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Derrick Rose's Adidas Contract: Breaking Down the Strange Terms

Derrick Rose's stunning decline continues, so why does Adidas continue to pay him like a star? Michael McCann examines the strange indecision and 20 key excerpts from Adidas's massive deal with Rose.

In early 2012, Derrick Rose was one of the most dynamic young players the NBA had ever seen. A season earlier he became the youngest player in NBA history to win the league’s MVP award. The No. 1 overall pick from the 2008 NBA draft electrified his hometown Chicago Bulls in ways that were reminiscent of Michael Jordan.

Like any apparel company, Adidas saw Rose as an athlete whose endorsement could dramatically boost sales. Adidas and Rose’s representatives negotiated a 14-year endorsement deal worth, at a minimum, nearly $190 million. Rose would net additional tens of millions if his endorsed products sold well, or if he made promotional appearances on behalf of Adidas and won player awards.

The contract would pay Rose extremely well but would also demand much of him. He would be required to carry the Adidas flag in how he conducted his career, how he interacted with the public and even in how he dressed.

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Back then no one could have predicted that Rose’s career would go off the rails, especially so fast. Just 64 days after Rose signed his mammoth deal with Adidas, Rose would tear his ACL in a playoff game against the Philadelphia 76ers. He would miss the entire following season. It would be the first of several significant injuries that would often keep Rose off the court.

Rose also encountered difficulties in his conduct. He was accused of raping a woman, who brought him to court in a high-profile (albeit unsuccessful) civil trial in 2016. Rose has also battled with his coaches and, at times, become estranged from his team.

Why is Adidas Still Paying Derrick Rose Superstar Money?

Knowing what it knows now, Adidas almost certainly would not have signed Rose to such an enormous and lengthy contract on Feb. 24, 2012.

Yet for reasons that remain unknown, Adidas—a publicly traded company—has repeatedly declined to invoke contractual language that would have permitted the company to substantially reduce its financial obligations to Rose or even terminate the contract altogether. Jon Wertheim’s story reveals and details this unusual dynamic. Below I annotate 20 key excerpts from the endorsement deal. These annotations shed light on both the scope of the contract and Adidas’s strange indecision in responding to Rose’s troubles.

(Editor's note: The following excerpts were taken via screen grab from Derrick Rose's official contract with Adidas.)

1. Explaining why Rose’s company—rather than Rose himself—signed the endorsement deal with Adidas

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McCann: When an athlete and a company agree to an endorsement contract, often the athlete does not, technically, enter into the contract themselves. Instead, a separate company on the athlete’s behalf agrees to the deal.

The Derrick Rose contract with Adidas International Marketing illustrates such an arrangement. Adidas didn’t sign Rose to an endorsement deal. Instead, it reached a contract with “D.M.R. Enterprises, LLC.” D.M.R. stands for Derrick Martell Rose and LLC refers to a limited liability company. The contract indicates that D.M.R. Enterprises has space in a Chicago office building but its mailing address refers to an office for the Wasserman Media Group located in a Los Angeles office building.

Why wouldn’t Rose sign the contract himself? Because by signing through an LLC, Rose absorbed less financial risk and better protected his money from liability.

Although there are a variety of circumstances that can “pierce” the so-called “corporate veil,” an LLC is structured as a separate entity from its owner. As a result, both are treated as separate entities for purposes of liability—a significant point for Rose given that he was (unsuccessfully) sued by a woman who claimed that he had raped her. Depending on how it is configured, an LLC can also offer its owners tax advantages. 

2. Definition of “player awards” and how it impact Rose’s earnings 

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McCann: At different points in Rose’s contract, the distinction of him earning an “All Pro Award” surfaces. Earning this award obligates Adidas to pay him much more money. It’s clear, then, that Rose being honored with such an award is a meaningful achievement in the eyes of both Rose and Adidas.

There’s a problem, however. There is no such thing as an “All Pro Award” in the NBA. This isn’t the NFL, after all.

