.B.A.'s Atlanta Hawks, Thompson spurned them for the A.B.A.'s Denver Nuggets and a salary that is a shade under $2,500,000 for five years. Court documents have since revealed that the first $700,000 of Thompson's salary was guaranteed by the other A.B.A. owners.

Walt Frazier. He earns $400,000 a year from the New York Knicks. But even as a flashy New York athlete with an opportunity for many splashy endorsements, Clyde earns less than $130,000 a year off the court. Much of that is from his partnership with Billy Cunningham and Weiner in Walt Frazier Sports Enterprises, a sports marketing and management firm.

Hockey

A bidding war between the N.H.L. and the W.H.A. is now only an infrequent skirmish. But that war brought hockey salaries up to an average of $75,000 in the N.H.L. and $60,000 in the W.H.A.

Bobby Orr. Despite fragile knees, Orr was able to leave the Boston Bruins (after making $200,000 a year for five years) and get a six-year deal with the Chicago Black Hawks at $500,000 a year.

Marcel Dionne. L.A. Kings owner Jack Kent Cooke acquired Dionne in a trade from Detroit, where Dionne had played out his option, for $300,000 a year for five years.

Bobby Hull. Hull's 1972 jump from the N.H.L.'s Black Hawks to the Winnipeg Jets of the W.H.A. began the costly salary war that has inflated all hockey salaries. Hull received a $1,000,000 bonus and a salary of $200,000 a year for five years. If he is a nonplayer after this season, he will still receive $100,000 a year for five more years.

Bernie Parent. Parent has negotiated a "lifetime" deal with the Philadelphia Flyers. He will receive $150,000 a year for seven years (until he's 37), and then a Flyer-purchased annuity will provide him with no less than $50,000 a year for the rest of his life. The total package could be worth between $3,000,000 and $3,500,000. Parent's agent, Howard Casper, says this approach is better than up-front money for investments that may someday be diluted by new tax laws or a poor economy. "It gives Bernie peace of mind," he says.

Golf

Golf was the first nonteam sport to explode financially, in large measure because of two men. One was a Yale law school graduate and a golf aficionado named Mark McCormack. The other became the most visible athlete of his generation: Arnold Palmer. In 1960, Palmer agreed to let the 29-year-old McCormack represent him. With Arnie as the kingpin, Gary Player and Jack Nicklaus soon came aboard to form McCormack's (and golf's) "big three." Among them, they won seven straight Masters championships. More important, with McCormack's aggressive off-the-fairway packaging, all three became millionaires from the royalties on golf equipment, clothing and scores of other consumer products.

By 1966, McCormack had decided to go after the rest of the sports world--especially skiing and tennis stars. Through his Cleveland-based international management group, which now has some 250 employees and 12 offices around the world, McCormack merchandised and marketed his athletes so well (for about 25 percent of the take) that he became one of the most powerful men in sports. His forte was always individual sports, where television packaging is possible and where athletes can develop international markets. McCormack said, "We could turn any individual sport--golf, tennis, skiing--on its head tomorrow."

Arnold Palmer. At 47, Arnie the golfer finished 115th on the 1976 P.G.A. tour with a bare $17,017 in earnings. Yet Palmer the conglomerate and sought-after personality made perhaps $5,000,000 away from the golf course last year.

There are plenty of golfers who yearn to become as successful. Twenty-four won more than $100,000 on the 1976 tour. And for the first time, three women, led by Judy Rankin's $150,734, were also over $100,000 on the L.P.G.A. tour.

But of all of those, the two biggest names in golf today are Nicklaus and his equally fair-haired rival Johnny Miller.

Jack Nicklaus. Jack left McCormack in 1970 because he felt he wasn't getting enough personal attention. He formed the Florida-based Golden Bear, Inc., to handle his affairs. Nicklaus still has endorsements for clubs (he practically owns MacGregor), gloves, shirts, slacks and shoes, and now he also designs golf courses and runs his own tournament. Somehow, he also finds the motivation to have led the P.G.A. tour for the second year in a row. His tournament earnings in 1976: $266,438.

Johnny Miller. One who chose not to sign with McCormack, he slipped to 14th last year with a modest $135,887. But his name is still magic. Miller, through his agent, Ed Barner, takes deferred payments on dozens of endorsements on four continents. Miller has a major account with Sears, Roebuck in the U.S. and endorses tomato juice in Japan, clothing in England, lawn mowers in Australia and shoes, gloves, clubs and balls round the world.

