We have had the opportunity to look at some of the details of the Fantex type deals being signed by professional athletes. As has recently been in the press NFL stars Arian Foster and Vernon Davis have both signed deals with Fantex to receive an upfront payment for a percentage of their future earnings including player salary, endorsements and post career income. The pure finance view would be to look at the present value of the player earnings, that is are the dollars being offered today a fair advance on ten percent of the athlete's future earnings or "brand income" as the prospectus labels it? Each deal is unique and the earning potential of each athlete is evaluated under standards established by Fantex. This is complex for many reasons. Two issues are key. First, neither side knows how much that future "brand income" number really is. The definition includes post playing career income and as even the most casual an knows that number varies widely. Not everyone is a Michael Jordan or George Foreman, but with the right guidance, there can be a reasonably long earning stream. Fantex is betting that their marketing skills will develop this post playing career value. In a sense, the player s that are signing up are betting the same thing. The other complexity is whether or not the individual has the personality and guidance to use or better yet invest that new lump sum wisely.
Taking an upfront payment for future earnings is an option for athletes to contemplate, but as with any investment athletes and investors need to seek the right advice. There are many critics, particularly after Foster's announcement close in time to an injury...another occurrence that can't be predicted. The Securities and Exchange Commission filing related to Foster is a good place to start to fully grasp the complexity of this opportunity.
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