If soccer star David Beckham leaves the Los Angeles Galaxy for AC Milan prior to the end of his five-year contract, one big loser could be another Los Angeles company: Herbalife Ltd.
The multilevel marketer of diet and nutritional products inked a five-year, $25 million jersey-naming rights contract with Galaxy owners AEG just two months after Beckham was signed in January 2007.
Now, just two years later, the British star is saying he wants to stay with the Italian club, where he has been on loan since last month.
The Galaxy redesigned its uniforms with the Herbalife logo prominently displayed, selling more than 600,000 Beckham jerseys. What’s more, with Beckham as the draw, the Galaxy has traveled extensively to play lucrative exhibitions in foreign countries where Herbalife has seen big sales growth, such as China where sales doubled through the first nine months of last year.
Last March, the Galaxy went on a tour sponsored by Herbalife in Asia and played matches in Hong Kong; Seoul, South Korea; and Shanghai, China. Those travel plans will grind to a halt until a similar caliber player to Beckham can be obtained.
“I don’t see us having great opportunities with that kind of exposure and those fees. That won’t happen,” acknowledged Tom Payne, president of business operations for the Galaxy. “It was a significant part of my budget.”
Typically, jersey contracts like the one Herbalife signed with the Galaxy include clauses that allow the sponsor to opt out if Beckham were to leave the team and he is not replaced with a similar caliber player.
Neither the Galaxy nor AEG would comment on whether there is such a clause in their agreement. However, Payne did say Herbalife and several other large sponsorships would need to be renegotiated to compensate the sponsors, who paid a premium when Beckham arrived.
“We have a couple of deals that we will have to review,” said Payne. “There would be some effect financially on the larger agreements.”
Of course, it’s unclear when and if Beckham will leave. Major League Soccer had set a Feb. 13 deadline for AEG to reach an agreement with AC Milan, in which the Italian club would compensate Beckham’s early departure. An initial $10 million offer was reportedly rejected.
But late last week at press time there were reports that AC Milan president Italian Premier and industrialist Silvio Berlusconi was ready to step in and personally negotiate a deal. L.A.-based AEG, which is owned by Denver billionaire Philip Anschutz, reportedly is seeking more than $20 million for rights to Beckham.
At issue would be compensation for lost revenue this year. AEG has acknowledged that even though it has a five-year contract with Beckham, the deal has a clause allowing him to walk away after three seasons. That mark would be hit in November at the end of the upcoming season.
For its part, Herbalife is maintaining that even without Beckham it would be pleased with its sponsorship agreement, though a spokesman declined to comment on any possible renegotiation of terms.
“The interest in U.S. soccer and L.A. Galaxy has never been higher so we still regard this as a strong partnership,” George Fischer said.
Football Franchise
The upstart United Football League announced that it received a $30 million investment from a group of investors led by Paul Pelosi, the president of San Francisco investment and consulting company FLS Inc.
The cash infusion will allow the league to hold its premiere season in 2009 with four teams playing in seven different cities. Three teams will have dual homes, including the L.A. franchise that also will play in Las Vegas.
The league has scaled back on its goal to begin play in October with eight teams. Instead, it will start play with just four franchises and hopes to expand the next season. The UFL is an outdoor football league that will have a six-week season and a championship game tentatively scheduled for Thanksgiving weekend.
UFL was founded by Bill Hambrecht, a wealthy investor, and Tim Armstrong, who handles advertising sales for Google’s North American division. The stated goal of the league is to provide football to underserved markets with players one cut below the National Football League.
Ball Call
The Los Angeles Angels of Anaheim have reached an agreement to have 110 regular season games broadcast throughout Southern California on CBS Radio’s KFWB-AM (980). The station entered into a partnership with the Angels to carry a simulcast of the team’s flagship radio station coverage on KLAA-AM (830), a property of Angels owner Arte Moreno.
CBS Radio will take over ad sales for both its and KLAA’s Angels broadcasts. It also will promote the Angels broadcast on its seven local radio stations including KROQ-FM (106.7) and KCBS-FM (93.1).
Since Moreno purchased the team in 2003, he has engaged in a battle for the hearts of L.A. baseball fans while trying to consolidate the media rights for the team. Moreno purchased KLAA in 2006 and moved Angel’s radio broadcasts to the station when its prior radio contract expired in 2007.
Staff reporter David Nusbaum can be reached at [email protected] or at (323) 549-5225, ext. 236.
