IGLOBAL UNIVERSITY ase 9.2 Maria Sharapova: Banishment from the WTA Tour and loss of Sponsorship.

Case 9.2: Maria Sharapova
Banishment from WTA Tour and a Loss of Sponsorship
You are running a $30-million-a-year sole proprietorship, and it depends on you remaining eligible …
what was she thinking? Either she or her team really screwed up.1
~ Richard W. Pound, former president of WADA (World Anti-Doping Agency)
Introduction
On March 7, 2016, Maria Sharapova walked to the podium at a press conference in a downtown Los
Angeles hotel to make a “major announcement.”2 The press was gathered to hear from the tennis
superstar, who had been ranked as the world’s richest female athlete for 11 years straight due to her
lucrative endorsement deals.3 The common belief was that Sharapova was there to announce she had
made the decision to retire at age 28 following several injuries. However, Maria made an even more
shocking announcement, she had failed a drug test at the Australian Open in January (see Exhibit 9.1 at
the end of this case study).
Following her loss to Serena Williams in the quarterfinals of the Australian Open on January 26, 2016,
Sharapova tested positive for the banned substance Meldonium. Sharapova admitted to haven taken
Meldonium and accepted responsibility for the failed drug test, but maintained she did not know that
Meldonium was a prohibited substance. The International Tennis Federation subsequently announced
that she was being provisionally banned and faced a potential two-year suspension following a review of
the case.4
What followed was a flurry of reactions on social media and from her sponsors, including Nike, Tag
Heuer, Porsche and Head. While Sharapova’s sponsors were being pressured to end their substantial
contracts with her, Sharapova was left to defend herself and her reputation.
Background
Maria Yuryevna Sharapova was born on April 19, 1987, in Nyagan, Siberia, Russia. Her parents, Yuri and
Yelena, were both avid athletes who enjoyed playing tennis, and wanted to teach their young daughter
the sport. Since they could not afford to buy a child-size racket, they sawed off a portion of the handle
of an adult-size racket and gave that for her to use as a toddler.5 Tennis great Martina Navratilova
noticed her at a youth tennis clinic in Moscow at age 6 and suggested she attend the Nick Bollettieri
Tennis Academy in Florida, a tennis-focused boarding school with notable alums including Andre Agassi,
Pete Sampras and Monica Seles.6
Sharapova and her father went to Florida the following year, borrowing money from Sharapova’s
grandparents to afford the trip. Unfortunately, she was too young to enroll at that time, so her father
took a job as a waiter and she worked with a private tennis coach until the age of 9, when she was old
enough for a tryout. She performed so well during her tryout that they offered her a full-scholarship to
the school, which cost $46,000 per year at that time.7
The Bollettieri Academy was part of the International Management Group (IMG), a sports and talent
management company.8 At age 11, Sharapova signed with IMG, which led to her first partnership with
athletic shoe and apparel maker Nike. After showing immense potential, she turned professional on her
14th birthday, the youngest eligible age to join the women’s professional tennis organization – the
Women’s Tennis Association (WTA).9
From Tennis Player to International Brand
Sharapova became a household name after winning the Wimbledon singles title in 2004 at just 17 years
old, the third youngest winner in history. She became the first Russian woman to win Wimbledon, and
would subsequently became the first Russian woman to hold the coveted world’s No. 1 ranking the
following year.10 Several injuries plagued her over the course of the next few years, but she lived up to
her enormous potential, going on to win every major tournament. After winning the 2012 French Open,
she became just the tenth woman to complete a career Grand Slam – having won the US Open,
Australian Open, Wimbledon and the French Open over the course of her career. Later that year, she
won a silver medal at the 2012 Summer Olympics in London.
Even amongst great triumphs on the court, Sharapova found even greater success off the court.
Following her win at Wimbledon in 2004, she amassed numerous endorsement deals from leading
companies and could command up to $500,000 per exhibition match.11 Fortune estimates that over the
course of her career she earned $285 million12, of which approximately $35 million was in prize money
from tournament wins. The remaining $250 million was through deals with Nike ($70 million over eight
years), Head ($2 million per year to play using Head rackets)13, and others such as Tag Heuer, Evian and
Avon, totaling approximately $20 to $30 million per year.