The reason why Rose and Adidas refer to a non-existent NBA award is because “All Pro” is a contractual term of art that serves as a catchall for actual NBA awards.

Specifically, “All Pro Award” is defined as the MVP award, selection to the NBA All-Star Game, winning an NBA championship, election or selection to the First Team All-NBA, Second Team All-NBA or Third Team All-NBA. Rather than having to frequently regurgitate that list within the contract, the contract more efficiently uses the expression “All Pro”.

3. Definition of “competitor” and how it impacts Rose’s responsibilities under the contract (page 3)

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McCann: Adidas has not only agreed to pay Rose millions of dollars to endorse its products. It also pays him to not endorse any products made by any of Adidas’ competitors. 

To that end, Adidas was careful to define “competitor” as broadly as possible. The definition doesn’t mention Nike, New Balance, Under Armour or any other company by name. Instead, it places the onus on Rose to find out if associating with another product or company could cause Rose to breach the contract. 

When possible, players’ agents normally check with sponsored companies before their client attempts to associate with a potential rival company. But sometimes the player acts without the agent’s knowledge. A good agent, however, stresses to his or her client of the need to have continuous dialogue with the endorsed company in order to avoid unintentionally violating the contract.

4. Definition of “formal wear” that Rose is expected to wear

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McCann: We live in a world where being instructed to wear “business casual” to an event often sparks confusion. Does “business causal” mean you need to wear a tie or at least a jacket? It often depends on who you ask, which sort of defeats the point of using a uniform moniker that is supposed to clarify rather than confound.

As an apparel company, Adidas is especially aware that categories of clothing can mean different things to different people.

To avoid the risk of Rose and Adidas having conflicting understandings of fashion terms, the contract painstakingly defines categories of clothing. One such category is “formal wear”, which is defined as meaning “a combination of Adidas products with morning dress, lounge and/or dinner suits, handkerchiefs, braces, cummerbunds, formal shoes, formal shirts and cufflinks from the top ranges of mutually agreed upon brands.”

5. Definition of “products” for which Rose must be mindful 

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McCann: Throughout the endorsement deal, Adidas frequently reminds Rose of the exclusivity of their agreement. This is clear in how the contract defines “products.” The contract instructs Rose that he cannot wear or otherwise endorse products made by Adidas’ rivals. To ensure that Rose understands the scope of “products” that Adidas manufacturers, “products” is defined broadly to include all items of sports and leisure footwear, clothing, equipment and “related goods.” “Products” is also defined to include items made by other companies associated with Adidas. As a result, the scope of relevant “products” includes toiletries and heart–rate monitoring devices.

The contract also uses the phrase “same as or similar to” various Adidas products. The words “similar to” are critical since they are deliberately vague and may require interpretation. The company wants representatives of Rose to reach out to Adidas before Rose wears or publicly uses a product that Adidas might consider to be a rival product. Adidas employing far-reaching and ambiguous language advances that objective.

6. Definition of “promotional appearances” as it relates to Rose 

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McCann: When Rose thinks of his “team”, he probably envisions the NBA franchise that employs him as well as his NBA teammates and coaches. Adidas wants Rose to know that he is also obligated to think of it as his team.

To that end, Adidas uses the contract to make sure Rose understands that he is “on the clock” for Adidas in a wide-range of promotional activities. They include NBA events, TV ads and—to protect Adidas in the event that emerging technologies lead to new forms of advertising—photography sessions “in all forms of media including such as the Internet and mobile wireless technology, now existing or hereafter developed.”

7. Making sense of the lengthiness of the Rose endorsement deal 

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McCann: At first glance, the length of Rose’s contract with Adidas might seem oddly long. The deal goes from Oct. 1, 2011 to Sept. 30, 2025. Rose, who was the No. 1 pick in the 2008 NBA draft, was 22 years old when the contract began. He was coming off his best season in the NBA. He averaged 25 points and eight assists per game for the Bulls in the 2010-11 season and became the youngest MVP in NBA history. He continued his excellent play into the 2011-12 season. Back then, it seemed like Rose would go on to an amazing NBA career—maybe even a Hall of Fame career.

