Contracts

David Beckham’s LA Galaxy contract clauses that made him a $500 Million fortune

ByAkriti
/ / David Beckham’s LA Galaxy contract clauses that made him a $500 Million fortune

David Beckham is one of the world’s most influential athletes. He is the 7th highest-earning athlete of all time and has more than 100 million followers across social media, despite none of the platforms existing during the height of his career.

But on January 12, 2007, he shocked the world, leaving Real Madrid to sign a multi-year deal with the LA Galaxy of Major League Soccer (MLS). But Beckham saw the bigger picture — because the fine print of his deal had little-known incentives that would eventually turn his $6.5 million salary into more than $500 million.

This is how David Beckham negotiated one of the greatest sports contracts of all time.

First, the salary cap issue. MLS wanted Beckham so badly that they created a new rule to pay him. It’s officially called the “Designated Player Rule,” but it’s more commonly known as the “Beckham Rule.”

This new rule allowed MLS teams to pay one player outside the league’s $2.1 million salary cap. So, the LA Galaxy only needed to count $400,000 of Beckham’s salary against their team’s salary cap each season.

Designated Player Rule Explained

  • David Beckham’s total annual salary = $6.5 million
  • Annual amount paid by club owners = $6.1 million
  • Annual amount counted against MLS salary cap = $400,000

The LA Galaxy also guaranteed Beckham an undisclosed percentage of all club revenue. That meant Beckham would get a cut of every dollar the team made — from merchandise, tickets, and sponsorships, all the way down to the hot dogs and beer sold at games.

And there was one more incentive hidden in the fine print of Beckham’s contract: the right to purchase an MLS expansion team at a fixed rate of $25 million upon retirement.

Remember that revenue-sharing agreement that he negotiated in his contract? Well, it ended up adding an additional $18 million to his $32.5 million salary over five seasons.

And when you add in his existing sponsorships and new endorsement deals with brands like Giorgio Armani, Yahoo, Electronic Arts, Burger King, and others — Beckham’s MLS contract ended up bringing in a total of $255 million.

David Beckham’s Total MLS Earnings

  • 5-year salary: $32.5 million
  • Revenue share: $18 million
  • Sponsorships & endorsement deals: $204.5 million
  • Total MLS earnings over 5 years: $255 million

That means Beckham averaged over $50 million of income per season in MLS — a 155% increase from the money he made at Real Madrid. And in total, Beckham made an astounding $800 million by the time he retired from professional soccer in 2013.

And while one could argue that David Beckham’s MLS career was a win-win for both Beckham and the league, the reality is that he was the true winner of it all.

Remember that clause that Beckham negotiated in his contract that allowed him to buy an MLS expansion team for $25 million? Well, on February 5, 2014 — less than one year after retiring from soccer — Beckham officially exercised the option and was announced as the new owner of an expansion team in Miami, Florida[1].’

So, with the help of these two unique contract clauses David Beckham earned around $225 million in salary, brand integrations, and revenue shared also allowing him to get an MLS expansion team after his retirement team for just $25 million, the club Inter Miami CF already valued at $585 million. These made David Beckham the highest-paid player in the world with fortune of more than $500 Million.

References:

[1] https://www.npr.org/sections/thetwo-way/2014/02/05/272084483/mls-and-beckham-will-create-a-new-soccer-team-in-miami

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