The World Anti-Doping Agency, Performance Enhancing Drugs, and Banned Substances
The World Anti-Doping Agency (WADA) was formed in 1999 through an initiative led by the
International Olympic Committee to monitor and fight the use of drugs in sports. The World Anti-Doping
Code “harmonizes anti-doping policies, rules and regulations within sport organizations and among
public authorities around the world”14, and WADA maintains a list of banned substances. WADA’s
Prohibited List Expert Group annually determines which drugs should be banned, and considers three
criteria: whether the drug can enhance performance, whether taking the drug could harm the health of
the athlete and whether taking the drug goes against the spirit of sport. Two of the three criteria must
be satisfied for the drug to be prohibited. If an athlete has a legitimate medical need for a banned
substance, they can apply for a therapeutic use exemption, which would be considered by WADA.15
Meldonium was being monitored by WADA for one year before becoming banned. At that time, WADA
felt they had enough information to conclude there was a clear pattern of abuse relating to Meldonium
and scientific evidence that it had performance-enhancing benefits.16
Meldonium, brand name Mildronate, is developed by Grindex, a Latvian pharmaceutical company, and
is used to treat lack of blood flow to parts of the body due to heart failure. Other uses for the drug
include treating infections of the lungs and upper respiratory tract and treating stomach ulcers. A
licensed drug used widely throughout Eastern Europe and Central Asia, Meldonium is not approved by
the Food and Drug Administration (FDA) for use in the U.S. The drug has become one of Latvia’s biggest
medical exports with sales reaching €56 million in 2013.17
According to the drug’s designer, Ivar Kalvins, Meldonium was created to increase the body’s oxygencarrying capacity. It was used for a decade by Soviet troops in Afghanistan to increase their endurance
while hiking throughout the mountainous terrain. A 2005 study found that taking Meldonium, in
combination with an enzyme called Lisinopril, improved exercise capability and circulation in patients
with chronic heart failure.18 This ability to increase endurance and exercise capacity perked the interest
of athletes. A 2015 study of Russian athletes found that 17 percent of those tested had Meldonium in
their systems, and another study found that 8 percent of all athletes tested at the 2015 European
Games tested positive for Meldonium.19
Sharapova was prescribed Meldonium by her family doctor in 2006 after irregular EKG results and was
given the drug to treat a variety of problems including a magnesium deficiency and due to a family
history of diabetes.20 She regularly took the drug for the next ten years.
In the fall of 2015, WADA announced that Meldonium would be banned beginning on January 1,
2016.21 The International Tennis Federation warned its players five times during the month of
December regarding the impending ban.22 However, Sharapova said she failed to click on the link to the
updated banned substance list that was sent to her via e-mail.23 She also insists that she only knew the
drug by the brand name, Mildronate, and was unaware that it was the same drug being added to the
banned substance list.24
The Women’s Tennis Association, Grand Slams and Prize Money
The Women’s Tennis Association (WTA) is the organizing body for women’s professional tennis. Its
counterpart for men’s professional tennis is the Association of Tennis Professionals (ATP). The WTA
organizes 50-plus competitive events and the four Grand Slam tournaments each year.25 The Grand
Slam tournaments rely on sponsors and fan attendance to earn revenue. Wimbledon advertises that for
nearly $40,000 a fan can reserve a guaranteed seat for the first ten days of the tournament over the
next five years.26 In 2015, the Australian Open reported revenue of nearly $175 million, the French
Open just over $200 million, Wimbledon $240 million and the US Open over $250 million. Wimbledon
was the most profitable event, netting nearly $80 million in profits.27
The WTA was formed in 1973 by legendary tennis great Billie Jean King. In 1980, the tour offered a total
of $7.2 million in prize money, before reaching $23 million in 1990, and $50 million in 2001. After a
decades-long campaign for equal pay in the sport, all four Grand Slam tournaments offered equal prizes
to men and women for the first time in 2007. In 2009 the WTA created a shorter season and a more fanfriendly structure, and by 2013, overall prize money had skyrocketed to $118 million as tennis became
increasingly popular with fans around the world.28
In 2016, the WTA included more than 2,500 players representing nearly 100 nations. More than 400
million fans watched WTA tennis on television and other digital channels, and total prize money reached
a record $139 million.29
Celebrity Sponsorships and Endorsements: the good and the bad
Celebrity endorsements can be a great way to build awareness and excitement regarding a company or
product. According to MarketWatch, research indicates that, on average, sales increase by 4 percent
after signing a celebrity endorser.30 Successful endorsements can provide substantial revenues, such as
Nike’s sponsorship of Michael Jordan and the creation of the Jordan shoe brand. Generating significant
profits for Nike, the shoe brand now holds 75 percent market share in basketball shoes and nearly 11
percent market share in the overall shoe market.31
However, celebrity endorsements can have severe potential downsides as well. While not only
incredibly expensive to sponsor an international athlete or celebrity, the company also becomes
intricately linked to that individual and his or her every action. Restaurant-chain Subway benefited from
rapid growth after launching an extensive campaign around Jared Fogle, who was prominently featured
in advertisements after attributing his weight loss to eating Subway sandwiches. Fogle was the face of
Subway for nearly 15 years and was estimated to be worth $15 million until he was arrested on child
pornography charges.32 After news broke, Subway immediately cut ties with Fogle, but saw a 3.4
percent revenue decline over the next year and faced harsh criticisms about its involvement with
Fogle.33
The sports world has also been rocked by celebrity athlete scandals, most notably Tiger Woods and
Lance Armstrong. Tiger Woods was propelled into the spotlight by news of his infidelity to his wife, Elin.