But Rose’s situation would change dramatically. He suffered serious injuries to both of his knees. Although his surgeries were successful, they may have robbed him of some of his elite quickness. The now 29-year-old has also encountered assorted controversies, most disturbingly an accusation of rape. It’s also not clear that Rose’s heart is fully in the game, as he recently contemplated retiring from the sport. Rose is hardly the kind of athlete Adidas would prefer to be the face of the company in 2018.

Yet put yourself back in 2011. Rose was a young and dynamic superstar on the rise. He seemed poised to have a long and marketable career. It was plausible that Rose could play at a high level in the NBA until age 36, the age at which his endorsement deal is scheduled to end.

Adidas, however, hedged its bet on Rose’s career. As the contract makes clear, the deal could be terminated if Rose retires from basketball prior to 2025. This clause may be one reason why Rose has decided to continue his career: if he retires anytime soon, he would forgo being paid tens of millions of dollars.

Unfortunately for Adidas, the “worst-case scenario" in signing Rose to such a massive contract may be playing out. His career has regressed to a point where he is much less marketable than at the time Adidas signed him, but he has not regressed to the point where he can’t find employment playing basketball. In fact, so long as Rose remains reasonably healthy, he’ll likely find work in the NBA or other pro hoop leagues for a number of years to come. And so long as that happens, Adidas will have to pay him.

8. Why Adidas agreed to pay Rose so much money and at different rates depending on the season 

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McCann: To put it mildly, Rose broke the bank with his Adidas contract. While Rose’s NBA salary was still constricted by the rookie wage scale at the time he contracted with Adidas, the deal with Adidas would soon infuse him with massive wealth. By the 2012-13 season, Adidas was obligated to pay Rose a retainer of $12 million along with a minimum royalty payment of $2.5 million.

Adidas’s payments to Rose were structured with his likely NBA career arc in mind. Rose was entitled to the highest minimum amount during the 2016-17 NBA season. That year, Adidas was obligated to pay him—at a minimum—$17 million in retainer and royalty payments.

Back in 2011, Adidas likely figured that Rose would be in the prime of his career during the 2016-17 season. He would be 28 years old that season and 28 is often the age when an NBA player is at his peak. The company probably also reasoned that by the middle part of the decade, Rose’s marketability would be similar to that of established superstars like LeBron James or Kobe Bryant. That may seem hard to believe now, but remember, Rose had just become the youngest recipient of the MVP award in league history. He was the real deal, it seemed. Adidas did not know—and could not have known—that Rose’s best days were behind him and that his peak year would occur when he was only 22.

Furthermore, while Adidas no doubt carefully researched Rose’s character and background, it had no specific reason to know that he would be accused of sexual assault years later and or that he would become regarded as something of a malcontent. In 2011, Rose’s previous troubles could have been attributed to youthful indiscretion. For instance, Rose was fined $1,000 for driving over 100 miles per hour on an Illinois highway in 2008. A year later the NCAA vacated Memphis Tigers wins because another person allegedly took Rose’s SAT so that he would score high enough to gain academic eligibility under NCAA rules. Although those were to some extent “warning signs”, Adidas likely concluded that as Rose aged into his mid–20s, he would gradually mature into the life of an NBA superstar.

9. Adidas protects itself from Rose failing to play—but the company declines to invoke those protections 

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McCann: Adidas wisely included provisions that empowered the company to substantially reduce its financial obligations to Rose in the event his NBA career veered off course. Specifically, if he failed to achieve an "All Pro" award two years in a row, Adidas could reduce its payments to him by 50%.

As we know now, Rose’s career did, in fact, veer off course. His last "All Pro" award occurred in the 2011-12 season, when he made the Eastern Conference All-Star team. While Rose enjoyed several productive seasons in the years that followed, none triggered a relevant award for purposes of the Adidas contract.