The Ryan Lochte Saga And Its Effect On Sponsorship

By: Zach Seybert, @zlseybert

In a memorable 2016 Olympic Games for the athletes representing our great country, the performance of these talented individuals is now somewhat overshadowed by the ongoing Ryan Lochte and company saga. Last week, we were still talking about the greatness of Michael Phelps, the most decorated Olympian of all time, and the performance of the “Final Five” USA Women’s Gymnastics team lead by Simone Biles and Aly Raisman. Now, even after the closing ceremony of the Games and the passing of the Olympic flag to Tokyo for the 2020 Summer Games, the media is still analyzing Lochte’s late night blunder in Rio.

As of the evening of August 22, Ryan Lochte had lost all of his major endorsement deals including: Speedo USA, Ralph Lauren Corp, mattress maker Airweave USA and hair-removal brand Gentle Hair Removal. The first company to sever ties was Speedo, which is huge in the swimming world as it sponsors and outfits the US swimming teams. Lochte, who ranks second all-time among Olympic swimmers with 12 overall medals, was worth an estimated $6.2 million, the majority of which came from these lucrative endorsement deals.

Throughout his swimming career his colorful personality has shown in a variety of ways, including wearing a red, white and blue “grill” during a medal ceremony in London, and his short-lived reality TV career on the “What Would Ryan Lochte Do?” show. He has been able to capitalize on strong performances in the pool during the Beijing and London games and sign major endorsement deals with Gillette, Mutual of Omaha, Nissan, AT&T, and Proctor and Gamble. The most lucrative deal was with Speedo, which began in 2006 and paid him an estimated $500,000 per year since then, according to Money Nation. After ending their partnership, Speedo announced that it would donate a $50,000 portion of Lochte’s would-be fee to a charity benefitting Brazilian children. He also had deals with Nissan and Gatorade, but they had previously expired. Money Nation noted his deals with Nissan, AT&T and Ralph Lauren were in the range of $1.5-$1.8 million each, the loss of which is a big blow to his bank account.

Although he will not be making any money by means of endorsements any time soon, his performance in the pool has earned him 12 Olympic medals (six gold, three silver and three bronze) with a total payout of $225,000. This number is based on $25,000 for each gold, $15,000 for each silver, and $10,000 for each bronze by the US Olympic Committee. In addition, he has made an estimated $1.1 million from swimming competitions since 2004.

The decision of these companies to end their endorsement deals of the now-troubled Lochte seemed to be a pretty obvious decision once the real story of what happened on August 14 came out. If some companies were unsure as to whether or not to drop him, the release of security camera footage of the four swimmers (Lochte, Gunnar Bentz, Jack Conger and Jimmy Feigen) at a Rio gas station confirmed any suspicion that law enforcement officials had of the event and likely made a decision easier. A question that often arises in a situation where a company drops an athlete from its endorsement roster is “How is that legal?” Many athlete endorsement deals contain a legal clause referred to as a “morality/morals clause,” which essentially states the company has the ability to suspend or terminate the contract if the athlete “commits an act that falls within the purview of the clause,” according to fkks.com. This is due to the fact that the company is paying the athlete to use his or her name and image in a positive light, and if the athlete is involved in a scandal of some sort, they do not want to associate the brand name with a negative image. This clause has been exercised in a few notable athlete scandals losing sponsors such as Tiger Woods and Michael Vick.

As more and more details surrounding the events of that night are released, Lochte (and his PR team) will have a lot of work in front of them in attempts to restore his image. The 32-year-old has likely participated in his last Olympics, which was the case prior to this debacle. It will be an arduous task for him and his business team to put his name back in a positive light. Many athletes have been able to restore their careers after scandals, but in a sport like swimming that is at the forefront of the sports world during the Olympics every four years for the average fan, it will take time.

UPDATE: On August 25, Lochte picked up a new sponsor — Pine Bros. Softish Throat Drops. He will appear in ads for the company with the tagline, “Pine Bros. Softish Throat Drops: Forgiving On Your Throat.” Hopefully the throat lozenge company will help the public forgive Lochte’s image as well.