As a result, he lost $22 million of endorsement deals in 2010.34 Sponsors such as Gatorade, AT&T and
Accenture all chose to cut ties with Woods as a result of his actions. Other sponsors, most notably Nike,
chose to stick by Woods. Lance Armstrong, a seven-time Tour de France winner, was another sports star
plagued by scandal. After testing positive for performance-enhancing drugs, he was stripped of his titles
and lost many sponsors. It is estimated he lost $150 million in potential earnings after being dropped by
numerous sponsors, including Nike.35
Statements from Sharapova’s Sponsors
The reaction from three of Sharapova’s most prominent sponsors following her announcement was
swift and unfavorable. The day after the press conference, her largest sponsor, Nike, said they were
“saddened and surprised by the news” and that they had “decided to suspend our relationship with
Maria while the investigation continues.”36 Luxury Swiss watch-maker Tag Heuer suspended ongoing
negotiations with Sharapova to renew her contract that had expired in December of 2015. Automaker
Porsche, owned by Volkswagen, said it was postponing all planned sponsorship activities with
Sharapova.37 Most of her other sponsors did not release statements and were monitoring the
investigation before making any decisions (see Figure 9.1).
One notable exception was her racket sponsor, Head, which pledged its support for Sharapova, saying
“the honesty and courage she displayed in announcing and acknowledging her mistake was admirable.
Head is proud to stand behind Maria, now and into the future, and we intend to extend her contract.”38
Head would later face scrutiny on social media and in the mainstream press for its decision.39
Additionally, Sharapova has her own candy line, Sugarpova. This line could also be adversely affected by
Sharapova’s scandal if her fans decide not to support her. With the availability of close substitutes in the
market, such as Dylan’s Candy Bar, the main differentiator for Sharapova’s company was its founder’s
name and celebrity status. If her public perception is negatively affected by the scandal, revenues may
also drop for Sugarpova.
Figure 9.1 Reactions from Sharapova’s Sponsors
Source: Brown, Andy. “Sponsors Ditch Sharapova Over Anti-Doping Rule Violation,” The Sports Integrity
Initiative, March 8, 2016. Online at www.sportsintegrityinitiative.com/sponsors-ditch-sharapova-overanti-doping-rule-violation.
Social Media Reactions
The continued growth and prevalence of social media makes social media responses a real-time hazard
during a time of scandal. When news of Sharapova’s failed drug test broke, there was a flurry of social
media responses both in support of Sharapova as well as angry outbursts toward her. Retired tennis
players Martina Navratilova, James Blake and Jennifer Capriati all tweeted their reactions to the news.40
While Navratilova and Blake showed support for Sharapova (see Figures 9.2 and 9.3), Capriati unleashed
a Twitter rant toward Sharapova, calling her a cheat, questioning her need to take Meldonium, and
saying it was all about the money (see Figure 9.4). Capriati’s first two tweets have since been deleted,
but her remaining rant was published on Twitter (see Figures 9.5, 9.6, 9.7 and 9.8).
Figures 9.2 and 9.3 Positive Twitter Reactions
Source: Hendricks, Maggie. “See Reaction to Maria Sharapova’s Shocking Announcement That She Failed
a Drug Test,” USA Today Sports, March 7, 2016. Online at http://ftw.usatoday.com/2016/03/seereaction-to-maria-sharapovas-shocking-announcement-that-she-failed-a-drug-test
Figure 9.4 Capriati Rant
Source: Gaines, Cork. “Former US Tennis Phenom Rips Maria Sharapova Over Failed Drug Test,” Business
Insider UK, March 8, 2016. Online at www.businessinsider.com/jennifer-capriati-rips-maria-sharapovafor-failed-drug-test-2016-3.
Figures 9.5, 9.6, 9.7 and 9.8 Capriati Rant
Source: https://twitter.com/jencapriati?lang=en
The Suspension
A three-member tribunal appointed by the International Tennis Federation held a hearing in May 2016
to discuss Sharapova’s failed drug test. On June 8, they suspended Sharapova for two years,
acknowledging that the violation was not intentional. She could have been suspended for up to four
years if the tribunal had found the violation was intentional. Sharapova said she would appeal the
suspension through the Court of Arbitration for Sport.