Media reports out of Europe have indicated that Roger Federer’s fragrance and cosmetics company “RF” will cease operations. Started in 2003 by Federer’s then-girlfriend Mirka Vavrinec, “RF” was one of the Federer initiatives during the entrepreneur management phase of his career, before re-signing with the International Management Group. Rene Stauffer, in his book THE ROGER FEDERER STORY, QUEST FOR PERFECTION ($24.95, New Chapter Press, www.RogerFedererBook.com), outlines Federer and his business career in this book excerpt below.
Lynette Federer was astonished to read one of her son’s first interviews in a Swiss newspaper when he was still a youngster. The question to Federer was “What would you buy with your first prize money paycheck?” and the answer actually printed in the paper was “A Mercedes.” Roger was still in school at the time and didn’t even have a driver’s license. His mother knew him well enough to know that the answer couldn’t be correct. She called the editors of the paper and asked to hear the taped conversation. The mother’s intuition was correct. He had really said, “More CD’s.”
Roger Federer never had extravagant tastes. Money was never the main incentive for him to improve. It was rather a pleasant by-product of his success. It is a fact that the most successful tennis players are gold-plated and are among the highest-paid individual athletes in the world. Normally, the top 100 players in the world rankings can make ends meet financially without any difficulties—but nationality plays a crucial role in this. The best player from Japan, a country that’s crazy about tennis and is an economic power house, may be only ranked No. 300 but he could still be earning substantially more than the tenth-best Spanish player even if the Spaniard is ranked 200 positions ahead of the Japanese player. Profits from advertising, endorsement contracts as well as other opportunities that arise for a top player in a particular nation sometimes greatly exceed their prize money earnings.
Anybody who asks a professional tennis player how many dollars or euros they win in a tournament will seldom receive an exact answer. For most, the total prize winnings are an abstract number on a paper and when it has finally been transferred to a bank account, it doesn’t look too good anyways after taxes. By contrast, every player knows exactly how many ATP or WTA points they accumulate and how many are still out there to be gathered and where. These points ultimately decide where a player is ranked, which in turn determines the tournaments a player can or cannot compete in.
While tennis, for the most part, is an individual sport, it’s hardly an individual effort when it comes to the daily routine. Nobody can function without outside help to plan and coordinate practice sessions, to get racquets, strings, shoes and clothes ready, to make travel arrangements, to apply for visas, to work out a tournament schedules, to field questions and inquiries from the media, sponsors and fans, to maintain a website, to manage financial and legal matters, to ensure physical fitness and treat minor as well as major injuries, to maximize nutrition intake and—something that is becoming increasingly important—to make sure that any sort of illegal substance is not mistakenly ingested.
Tennis professionals are forced to build a team around themselves that are like small corporations. This already starts in junior tennis, although sometimes a nation’s national association will help with many of a player’s duties—as the Swiss Tennis Federation did with Federer.
Virtually all top players are represented by small or large sports agencies, where agents and their staff offer their services—not always altruistically—to players. The reputations of agents and sports agencies are not always positive as many put their own financial goals ahead of what is best for their client.
The International Management Group or IMG—the largest sports agency in the world—signed Martina Hingis when she was only 12 years old. Federer also drew the attention of the company’s talent scouts at a very young age. IMG signed a contract with the Federer family when Roger was 15 years old. Régis Brunet, who also managed the career of fellow Swiss Marc Rosset, was assigned to work with the young Federer. Lynette and Robert Federer invested a great deal of time and money in their son’s career but were also in a relatively privileged position because Roger was able to take advantage of the assistance of local and national structures early on. For years, Swiss Tennis picked up the bill for his travel and accommodations at many of his matches and also provided opportunities for training and sports support care.
