Wednesday, August 20, 2008

Phelps' Crystal Ball Article from 2004 - $1 Million Bonus First Revealed

Olympics Still Months Away, Swimmer Brings Home Gold
By Michael E. RuaneWashington Post Staff WriterTuesday, June 1, 2004; Page A01
Second in a series of occasional articles
The three Olympic swimmers and their agents, and the hair stylist, and the makeup people, and the public relations man from the swimsuit company, are crammed into a corner room on the 22nd floor of a swanky hotel overlooking New York's Times Square.
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_____ Swimming's Wonder Boy _____

Numerous endorsements have already made North Baltimore's Michael Phelps a millionaire.• Gallery: Road to Games Paved With Gold• Phelps is expected to be the most decorated athlete at this summer's Olympic Games.• Gallery: Making a Splash
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Michael Phelps, who is aiming for seven gold medals at the Summer Games in Athens, has just had his hair done in the bathroom, and is checking himself out in the bedroom mirror.
He and the others are about to help Speedo launch a new line of racing suits before a national TV audience. All have Speedo endorsement deals. As they wait, one reviews Speedo's talking points. Phelps doesn't need to brush up. He knows the mantra by heart. "It's like, 'Repeat Speedo as many times as possible,' " he jokes.
An hour later, during his 55-second dialogue with "Today" show host Matt Lauer, when Phelps tells millions of viewers he is looking forward to the Olympics, he deftly adds, "This year is a very exciting year for me, and Speedo."
Twenty-five years after the Olympic movement allowed professional athletes to compete in the games, Phelps has become the epitome of the modern American corporate Olympian.
Many Olympic athletes get corporate stipends or support from companies that believe such associations help sell their products. For most, says Bob Condron, director of media services for the U.S. Olympic Committee, the funding pays the bills and allows them to train. Phelps, he said, is at another "extreme of the spectrum."
Although he is only 18, is less than a year out of high school and still lives with his mother in a Baltimore County townhouse, he already is a millionaire.
He has been a professional swimmer since he was 16. He is the youngest male ever to turn pro in his sport. He has sponsors, agents, lawyers, accountants, deals, charities, obligations, his own Web site, and his own logo, a jazzy-looking MP over the name Michael Phelps.
He also has looks, poise and smarts. This summer, thanks to a cascade of corporate marketing deals, he could become the richest professional swimmer ever.
Phelps is aiming to match, or beat, the record of American swimming legend Mark Spitz, who won seven gold medals at the 1972 Olympics in Munich. Such a feat, never equaled, would be glorious enough. But Speedo, with whom Phelps already has a multimillion dollar, multiyear endorsement deal, has added the promise of another $1 million if he pulls it off.
It has been a brilliant marketing coup: generating extensive media coverage that, to the delight of his corporate sponsors, has catapulted Phelps into the public spotlight as no other swimmer since Spitz.
His athletic achievements haven't hurt. Four years ago, at the age of 15, Phelps became the youngest male in over 60 years to make the U.S. Olympic team. A year later he became the youngest male swimmer to set a world record.
Since then he has set a string of world records -- bagging five in one meet last summer. He currently holds three: in the 200-meter butterfly, the 200-meter individual medley and the 400-meter individual medley. In February, he narrowly missed a world record in the 200-meter backstroke.
He quickly got the attention of the corporate world, betting that he would "podium" often in Athens, as one executive put it, and eager to bask in the halo of his fame.
In addition to the Speedo endorsement, which Phelps signed in September 2001, he landed lucrative deals with Visa, the credit card giant, in 2002; Argent, an Irvine, Calif.-based mortgage company in 2003; and this year with AT&T Wireless and PowerBar, the energy food company.
Phelps has been as conscientious with his commercial obligations as he has been with his training in the pool. Diligent and dedicated in the water, he has been a quick study in the unfamiliar world of business, his advisers say.
"Being able to work with sponsors, Speedo, Argent and Visa . . . if you're away from home and you're with them, they're a family away from home," Phelps says. "It's like we're pretty much all in this together, the sponsors and myself . . . working to get at the top of the game and to stay at the top of the game."
In recent months, with careful orchestration, Phelps's profile has risen further.
In January, he flew to Los Angeles to film a Super Bowl TV commercial for Visa with other prospective Olympians, and posed for a Speedo photo shoot at Baltimore's Meadowbrook Aquatic and Fitness Center, where he trains. (He was cut from the Super Bowl ad, which featured female volleyball players instead.)
In February he starred at a big meet in Orlando, where he was hunted by New York fashion photographers from Vanity Fair and FHM magazine, and his picture appeared on 57 million Visa brochures that were mailed to customers.
