Fantex - Advance money in exchange for percentage of future earnings, signs Scott Langley

[nevets88]

3 million and change for 15% of all future golf brand related earnings. Tough call, it depends on the situation of course. 26 yo and his best year was ~$1.1 million in tournament earnings. 

Quote

How does Fantex actually work? The company pays every athlete it signs a one-time, upfront lump sum in return for a percentage of the athlete's future brand income—all future income tied to the athlete's brand, whether it's from the sport or from business outside of it. (That includes, for example, money from endorsement deals, fast-food franchising, speaking engagements, TV appearances and more.) In Langley's case, Fantex is paying Langley $3.06 million in return for 15% of his future brand income. Fantex raises that fee from the IPO process; if it fails to sell enough shares of the athlete in the offering, it can't pay him.

http://finance.yahoo.com/news/fantex-signs-golfer-scott-langley-163930721.html

[David in FL]

Tough to tell, but brand earnings is entirely different from simple tournament earnings.  I'm just guessing, but I wouldn't be surprised if annual brand earnings didn't significantly exceed the annual tournament earnings for most PGA Tour pros.

[Golfingdad]

21 minutes ago, David in FL said:

Tough to tell, but brand earnings is entirely different from simple tournament earnings.  I'm just guessing, but I wouldn't be surprised if annual brand earnings didn't significantly exceed the annual tournament earnings for most PGA Tour pros.

I think that is only true of a handful of guys.  I'm, admittedly, not very knowledgeable here though, but I'm basing it off of a list I saw recently from, I think, Golf Digest, listing the top earners in golf. This is an older version of the same list here (but not the one I saw - the one I saw had Spieth at the top):

http://www.golfdigest.com/gallery/gd-50-photos-2015-03#3

Note that pretty much every active player on that list with the exception of Tiger, Rory, and Phil sees a significant portion of their earnings coming from their golf.  Even somebody like Rickie Fowler (who's so into his brand and an "underacheiver" that he's been compared to Anna Kournikova before) makes 40% of his money on the course.

Again, the list linked is a year or so old, but the new list I saw was similar (just with different guys filling different spots)

Oh, here's the latest list: http://www.golfdigest.com/gallery/golfs-top-earners

(I count 17 players who actually earned more on the course than off, as well as 7 or 8 who don't even play golf anymore)  Only about the top 4 and the retired guys (and Paula Creamer :P) made most of their living from endorsements, the rest still counted on both on and off the course earnings to contribute significantly to their totals.

[nevets88]

I wonder how "under the table" income works out? Is "under the table" really, "under the table"?

[SavvySwede]

On 1/19/2016 at 5:54 PM, nevets88 said:

I wonder how "under the table" income works out? Is "under the table" really, "under the table"?

I doubt they'd get of cut of his on course gambling winnings if that's what you mean.

Edit: I wouldn't be surprised if there was a no gambling clause in his contract.

[nevets88]

9 hours ago, SavvySwede said:

I doubt they'd get of cut of his on course gambling winnings if that's what you mean.

Edit: I wouldn't be surprised if there was a no gambling clause in his contract.

Agreed. I was thinking about appearance fees, not that that would apply to him now, so it's a moot point, but just wondering.

[Marty2019]

It's an interesting concept, but I have no idea how you would evaluate whether the company would make money.  

 It kind of reminds me of payday loans, or these "Need Cash Now?" type of operations.   I think this is going to be lawsuit city.  Some athlete is going to take the money and then retire, or some athlete is going to take the money and then find out he's making a lot more money than he thought he would, and so he sending Fantex a lot more money than he thought he would have to. 

I think the only people to get rich off this will be the lawyers. 

[chspeed]

11 minutes ago, Marty2019 said:

I think the only people to get rich off this will be the lawyers

Bingo.

[WUTiger]

The "future earnings" idea has jumped into the college student loan debate. Investors would lend money to students at a very low interest rate in return for a percentage share of future earnings.

People are pitching the concept, but I haven't seen any scenarios on how it would work.

When I was in graduate school, our happy-hour crew came up with the idea of "Junk Bonds for Doctoral Students." Invest in someone working on a doctorate in return for percentage of future earnings. Factors for investors to consider:

• Only about half of doctoral students ever do a dissertation and graduate, hence the "junk" rating.
• Is the student working on a PhD in finance (big $$ in academia or industry) or anthropology (you can really help society - but finding a job may be tough).

[pganapathy]

Am just curious whether Fantex would now start pushing their athletes to sign endorsement deals irrespective of how good/bad it is for their game.  Would they also get involved in becoming player agents.  Do future earnings also include money he has invested and then got a return from (stocks etc).  How do they value the free golf equipment players receive (balls, clubs etc).  Way too many unknown's for anyone but journeyman or not so talented golfers only to consider, and they would only do so because of the cash up-front.  Barring that, not a great idea

[Mr. Desmond]

1 hour ago, Marty2019 said:

I think the only people to get rich off this will be the lawyers. 

Hopefully, the lawyers on both sides have written contingency and "get out of jail" clauses.