Paul McBeth signs 10 year, $10 000 000 contract with Discraft

[Echota]

From a business perspective, (sorry, I was a finance major, can't help my train of thought...) how does Discraft justify this? Their reported 2020 sales were just under $4 million. That is sales, not profits. Now one player is getting 25% of their sales?!

Gotta be an angle I am missing...

If they're investing in more machines as well, looks like their plan is to out press and out market their competition. Having the premier spokesmen (and #2 in Paige Pierce) for the sport representing your brand and having the capacity to keep shelves stocked with your product while others are playing catch up seems like a winning move to me.

Also who will be the next company to follow this model?

 

[gogo]

Also who will be the next company to follow this model?

Now is the time for the return of salient!

 

[oldmandiscer]

And the only discs that sell in big numbers are the Discraft Paul McBeth line and any other mold Paul uses. Maybe the Roach for those who can't find the Luna in premium but.... that might be it.

https://infinitediscs.com/blog/category/top-selling/

Keep in mind, most of these were out of stock for much of the year. Heat outsold the Sidewinder. Thrasher outsold the Anax. Fierce is up there as well. Nuke, etc.

 

[DG_player]

From a business perspective, (sorry, I was a finance major, can't help my train of thought...) how does Discraft justify this? Their reported 2020 sales were just under $4 million. That is sales, not profits. Now one player is getting 25% of their sales?!

Gotta be an angle I am missing...

I thought the same thing. Even Nike who's entire business model is pretty much built on selling tremedously marked up product via sponsorships only spends like 15% of their revenue.

I would have to think given the fact they already had him under contract for 4 years and didn't have any reason to extend it, that they have seen a huge bump in sales due to McBeth and that's what drove the decision. The mention of buying more equipment to expand production capacity seems to support this.

If that's the case though I find it a bit surprising. No one I play with seems to buy discs based on brand loyalty or the pro's name on it. I never thought that meant much to most disc golfers.

 

[gammaxgoblin]

because the McLaren doesn't have room for a disc golf bag, duh

Discs are transported in separate climate controlled vibration dampened vehicle....

 

[DanJon]

In the video McBeth talks about his brand and having a partnership with Discraft.

This move really attaches the McBeth brand to Discraft almost permanently.

So even if he's not winning MPO World's at 40, he's still going to be moving a lot of discs.

As for the financial side, Bob Julio mentions in the video that they surpassed the first contract expectations in year #1.

Meaning they must have made the full contract (4 years) expectations/returns back in sales in one year.

 

[Tomphoolery]

Maybe the contract is backloaded where he gets paid more years down the road instead of a flat million a year. Lots of NBA contracts are either frontloaded or backloaded to help with cap flexibility.

Cuz yeah I had the same thought. The sport exploded in 2020, and if Paul's name is on a disc it will sell, but that's a significant jump. McBeth was already MUCH better paid than anyone else. I'm wondering if the tide rises for all new contracts/extensions in the next couple years.

Furthermore, is he still making royalties on his discs? I don't have a source, but I heard he makes $5 per McBeth disc sold, whereas most pros make $2 per on their tour series discs.

 

[Superbford]

I thought the same thing. Even Nike who's entire business model is pretty much built on selling tremedously marked up product via sponsorships only spends like 15% of their revenue.

I would have to think given the fact they already had him under contract for 4 years and didn't have any reason to extend it, that they have seen a huge bump in sales due to McBeth and that's what drove the decision. The mention of buying more equipment to expand production capacity seems to support this.

If that's the case though I find it a bit surprising. No one I play with seems to buy discs based on brand loyalty or the pro's name on it. I never thought that meant much to most disc golfers.

There are a whole lot of first year golfers out there and I bet a lot of them will be paying more attention to advertising and branding.... and for many of them I believe, the best discs to throw are the ones they can more easily get.

 

[nothinbuttree]

2020 sales might not be the best to look at. They did have factory shutdown for several months, so they weren't making additional revenue. All the discs in stores are already 'sold' by them at that point.

That is a good point, I don't know exactly how many weeks/months they were down, but the fact that everyone's shelves still seem to be low tells me that for whatever reason it is not that easy to simply 'make more' in a hurry. I know the process for each disc takes a while, so to dramatically increase production would mean a large capital investment in more equipment. And with the seemingly exponential growth in different discs, molds, weights, stamps, etc, it must take a lot of machines to keep up.

I do wonder if demand will stay elevated once the pandemic is largely over. I personally hope so, but again, the business side of me wonders. We could be on the brink of a large growth spurt, time will tell.

 

[Biggie_Robs]

And the only discs that sell in big numbers are the Discraft Paul McBeth line and any other mold Paul uses. Maybe the Roach for those who can't find the Luna in premium but.... that might be it.

They'll sell plenty of non-McBeth Zones and Buzzzes.