From an early age, Federer began to earn more money in the sport than his contemporaries. By age 18, he already won $110,000 in prize money on the professional tour and by 19, he had earned over $500,000. As Federer became a top professional, his prize money earnings catapulted. At age 20, his earnings soared to $1.5 million. By the time he was 23, his official winnings surpassed $10 million and at 24, the $20 million mark was eclipsed. At the end of 2005, Federer was already in seventh place in the all-time prize money list for men’s tennis and was almost half-way to earning the $43 million that Pete Sampras earned as the top-paid player of all-time before his retirement.
At the age of 17, Federer already signed endorsement contracts with sporting good giants Nike (clothes and shoes) as well as Wilson (racquets). Babolat supplied him with one hundred natural gut strings each year while Swisscom picked up the bill for his cell phone use—which the teenager found pretty cool considering his numerous calls.
Federer did not care much for the details of his early business dealings. “I don’t even want to know if I am receiving money from Head and Wilson or just equipment, because if I care too much about things like that, it could change my attitude towards tennis,” he said in an interview at that time. “The prize money is transferred to my bank account and will be used later when I begin to travel even more.” He then added somewhat hastily that “I will never buy anything big. I live very frugally.”
Federer was never a player who would do anything to earn or save extra money. He also didn’t move to Monte Carlo—the traditional tax haven for tennis players—to save on his taxed earnings like many professional tennis players such as his Swiss countrymen Marc Rosset, Jakob Hlasek and Heinz Günthardt. In 2002, he told Schweizer Illustrierte, “What would I do there? I don’t like Monaco. I’m staying in Switzerland!”
He was less tempted to chase after the quick buck for several reasons. First, he was already earning considerably more money than his peers at such an early age. Second, as a Swiss citizen, there were fewer corporate opportunities than players from other countries such as the United States and Germany. Third, his creed was always “Quality before Quantity” and he wanted to concentrate on the development of his game in the hope that his success would reap larger rewards later in his career.
Federer, however, was always very aware of his value. He slowly but steadily moved up the totem pole of pro tennis and he observed the type of opportunities that opened up for the top players. When I asked him in Bangkok in the fall of 2004 if he was tempted to earn as much money as quickly as possible, he said, “I’m in the best phase of my life and I don’t want to sleep it away. I have a lot of inquiries but most importantly, any new partners have to conform to my plans. They can’t take up too much of my time and their ad campaigns have to be right. I’m not the type of person who runs after money. I could play smaller tournaments, for example, where there are big monetary guarantees, but I don’t let it drive me nuts. The most important thing for me now is that my performance is right and that I have my career under control.”
The fact that Federer does not go for the quick, easy dollar shows in his tournament schedule. After he became a top player, he only played in a very few number of smaller tournaments on the ATP Tour where players can be lured to compete with large guaranteed pay days (this is not permitted at the Masters Series and the Grand Slam tournaments). At these events, the going rate for stars the caliber of a Federer or an Andre Agassi could reach six digits. Federer is considered to be a player who is worth the price since he attracts fans and local sponsors and is certain to deliver a top performance. He won all ten tournaments in the “International Series” that he competed in between March, 2004 and January, 2006—an incredibly consistent performance.
Federer’s strategy of looking at the big picture has panned out. He has developed into the champion that he is today because he hasn’t been sidetracked by distractions and has remained focused on the lone goal of maximizing his on-court performance. His successes and his reputation as a champion with high credibility have increased his marketability over the years.
The number of Federer’s advertising contracts was always manageable—in contrast to Björn Borg, for example, who had to keep 40 contract partners satisfied when he was in his prime. At 20, Federer signed a contract with the luxury watch maker Rolex—the brand that is also associated with Wimbledon. In June of 2004, Federer’s contract with Rolex was dissolved and he signed a five-year contract as the “ambassador” for the Swiss watch maker Maurice Lacroix.
This partnership was prematurely dissolved after two years. Since Rolex became aware of the value Federer had as a partner, they signed him to another contract in the summer of 2006, replacing Maurice Lacroix.
In addition to this, he signed contracts with Emmi, a milk company in Lucerne (which seemed appropriate for someone who owns his own cow), as well as with the financial management company Atag Asset Management in Bern (until July, 2004) and with Swiss International Air Lines. All of the contracts were heavily performance-related in general and have increased substantially in value with Federer’s successes.
