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Thursday, January 11, 2007

David Beckham Signs Unprecedented Deal With The LA Galaxy

As anticipated, David Beckham today signed a mammoth deal with the MLS and AEG (the operational managers of the Galaxy) that will make him the highest paid soccer player in the world. He is the first major signing under the "Designated Player Rule" to obviate the normal $2.2 million a year salary cap (for the entire team) of the MLS. In cases such as this, the MLS pays $400,000 towards the player's salary, and AEG foots the rest.

According to an excellent article by Mihir Bose of BBC News, the five year deal, which will commence in August 2007, is organized as follows:
  • Beckham will be paid an annual salary of $10 million.
  • He has four sponsorship deals with Gillette, Motorola, Pepsi, and Volkswagen. On an annual basis, these will yield approximately $25 million.
  • Shirt sales are anticipated to bring $10 million more to the table on a yearly basis.
  • In an interesting move, Beckham will earn a share in the profits of the Galaxy. Estimated at $10 million annually.
This adds up to over $55 million per year. The announced deal was a $250 million dollar contract over a span of five years.

Mr. Don Garber, Commissioner of the MLS, had this to say about the historic moment:

"David Beckham is a global sports icon who will transcend the sport of soccer in America. His decision to continue his storied career in Major League Soccer is testament to the fact that America is rapidly becoming a true 'Soccer Nation' with Major League Soccer at the core. In the last few years, MLS has added three new teams, six new owners, four new soccer specific stadiums and signed four long term television agreements. The addition of David Beckham represents another significant step forward for the MLS and the sport."

Link to the BBC News article by Mihir Bose.

Some further details by the Wall Street Journal:

"Mr. Beckham's five-year pact includes an annual salary approaching $10 million a year, 40% to 50% of team-jersey sales and a share of club ticket revenue. His endorsements are expected to bring in $20 million to $25 million a year. Anschutz Entertainment Group, which owns the operating rights to the Galaxy and two other MLS teams, said it estimates that, including endorsements, Mr. Beckham could could earn in excess of $250 million over the five years -- a deal the company called "the biggest in sporting history."

As JP Morgan used to say, "Put all your eggs in one basket, and watch that basket." For the sake of the game in North America, let us hope that Mr. Garber, AEG, the LA Galaxy, and the fans of soccer can reap the benefits of this deal. Along with the hard-working players (some are only earning the league minimum of $11,000 per annum) in the MLS who hopefully will gain as well. On the pitch, and in their bank accounts.

Steve Goff's article from the Washington Post.

Welcome to America, Mr. Beckham.

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