Tennis

After golf came tennis. Ironically, although McCormack's clients won their share of the $9,500,000 in tennis prize money and bonuses available in 1976, most of the top players let someone else do their business for them. And what a market it was. World Team Tennis clubs paid six-figure salaries for three-month commitments by top players. The tennis "boom" reached deep into the American consciousness. More than 30,000,000 Americans played the sport. Companies figured it was worth millions in sales to have their racket or clothing used by a superstar seen on television or pictured on the cover of Sports Illustrated.

Jimmy Connors. He earned $303,335 in tournament play in 1976, plus another $684,000 in matches contrived solely for television, including $300,000 from CBS-TV alone for his Las Vegas challenge match with Manuel Orantes. His endorsement of the Wilson T-2000 metal racket pays him $150,000 a year--the equivalent of 9000 rackets at wholesale. But royalties from the Robert Bruce line of Jimmy Connors tennis wear could be his largest source of income. Robert Bruce executives expect sales of Connors' fashions to hit $14,000,000 in 1977, double the 1976 figure. In sum, Connors probably made more than $1,750,000 in 1976. He made so much money that he actually turned down $60,000 in bonus money last December, when he failed to show up at the Grand Prix Masters tennis tournament in Houston. The money was his for a third-place finish in the year-long Grand Prix standings, but he had to play in Houston to collect. Connors chose to stay away and rest. This year figures to make him even more money. For one thing, he has signed on with the W.C.T. tour (January through May) for $250,000 a year for four years just to play in W.C.T. events. That is in addition to prize money he can win.

Chris Evert. Chrissie earned $343,165 in 1976, down about $70,000 from 1975's total prize money. However, she played for the Phoenix Racquets of World Team Tennis last year, and that was worth $140,000 to her. She doesn't endorse many products, but she has a half-dozen Wilson tennis rackets in her name, as well as a line of Puritan tennis clothes. Her year was worth at least $1,000,000.

Arthur Ashe. Ashe won $368,386 on the court in 1976, which was less than Connors, Ilie Nastase ($406,420), Raul Ramirez ($465,942) and Björn Borg ($406,420). But Ashe, under the conservative investment guidance of his agent, Donald Dell, probably made more than all but Connors. Among Ashe's best contracts: AMF for Head rackets and Catalina tennis wear.

Horse Racing

The smallest of the professional athletes get their share of the large amount of money in pro sports. With more stakes races than ever before, jockeys are earning more money than ever before. And so are their agents, who take about 25 percent in return for landing mounts for the jockeys to ride.

Angel Cordero. The man who rode Kentucky Derby winner Bold Forbes won $4,709,500 for horse owners in 1976. At roughly 10 percent for himself, Cordero took in about $470,000 and gave his agent, Tony Matos, about $117,000.

Auto Racing

For race-car drivers, the money is plentiful, too. Six NASCAR drivers won more than $200,000 on the circuit in 1976. A driver usually competes on a monthly salary and can keep 40-50 percent of his prize money. Commercial tie-ins with automotive products pump lots more money into the sport.

Cale Yarborough. He nosed out Richard Petty on the NASCAR winning list, $387,173 to $338,265.

Johnny Rutherford. He led all USAC drivers with $378,508 won.

Soccer

One man, the shakers of soccer in the U.S. decided, could give the North American Soccer League credibility. He would make possible marketing tie-ins and national television contracts. He would help youngsters think of soccer as a potential professional career. That man was the legendary Pelé, whose net worth in his native Brazil had been estimated at $8,000,000.

Pelé. Warner Communications, the corporate owners of the New York Cosmos, gave him $4,700,000 for three years to come to the U.S. and do all those things. Pepsi-Cola gave him $200,000 a year to work with Pepsi's youth soccer program.

Boxing

As Pelé markets soccer, one man markets the otherwise sagging sport of boxing--Muhammad Ali. Perhaps the most recognizable person in the world, Ali is the only boxing personality who can either bring people to closed-circuit theaters or glue them to their TV sets.

Muhammad Ali. Ali grossed a staggering $16,200,000 in 1976, and yet may not have enough money to retire. His longtime goal is to put $10,000,000 into tax-free bonds so he can draw $85,000 a month for life in tax-free interest. Despite receiving $1,000,000 to beat up Jean-Pierre Coopman, $1,600,000 to decision Jimmy Young, another $1,600,000 to topple Richard Dunn, $6,000,000 to fool with a Japanese wrestler named Antonio Inoki and another $6,000,000 to fight Ken Norton, Ali needs more money. His sycophantic entourage literally eats him out of house and home, and his own spending habits are less than careful. As with so many of the gilded jocks, his money is easier to make than it is to keep.

"Fifteen quality baseball players turned free agents in 1976; only one failed to sign at least a million-dollar contract."

"With only 12 men on a team, basketball players are able to get more money than athletes in other team sports."