Federer is a very reliable partner for companies. He was associated with his sporting goods sponsors Wilson (racquets) and Nike (clothing and shoes) since the beginning of his career and probably will be forever. His agreement with Nike was renewed for another five years in March of 2003 after the contract expired in the fall of 2002. The new contract was at the time considered to be the most lucrative ever signed by a Swiss athlete. Like almost all of Nike contracts, it contains a clause forbidding additional advertising on his clothing—or “patch” advertising—which is something that Nike also compensates Federer for.
But the renegotiation of the Nike contract was a long and tiresome process, which was one of the reasons that Federer dissolved his working relationship with IMG in June of 2003. In the spring of that year, he said that “one thing and another happened at IMG. Those are things that I can’t and am not allowed to go into.” It was a matter of money, he said, but not just that. “There were too many things that I didn’t like.”
From that point forward, Federer only wanted to work with people who he trusted implicitly. He noticed that the best control doesn’t work if there is no trust. He gave his environment a new structure that became known as “In-House Management,” based on his conviction that family companies are the best kind of enterprises. John McEnroe’s father—a lawyer—frequently managed business affairs on behalf of his son—and it all worked out well for him. Federer’s parents became the mainstay of his management and established “The Hippo Company” with headquarters in Bottmingen, Switzerland to manage their son’s affairs. “Hippo,” of course, was chosen in association with South Africa, the homeland of Roger’s mother. “My wife and I had often observed hippos during our vacations to South Africa and have come to love them,” Robert Federer explained once.
After 33 years, Lynette Federer left the Ciba Corporation in the fall of 2003 and became her son’s full-time help (she doesn’t like to be called a manager). “We grew into this business,” she said months later. “If we need expert opinion about a specific question, we’re not afraid to ask professionals.” The two main goals for their son were to “build Roger into an international brand name” and to “maximize profits over a lifetime.” The native South African, who, in contrast to Mirka Vavrinec, only occasionally traveled to the tournaments, worked very much in the background, which is exactly what her son wanted. It’s important, Federer said in 2005, that his parents go about their private lives in peace despite their business connections to him. “I don’t want them to have to suffer because of my fame,” he said. “I also pay close attention that they are not in the center of media attention very often and only rarely give interviews.”
Robert Federer continued to work for Ciba until the summer of 2006 when he took his early retirement at the age of 60. Robert, however, was always part of the core of his son’s management for years. “I view myself as working in an advisory capacity and try to disburden Roger wherever possible,” he said in the summer of 2003. “But even if we have a great relationship that is based on trust and respect, we still sometimes have trouble.”
In 2003, Federer’s girlfriend officially assumed responsibility for coordinating his travels and his schedule, especially with the media and with sponsors. Mirka’s new role and responsibility gave her a new purpose in life following the injury-related interruption of her own professional tennis career. While mixing a business relationship with a personal relationship can sometimes cause problems, both Roger and Mirka say balancing the two has been easier for the couple than they first anticipated. Mirka treats both roles independently as best as she can and soon decided “not to get stressed any more” when requests and requirements of her boyfriend/client pile up.
“I’ve made everyone realize that they have to put in their requests a long time in advance and it works great,” she said in 2004. She makes sure to expeditiously bring the most pressing matters to Roger’s attention while seeing to it that he is not unnecessarily disturbed by what she believes to be trivial matters.
Nicola Arzani, the European communications director of the ATP Tour, extols the working relationship he has with Mirka. “I work regularly with Mirka and it works great,” he said. “We coordinate all inquiries and set Roger’s schedule according to priorities—usually a long time in advance.” Federer, like all players, is supported by the communications professionals on the ATP Tour or with the International Tennis Federation at the Grand Slam events.