 

[Dingus]

My bet is that the $10 million is highly padded with unattainable tour and sales incentives. Otherwise that is pure insanity. You could manufacture that Ezra kid into a far bigger start with a fraction of the money. Either way it is cool, big dollar figures only help our sport seem legit in the mainstream.

 

[oldmandiscer]

I thought the same thing. Even Nike who's entire business model is pretty much built on selling tremedously marked up product via sponsorships only spends like 15% of their revenue.

I would have to think given the fact they already had him under contract for 4 years and didn't have any reason to extend it, that they have seen a huge bump in sales due to McBeth and that's what drove the decision. The mention of buying more equipment to expand production capacity seems to support this.

If that's the case though I find it a bit surprising. No one I play with seems to buy discs based on brand loyalty or the pro's name on it. I never thought that meant much to most disc golfers.

I play in several leagues and with a lot of different people. I would say I saw a lot more Discraft then in years past, prior to McBeth moving to Discraft. He definitely moves the needle. I personally only throw what I like, I couldn't care less what pro throws it.

 

[oldmandiscer]

My bet is that the $10 million is highly padded with unattainable tour and sales incentives. Otherwise that is pure insanity. You could manufacture that Ezra kid into a far bigger start with a fraction of the money. Either way it is cool, big dollar figures only help our sport seem legit in the mainstream.

That certainly is likely considering how much they sell now. Otherwise if things went bad they would go bankrupt. (McBeth gets injured, comes back but plays poorly due to lingering injury, something like a back injury that is reoccurring)

It would be crazy not to have some large guarantees in it that certain sales figures are met along the way.

 

[Cgkdisc]

My bet is that the $10 million is highly padded with unattainable tour and sales incentives. Otherwise that is pure insanity. You could manufacture that Ezra kid into a far bigger start with a fraction of the money. Either way it is cool, big dollar figures only help our sport seem legit in the mainstream.

What about the possibility this is a clever way for McBeth to gradually buy a significant stake in Discraft? Seems like he's stated he's wanted to own production long range. So perhaps a good chunk of that $1 million per year is looping right back into Discraft? Discraft gets to book a $1 million dollar salary/contractor expense each year to reduce their net income and then receives a good portion of the cash back as a capital infusion from McBeth. I know absolutely nothing on this deal beyond the announcement. Just presenting a possible scenario.

 

[dehaas]

What about the possibility this is a clever way for McBeth to gradually buy a significant stake in Discraft? Seems like he's stated he's wanted to own production long range. So perhaps a good chunk of that $1 million per year is looping right back into Discraft? Discraft gets to book a $1 million dollar salary/contractor expense each year to reduce their net income and then receives a good portion of the cash back as a capital infusion from McBeth. I know absolutely nothing on this deal beyond the announcement. Just presenting a possible scenario.

That would make sense...increased production could be directed straight towards his own line of discs.

 

[mrclc]

What about the possibility this is a clever way for McBeth to gradually buy a significant stake in Discraft? Seems like he's stated he's wanted to own production long range. So perhaps a good chunk of that $1 million per year is looping right back into Discraft? Discraft gets to book a $1 million dollar salary/contractor expense each year to reduce their net income and then receives a good portion of the cash back as a capital infusion from McBeth. I know absolutely nothing on this deal beyond the announcement. Just presenting a possible scenario.

This makes a lot of sense as a mutually beneficial scenario. Speculation, but good speculation.

 

[Casey 1988]

They'll sell plenty of non-McBeth Zones and Buzzzes.

Yes but Paul Uses those molds too, so the non signature versions will sell as well due to who uses them.

 

[Finny]

From the UltiWorld article: "In his first year at Discraft, McBeth easily surpassed his guaranteed salary, selling over 250,000 discs even as some of his own most popular discs, like the Hades, had yet to be released."

That's $5 million in revenue in one year at $20/disc. And disc sales are much higher now. So if McBeth just gets the guaranteed $1 million a year but nothing additional from disc sales anymore, this contract is a steal for Discraft.

That's my #1 question: does the $10 million cover everything?

 

[oldmandiscer]

From the UltiWorld article: "In his first year at Discraft, McBeth easily surpassed his guaranteed salary, selling over 250,000 discs even as some of his own most popular discs, like the Hades, had yet to be released."

That's $5 million in revenue in one year at $20/disc. And disc sales are much higher now. So if McBeth just gets the guaranteed $1 million a year but nothing additional from disc sales anymore, this contract is a steal for Discraft.

That's my #1 question: does the $10 million cover everything?

They sell mostly at wholesale though which is more like what, 6-7 bucks per?

 

[roblee]

Incredible and exciting.

10years/$10M does not = $1M/yr for 10 yr. Probably 100's of details: performance, sales, 401k's, insurance, stipends, travel allowance, appearances, delayed payment, stock options......I expect that Paul expects to exceed that amount.