Fantex, Inc. announced today that it has entered into brand contracts with five Major Leaguers: Phillies third baseman Maikel Franco, Astros right-hander Collin McHugh, Orioles second baseman Jonathan Schoop, Twins right-hander Tyler Duffey and Padres third baseman Yangervis Solarte (as noted on BusinessWire.com).
Fantex offers professional athletes an up-front, one-time payment in exchange for a portion of that player’s future earnings both on and off the field. Fantex then sells “shares” of that player to public investors for a set price (thus covering the up-front payment to the player), allowing those investors to turn a profit if said player crosses a certain threshold in his career earnings. Obviously, that creates risk for the investors, who stand to take a financial loss if the player fails to earn enough money in his career to justify the shareholders’ investment. Angels left-hander Andrew Heaney became the first player to enter into an agreement with Fantex last September, taking a $3.34MM up-front payment in exchange for 10 percent of his future earnings. (Notably, the league and the MLBPA each approved that agreement, and Fantex’s announcement seemingly suggests that the same is true of these five agreements.)
As for the new wave of Fantex additions, Schoop secured the largest sum, agreeing to an up-front payment of $4.91MM. Franco, meanwhile, will earn $4.35MM, while McHugh will take home $3.96MM, Solarte will take home $3.15MM and Duffey will earn $2.23MM. Notably, Solarte’s agreement is for 11 percent of his “brand,” while the other four (and Heaney) signed away 10 percent.
With six big leaguers now on board in addition to 14 athletes from other sports, it stands to reason that the number of professional baseball players willing to enter into such agreements will increase. It’s an interesting proposition for Major Leaguers — not entirely dissimilar from agreeing to an early contract extension; in essence, the players in question are taking a life-changing sum of money early in their career in exchange for limiting their earning capacity once they’ve navigated through their arbitration years and entered their free-agent seasons. Those same principles are all true of players that sign contract extensions, though the extent of the up-front sum and the long-term risk obviously vary.