Mirka took up additional activities in 2003 as the driving force behind a Roger Federer branded line of cosmetics and cosmetic care products that were introduced during the Swiss Indoors in Basel. RF Cosmetic Corporation was thus born and Federer actively helped create the scent for his perfume called “Feel the Touch.” Even if this perfume was generally met with wide acceptance, experts in the business believe that launching this line of cosmetics was extremely risky and premature, considering Federer’s youth.
Federer had hardly replaced IMG with his In-House Management when his breakthrough months in 2003 and 2004 followed and provided many opportunities and requests for him—and a lot of work for his entourage. Within seven months, Federer won at Wimbledon, the Tennis Masters Cup and the Australian Open and then became the No. 1 ranked player. All of his successes and its consequences subjected the structure of his management to a tough stress test. “We were all taken by surprise, no question,” Federer said. He admitted that he wanted to be informed about all activities and perceived himself to be the head of the In-House Management.
On July 1, 2004, Thomas Werder joined the team as new “Director of Communications” responsible for trademark management, public and media relations, as well as fan communication. This working relationship, however, was soon terminated nearly a year later. The German consulting agency Hering Schuppener with headquarters in Düsseldorf was then introduced as a partner to manage international public relations. But it remained mostly in the background.
With the exception of Maurice Lacroix, new sponsorship agreements were not initially announced. In February, 2004, when his son became the No. 1 ranked player in the world, Robert Federer said that while they were engaged in negotiations with various businesses, space for other partners was nonetheless “not infinite.” “We’re taking our time,” he said. “We don’t want to force anything. Roger can’t have 20 contracts because each contract takes up part of his time.”
According to marketing experts, the fact that Roger Federer’s attempts to take better advantage of his commercial opportunities did not initially lead to additional advertising contracts not only had to do with this restraint, but also with his team’s lack of contacts in the corporate advertising world. In addition, Federer was not the first choice for many international companies as an advertising medium, which specifically had to do with his nationality, his image, and—as absurd as it may sound—with his athletic superiority.
Federer had a limited corporate market at home in Switzerland from which to draw and, like all non-Americans, he had difficulties reaching into the financial honey jars of the corporate advertising industry. Such an undertaking, without the help of a professional sports marketing agency that knows the American market and that has the necessary connections, is nearly impossible. Federer’s reputation as a fair, dependable and excellent athlete may also have made him not flamboyant or charismatic enough for many companies. Federer doesn’t smash racquets or get into shouting matches like John McEnroe or Ilie Nastase used to. He doesn’t grab at his crotch like the street fighter Jimmy Connors and, at the time, he was not considered to be a legend like Björn Borg, who looks like a Swedish god. He doesn’t dive over the court until his knees are bloody like Boris Becker and he also doesn’t surround himself with beautiful film starlettes like some of this colleagues, for instance McEnroe, whose first wife was actress Tatum O’Neal and his second, the rock star Patty Smythe, as well as Andre Agassi, who married the actress Brooke Shields, before being settling down with fellow tennis superstar Steffi Graf.
Anybody who likes convertibles, safaris, playing cards with friends, good music and good food, sun, sand and sea, is too normal and unspectacular. Federer was still missing something. During his first two years as the world No. 1, Federer lacked a rival that was somewhat his equal. Tennis thrives from its classic confrontations between rival competitors. Borg had Connors and later McEnroe. McEnroe had both Connors and Borg and later Ivan Lendl. After McEnroe and Connors, Lendl had Boris Becker. Becker had Stefan Edberg and Andre Agassi had Pete Sampras. In the women’s game, there was no greater rivalry than Martina Navratilova and Chris Evert. Roger Federer didn’t have anybody between 2004 and 2005 who could hold a candle to him. During the 2004 and 2005 seasons, Federer lost only 10 times to nine different players, seven of whom were not in the top 10. A real rivalry only grew starting in 2006 with Rafael Nadal.