His "Today" show appearance, followed by a Speedo swimsuit extravaganza at a Manhattan nightclub, was in March, the same month he was featured on the cover of ESPN's magazine and Chase Bank began offering a Visa credit card with his picture on it.
In April, he beat out basketball stars LeBron James and Diana Taurasi for the AAU's James E. Sullivan Award. He jetted to the Bahamas, Arizona and Miami for more commercial work, and appeared in Indianapolis with NBA legend Larry Bird to promote a meet there next fall.
In May he was in TV commercials that aired during the Kentucky Derby and the Preakness and was the main attraction when the North Baltimore Aquatic Club, with whom he trains, held its first ever fundraiser.
He has also filmed TV promos for NBC, which is broadcasting the Olympics, signed a multiyear endorsement deal with Omega, the Swiss watch firm, and has an informal arrangement with California's Vans footwear company: He wears their shoes; he gets them for free.
"Michael Phelps should not have to get a job, ever," says Josh Schwartz, of the SFX Sports Group marketing firm.
But his handlers want more.
In order to gain true commercial stardom, he must first live up to his potential in Athens, his agent, Peter Carlisle, says. Indeed, unlike any other Olympian, Phelps's commercial bonanza is speculative, says Condron, a corporate "roll of the dice."
If he lives up to his promise, he must then surmount the Olympic athlete's traditional marketing dilemma: Can he reach the masses?
"The swimming world, forget what they think," Carlisle says. "Olympic world? Really forget that." The question is: Can Phelps become known by the general public? "That's what you're after. . . . That's what you're up against."
Generally speaking, Olympic athletes have a narrow window of marketability, says Carlisle, who is based in Portland, Maine, and heads the Olympic division for the sports marketing firm of Octagon, headquartered in McLean.
The window, which comes around only with each four-year Olympic cycle, occurs during the games, and about a month or so before and after, he says.
The challenge is to expand that window. "Can you keep the . . . marketability alive beyond the window? Can you potentially enable that athlete to transcend the Olympic space altogether?"
Fast Lane Speeds Up The lights were low inside the crowded second-floor Manhattan nightclub, Pressure. People pretending to be scientists walked around in white lab coats and plastic safety glasses. The audience -- business executives, public relations people and the press -- began to take seats in the rows of white armless chairs that resembled huge marshmallows.
An ominous-sounding techno track thumped: "I am legendary, you are not; I am legendary, you are not."
Up on stage, behind opaque, illuminated screens, shadowy human figures appeared. One by one, to scattered applause, they emerged from behind the screens, four swimmers clad in what look like fish-colored leotards.
"It's truly scary how awesome they are," a female announcer said, introducing Olympic swimmers Amanda Beard, Jenny Thompson, Lenny Krayzelburg, and "oh yeah, three-time world record holder and the only male to break five world records at one single meet: phenom Michael Phelps."
The hyped-up, high-glitz, multimedia experience, designed to simulate a science fiction "aqualab," had been created to debut a bathing suit.
It was Speedo's new Fastskin FSII racing suit, the super light, super tight, super expensive garment that is supposed to increase a swimmer's speed in the water.
Speedo had brought in four of the dozens of top swimmers it sponsors to model the suit, but Phelps was the headliner. He has what the company calls its "richest swimwear sponsorship of all time," one that his agent says is probably worth between $2 million and $6 million through 2009.
Though he has never won an Olympic medal, and the other three all have, it is "the Phelps meteor," as one sports agent put it, that Speedo and many others are gambling will streak over Athens this summer.
The 76-year-old brand, whose net revenues topped $240 million last year, has been eyeing Phelps since he was 12, according to Stu Isaac, a former collegiate swimmer and coach, and the company's senior vice president of team sales and marketing.
The Los Angeles-based firm, which was born in the mind of an Australian underwear maker in 1928, tracks many young swimmers at clubs around the country. Phelps quickly stood out.
By the summer of 2001, he had gotten so good that he had a serious decision to make. He faced the prospect of earning big time endorsement money. But if he did, he would have to forego swimming in college, where professional athletes may not compete, and lose the athletic scholarship he was almost certain to get.
The majority of top high school swimmers choose college, Isaac says, and it is a rare few whose prospects are good enough to make it worthwhile to turn pro beforehand.
In Phelps's case, the decision was made easier when Speedo agreed to pay his future college tuition, along with endorsement money. The initial contract went out to 2005. Last fall it was extended to 2009 -- sweetened with the $1 million seven-gold-medal Spitz challenge.
That idea, Isaac says, originated with Carlisle, Phelps's agent.
