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12.09.09

Chaos at Tiger Inc.

The man behind the billion-dollar brand is desperately trying to save Tiger's financial empire, as his Gillette and Accenture deals now look vulnerable.

As Tiger Woods’ image gets tarnished by new daily accounts of dalliances, his workaholic agent, 42-year-old Mark Steinberg, has been scrambling. The goal: less to blunt press reports than to minimize the effect on the golfer’s $100 million-a-year cash stream.

Specifically, sources at two of Woods’s corporate sponsors told The Daily Beast that Steinberg has been working furiously to get them to issue public statements demonstrating that they “had full faith in Tiger and backed him completely.” Steinberg hoped the votes of confidence might help stem the tide of bad news and block any defections among his corporate endorsements.

Gatorade seized on the golfer’s travails as an opportune time to announce the break from a deal that had already gone bad.

The Daily Beast has learned that the strategy so far is working at Nike, but not at Gillette or Gatorade. Accenture might also be at risk. On Tuesday, one of Steinberg’s first priorities, Pepsi, whose Gatorade subsidiary signed Tiger in March 2008 to a five-year, $100 million deal, dropped the golfer, despite intense lobbying from Steinberg. Contrary to published reports that the break was strictly about poor sales—a few days before the now-infamous fender-bender, Beverage Digest reported that Tiger Focus’s sales were down a dismal 34 percent in a year—one insider at the company, who asked for anonymity, says that Gatorade seized on the golfer’s travails as an opportune time to announce the break from a deal that had already gone bad. Steinberg was desperate, says one Pepsi insider, to prevent Gatorade from making a decision that would leave the impression the deal had been scuttled because of Tiger’s personal affairs. (Gatorade’s unfortunate slogan: Is it in you?)

It is not clear whether Gatorade, who will otherwise have to pay Woods an early termination fee, might now rely on a “morals clause” to avoid any further payment. Jennifer Schmit, Gatorade’s senior manager for public relations, told me, “We don't comment on specific sales numbers or details of contracts. We hope to be able to share 2010 plans soon.”

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Additionally, The Daily Beast has learned from an executive familiar with Gillette’s relationship with Woods that Procter & Gamble, Gillette’s parent company, doesn’t think Tiger is worth the estimated $20 million Gillette agreed to when it signed the deal in 2007. It is considering sending a formal notice to Steinberg that it wants to reduce its payout schedule starting in 2010.

Damon D. Jones, global communications director for Procter & Gamble Grooming, deflected any questions about possible renegotiation. “The terms of our agreement with Mr. Woods, like all our business partners, are confidential.”

“No question he will suffer a reduction in earnings, a whole bunch of sponsors will scale back, if not this year, next year, depending on the contract,” says Andrew Bateman, president of Interbrand, a leading international branding consultancy firm. “Because he was such a perfect promotional vehicle, shiny and bright, there was no hint of any risk at all with Tiger Woods, but there is now going forward. The leverage has moved to the sponsors.”

Steinberg appears to have had some success with the most critical component of Tiger Inc., Nike. An advertising executive familiar with the Nike endorsement contract told The Daily Beast that while Nike could terminate its contract—an estimated $105 million over five years—based on another morals clause, it would not do so. Woods' camp built in a significant early termination penalty (close to $10 million according to the ad exec). And Nike’s golf line—nonexistent until their first deal with Tiger in 1996—is still one of its most profitable. Nike’s deal is unparalleled in sports sponsorship. It bought the rights to almost every aspect of the Tiger Woods brand, and a piece of almost every marketing appearance he made. Under its agreement, Woods is obligated to wear Nike apparel and gear, even when he's pitching other products from other sponsors.

Beth Gast, Nike’s public-relations manager, told me, “We don’t disclose the nature of our sports-marketing contracts.” She then reiterated Nike’s public statement: “Nike supports Tiger and his family. Our relationship remains unchanged.”

Marketing experts cite technology and management consulting firm Accenture as another company that might be looking for an escape. The company’s slogan has been tailored to Woods: "Go on. Be a Tiger.” A senior officer at a rival company, who counts Accenture executives among his friends, told The Daily Beast that the company has already had "emergency" discussions about the Tiger deal. Moreover, Accenture is particularly concerned that so many of its ads are airport billboard ads, not as easily pulled as pending TV or radio spots.

“All of this has shaken his identity,” says Bateman, “everything he stood for in terms of performance, integrity, focus, dedication, commitment, things that firms like Accenture like to associate themselves with—well, it turns out he’s not only not perfect, he’s quite far from it.” Accenture isn’t likely to make a decision until early next year, but one ad executive doesn’t believe they’ll keep the contract even if Tiger significantly discounts his price. No one from Accenture returned calls or email.

Besides Nike, Steinberg’s efforts have yielded other successes. “Our strong relationship with Tiger for more than a decade remains unchanged,” said Electronic Arts in a statement to The Daily Beast on Monday. “We respect Tiger's privacy, we wish him a fast recovery and we look forward to seeing him back on the golf course.” Steinberg has also reached out to luxury watchmaker, Tag Heuer, and AT&T, which has its logo on the side of Tiger’s golf bag. Both seem stable for now. Steinberg did not respond to messages for comment on Wednesday.

So how bad will it get for Tiger, endorsement-wise? Some marketing experts say he could see his income drop in half for a year or two—but that image rehabilitation will follow.

“You have to make people relate to him now,” says Miranda Sevcik, a partner in Media Masters, a Houston-based media consulting firm that specializes in crisis management, and whose most recent high-profile client was Conrad Murray, the physician at the center of the Michael Jackson death probe. “Everyone makes mistakes. The public is forgiving of people who own up to their mistakes.” She would put him on Oprah and Larry King after he’s finished addressing his personal demons.

“He’s revealed himself to be a bit of a bad boy, but Americans love a comeback,” adds Bateman. “If he can find a way to be a bit more human and more approachable, it might actually help him in the long run. He has to claim he is addicted to whatever his fault is and then go to rehab and come back and say, 'I’m better now,’ and then apologize publicly, and start rebuilding his image.”

“He’s too valuable a product commodity not to come back,” he adds. “The only thing that could change it is if this somehow affects his game. If Tiger doesn’t stay at the top of his sport, he’s finished.”

Gerald Posner is The Daily Beast's chief investigative reporter. He's the award-winning author of 10 investigative nonfiction bestsellers, on topics ranging from political assassinations, to Nazi war criminals, to 9/11, to terrorism. His latest book, Miami Babylon: Crime, Wealth and Power—A Dispatch from the Beach, was published in October. He lives in Miami Beach with his wife, the author Trisha Posner.