When in July of 2005 Forbes magazine came out with its list of the world’s top-paid athletes, Federer did not make the list. His annual income (from prize money, start guarantees, advertising and sporting goods contracts) was estimated to be about $14 million. Forbes tallied only two tennis players on their list—Andre Agassi, who, at $28.2 million, came in seventh overall on the list, as well as Maria Sharapova, the attractive Russian Wimbledon champion of 2004 whose estimated annual income was at around $18.3 million due to various advertising contracts. The Forbes list was dominated by basketball and baseball players with golf star Tiger Woods ($80.3 million) and Formula 1 world champion Michael Schumacher ($80.0 million) holding the top positions.
Given the undeniable need to play catch up to his fellow elite athletes on the Forbes list and gain more of a foothold in the commercial advertising space, nobody was surprised when Federer once again augmented his management with a professional international agency in 2005. It was a surprise, however, when he chose to rehire IMG after a two-year hiatus, despite such offers made by Octagon, SFX and other top agencies. However, the world’s largest sports marketing agency was only announced as an addition to the In-House Management with the goal of “concentrating intensively on his economic opportunities.” This was an optimal situation, Federer said, explaining that “I’m continuing to work with my present team, taking advantage of its lean structure while at the same time having a world-wide network at my disposal.”
American Tony Godsick became Federer’s manager. A tennis insider who also managed the tennis career of former Wimbledon, US and Australian Open champion Lindsay Davenport, Godsick was also married to Mary Joe Fernandez, the former top tennis player who owned three pieces of hardware that Federer desperately envied—two gold medals and one bronze medal from the 1992 and 1996 Olympics.
Following the 2003 death of IMG’s founder, Mark McCormack, the company was sold. The Cleveland, Ohio-based company then reduced its staff of 2,700 considerably, sold many of its properties and parts of its business, apparently to remedy its financial woes. IMG’s stake in professional tennis was also reduced as the company dumped its stake in events in Scottsdale, Ariz., Los Angeles and Indian Wells. The incoming IMG owner was Ted Forstmann, an investor who buys and sells companies at will, and made personal efforts to Federer to have his new company do business with him. The American was said to have paid $750 million for IMG and some insiders immediately speculated that Federer was signed to help increase the market value of the company and that he would share in the accruing profits if IMG were to be re-sold or listed on the stock market. No official comments came from either camp regarding this speculation.
Asked during the 2006 Australian Open if his new working relationship with IMG changed things for him and if he was now more active in off-the-court endeavors, Federer was unequivocal in stating that he was now in a new and much stronger position vis a vis IMG than before: “I don’t want much more to do because I’m booked pretty solid. I’ve made it clear to IMG that this is the reason that I’m coming back. It’s the opposite: IMG have to do more than before.”
IMG quickly became very active in order to optimize Federer’s economic situation and better exploit his potential. The goal was to find ideal partners and contracts that accurately reflected his status as a “worldwide sports icon.” In 2006, existing contracts were re-negotiated, cancelled (Maurice Lacroix) and new ones were signed (Rolex, Jura coffee machines). Federer also signed a lifetime contract with Wilson, despite attractive offers from rival racquet companies in Japan and Austria.
Early in 2007, Federer signed his first big endorsement contract with a company that was not related to tennis or to a Swiss company. In Dubai, he was unveiled as the newest brand ambassador of the new Gillette “Champions” program, together with Tiger Woods and French soccer star Thierry Henry. “These three ambassadors were selected not only for their sporting accomplishments, but also for their behaviour away from the game,” the company explained. “They are as much champions in their personal lives as they are in their sports.”
The highly-paid contract was a stepping-stone for Federer and reflected that he had become an international megastar. The multi-faceted marketing initiatives, including global print and broadcast advertising in over 150 markets, helped him increase his popularity outside the sports world.
When I asked Federer in the end of 2006, if his relation to money had changed over the years, he said, “Suddenly, money turned into a lot of money, and in the beginning, I had problems with this.” He felt that some articles suggested the impression that top tennis players are a modern version of globetrotters who run after the money from town to town. He did not feel this was an accurate portrayal of his priorities. “It’s not true,” he said. “All I’m trying to do is fulfill my dreams as a tennis player.”