Agents: Agent Services
An athlete delegates authority to an agent to negotiate contracts with the team that holds the athlete’s rights and to provide other services, such as seeking endorsement opportunities. Today most agents charge a player a fee based on a percentage of the total salary or endorsements negotiated on behalf of the player, although the actual percentage has decreased as total transaction values have increased. The industry standard for contract negotiations in North America has decreased from 10 percent during the late 1960s and 1970s to between 2 percent and 5 percent, depending on the services provided to the player.With more agents vying to represent players, financial rewards for agents are likely to decrease as agents accept less favorable terms in order to contract with players. Thus, the agent business is a highly competitive profession in which aspiring agents establish themselves only with difficulty.
Typically agents enter into a written contract with the players they represent. Similar to the standard player’s contract that is negotiated with a team by the agent on behalf of a player, a standard representation contract (SRC) is negotiated between player and agent. The SRC establishes the rights and responsibilities between player and agent and clearly defines the period of service, exclusivity of representation, fee system, and if/how agent expenses are repaid. The terms of the SRC are created and enforced by the players’ association. Although initiated to protect players, the SRC cannot fully police agent competence in the sense that the contract calls only for a good-faith effort on the part of the agent; in other words, the agent’s efforts do not necessarily have to be successful. The player-agent relationship is also considered to be fiduciary: Agents are bound to act faithfully and honestly toward the players they represent. In this manner any breaches of contract are treated like breaches of service contracts that govern any other agency relationship, such as that between a vehicle owner and a mechanic. Thus, the agent is bound by two types of legal duty to the player: The agent must agree to perform the services contracted for and must act in the best interests of the player. Although this arrangement may seem straightforward, the ability of the agent to fulfill the terms of the contract can vary greatly.
In addition to negotiating a player’s contract with a team, an agent may provide a number of other services. These may include (1) providing legal counseling, (2) obtaining endorsements and other income for the player, (3) providing financial planning and management, (4) providing career planning and counseling, (5) improving the player’s public image, and (6) resolving disputes under the employment contract, such as arbitration. Agents are then compensated based on the services they provide, which is typically achieved in any of four ways: (1) on an hourly rate, (2) a flat rate, (3) a percentage of the athlete’s salary, such as a commission, or (4) any combination of the preceding three ways. By far the most popular means of compensation is using a performance-contingent compensation (commission) system, although agents providing specific services may use a compensation scheme that is standard for their profession, such as attorneys who choose to bill at an hourly rate. Many agents do not represent players as a full-time occupation, and they perform services to other principals in the disciplines they have been trained in, such as financial planning or law. As salaries have escalated, the percentage that agents have charged players has decreased. Endorsements usually result in a substantially higher fee. The rationale for charging more is simple: An agent is more directly responsible for obtaining an endorsement and therefore expects to be paid more for the effort.
In order to perform the variety of services offered to players, agents must be cognizant of many issues in professional sports. Planning strategies, legal issues involved in creating personal service corporations, rights to publicity (an athlete’s ability to retain the right to his or her name and likeness while agreeing to play for a team or in an event), tax planning, and state and local income taxation of professional athletes playing outside of their residences are important issues of which agents must be aware. In addition, agents must be aware of issues specific to the sport of their client, such as the application of revenue laws and codes to foreign-born athletes playing in other countries and the growing internationalization of sports, which today can involve complex transfer fees paid to foreign sports clubs or associations to release players to play elsewhere.
However, the relationship between player and agent cannot be defined solely on the basis of services that are provided in the SRC. Agents also provide a number of other benefits that are not so easily defined. Some contract negotiations can last for prolonged periods, which can be grueling for a player and strain relations between player and team and reduce team morale. In this instance an agent can act as a buffer between management and player. Because at contract time team management tries to minimize the player’s contribution to the team in order to pay a lower salary, an agent can reduce any emotional trauma that the player might endure as result of having his or her abilities downplayed by team management. The agent also can act as a lightning rod for criticism; team management and local media members can more easily vilify an agent than a player for being greedy.
Agents are often expected to provide other services that are not necessarily addressed by a SRC. For example, the pioneer agent Bob Woolf recalled when his client, the former Boston Bruin Derek Sanderson, was on vacation in Hawaii and had left a number of urgent messages for Woolf at his office in Boston. Sanderson wanted Woolf to call the manager of the hotel that Sanderson was staying at in Hawaii to complain about the lack of hot water in his room.