"It's created a huge buzz," says Evan B. Morgenstein, president of Premier Management Group, which represents a host of other top-flight swimmers. "Speedo's the big winner; we'll see if Michael is."
It was also touted as "inventive and memorable advertising" in the annual report of Speedo's parent company, the apparel giant, Warnaco Group.
"The bonus has been worth every bit of it, even if he's not able to achieve that very, very difficult goal," Isaac says. "Because it really raised the profile of swimming, and Michael Phelps in particular, in the public's eye."
It's also been good for Speedo. "No doubt about it. A lot of people wouldn't have written about our sponsorship deal with Michael if it wasn't for that bonus clause."
An Ever-Expanding 'Team' Just before 8 on a rainy night in April, the crowd in the glittering New York Athletic Club, just off Central Park, began to drift from the 9th-floor Card Room to the carpeted lounge next door.
The occasion was the announcement of the winner of the 74th annual Sullivan Award for athletic achievement in the previous year.
One of the most venerable honors in sports, it has been awarded by the Amateur Athletic Union since 1930. Athletes such as Peyton Manning, Carl Lewis and Spitz have won in the past.
The award bills itself as "honoring America's top amateur athlete." But big-name amateurs can be hard to find these days. And the AAU recently started accepting the nominations of some athletes who are not amateurs, according to an AAU spokesman.
This year Phelps was one of the five finalists, along with basketball stars James and Taurasi, masters track star Philippa Raschker, and speed skater Apolo Anton Ohno.
There was excitement in the room because James and Taurasi had failed to show, and were presumed to be out of the running.
Phelps, who was present with his mother, one of his sisters, his father, his coach and his agent, joined the rest of the migration to the lounge, and then, bathed in a spotlight, was summoned to the stage with Ohno and Raschker.
Film clips of the finalists' achievements were shown, a few speeches were made, and a female emcee opened the award envelope. "The recipient of the 2003 AAU Sullivan Award," she said, "is Michael Phelps."
The room burst into whoops and applause. Phelps's family and coach beamed from the audience. He smiled and waved, and then took to the podium.
"Standing in front of you guys tonight, receiving this award is definitely an honor," he said. "Being in a group with athletes who I'm here with today is an amazing accomplishment within itself."
He said he wanted to thank all those who had made this possible. He would later express his gratitude to his parents, sister, coach, agent and friends.
But the first to get his thanks that night, as he stood in the hallowed temple to sports, was "the team that I've been working with:
"Speedo, Visa, Argent.
"They've been a big help to allow me to get to this point today."
'Co-Branding Action' The two PowerBar photographers, along with a company representative, had been waiting all morning by the concrete diving tower at the George F. Haines International Swim Center in Santa Clara, Calif., for time with Michael Phelps.
They had their camera gear. They had a pile of gray sweat shirts and black baseball caps emblazoned with the brown and yellow PowerBar logo. And they had a good spot for photographs. All they needed was Phelps.
But these days everyone wants time with Michael Phelps, and on this Sunday in May he was in the middle of an arduous morning of preliminary races in an annual Santa Clara meet, where he was the main celebrity.
Phelps had three races that morning, and three that evening. And he was leaving for Colorado the next day for more training. His time was limited.
Finally, with the morning session ending, his agent's assistant approached the worried-looking photographers. "Okay," she said, "we're going to do it now." But they would have only five minutes. "Literally, five minutes. Do you have anything you want him to wear?"
They did. "We'll do sweatshirt, hat, and I want one with his hat on backwards," said Natalie Santos Ferguson, the PowerBar rep. She had gotten Phelps's red and blue "MP" logo sewn on the back of one of the hats. "A little co-branding action," she said.
After his last race, which he won, Phelps walked over wearing a white T-shirt with the Visa logo on it. That kind of co-branding was okay, Ferguson had explained, because PowerBar wasn't a credit card company. Plus, the sweatshirt would cover the T-shirt.
Phelps stood on the concrete foundation, while the photographers worked, ordering him to strike this pose or that. At one point, he raised his arms, which lifted his shirt, exposing the waistband of his underwear. "If you could push your Calvin Kleins in a little bit," one of the photographers said. "We don't want too much co-branding."
"Two minutes, guys," someone called out. "Actually, a minute and a half."
The final shots would be Phelps in swimming goggles. He started to put on a pair, but stopped. "Time out," he said. "Gotta get the other goggles." He jogged off to the bleachers and was back in moment. He pulled on the new goggles, which looked shiny and sleek, and had clearly etched in the side the word, "Speedo."
Time was now almost up.
"Just one, just one," said Phelps's agent, Carlisle, who was watching.
"We really got to run."

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