Big Endorsement Deals and the Rise of Big Business
How Corporate Monopolies Are Stifling Start-ups and the Economy
The world of college sports is once again embroiled in scandal after it was announced earlier this week that coaches at The University of Louisville had been part of a bribery scam between Adidas and two high school basketball players.
Federal prosecutors in New York released a report Tuesday, detailing how an Adidas executive agreed to pay the family of one high school player $100,000 if he agreed to attend Louisville and sign an endorsement deal with Adidas once in the NBA. Among the allegations of bribery, conspiracy, and fraud, are charges against 10 individuals including financial advisors, agents, and assistant coaches at other programs including University of Arizona, Auburn, Oklahoma State, and University of Southern California.
Thus far, the scandal has resulted in the firing of Rick Pitino, one of the most successful coaches in NCAA basketball history, and the removal of Louisville athletic director Tom Jurich, leaving many college basketball fans questioning the ethics of big businesses investing in athletes at a young age.
For decades, professional athletes’ footwear choices have influenced buyers around the world, and as long as big endorsement deals have been around, companies have been clamoring to gain their share of influence over top teams and players.
Three major brands control the share of endorsement deals in college basketball, and smaller brands have almost no chance of competing with these top sponsors who attract high school players from all over the U.S. with their league tournaments, meetings with recruiters, and endless swag and perks to win players’ loyalty.
The rising power of big corporations is not limited to college sports or endorsement deals. Wednesday the Census Bureau released a report showing the U.S. economy is suffering from a start-up slump. A total of 414,000 businesses were formed in 2015, which is an increase over 2014, but still well below pre-recession numbers.
The start-up funk, according to some economists, may have originated in the recession, but the slow recovery indicates a bigger problem. The dominance of big corporations could be stifling entrepreneurship, making it tougher for start-ups to compete, especially in industries where a small group of big businesses dominates.
Entrepreneurship is a driving force in the U.S. economy—it’s where new products and new approaches are often born. Often touted as the backbone of the economy, small businesses, especially start-ups, are a significant driver of hiring in the U.S., and oftentimes a way for less-educated workers and immigrants to work their way into the middle class.
The decline in the creation of new businesses indicates just how tough it is for new businesses to compete with incumbents who hold all the market power. Small businesses have always struggled to keep up with corporate giants who often buy out or absorb small firms, have greater access to capital, and have more resources in place to handle compliance to government regulations.
According to John Dearie, founding president of the Center for American Entrepreneurship, “everybody loves entrepreneurship, but they’re not aware it’s in trouble. If new businesses are the engine of net new job creation, and if new businesses are the engine of innovation, and new business creation is at 30-year lows, that’s a national emergency.”
Are you the owner of a start-up or small business struggling to compete against corporate giants? Share your experiences in the comments.