Published February 02, 2009
Michael Phelps took a big hit — and now his wallet could take a big hit, too.
A photo of Phelps smoking marijuana out of a bong at a party in November has brought his endorsement career to a crossroads, marketing experts say. And the megabucks that were flowing in could soon go down the drain unless America's superstar swimmer, who won a record eight gold medals at the 2008 Olympic Games, changes his ways.
"It's certainly not good and it’s a disaster in terms of the near future," said Robert Tuchman, president of Premiere Corporate Events, a sports entertainment firm. "He's very unlikely to have new sponsors come on board and endorse him. And there's the potential for other sponsors to pull the plug on him, using this is an opportunity. He's going to take a big hit on this."
Phelps, 23, acknowledged on Sunday that the photo, which first appeared in the tabloid News of the World, was of him, and he cited his age as an excuse for his poor judgment.
"I engaged in behavior which was regrettable and demonstrated bad judgment," Phelps said. "I'm 23 years old and despite the successes I've had in the pool, I acted in a youthful and inappropriate way, not in a manner people have come to expect from me. For this, I am sorry. I promise my fans and the public it will not happen again."
But Tuchman said it's unlikely corporate sponsors will factor Phelps' young age into long-term affiliations with him.
"When these brands make an investment in you, they make a serious investment in you and it doesn't matter what age you are," Tuchman said. "He kind of used that as an excuse in his apology, but these companies are paying him a lot of money and they have a right to hope that he continues to be seen in a positive light."
Two of Phelps' endorsement deals — with AT&T and Rosetta Stone — ended on Dec. 31, 2008. AT&T officials declined to comment Monday on any plans to re-sign Phelps; a Rosetta Stone spokeswoman said Phelps is not being considered for future promotions, but that decision was made before the photo surfaced.
"We do not condone his activities and are disappointed in his recent judgment," a statement issued by Rosetta Stone read.
But two of Phelps' leading sponsors indicated Monday they are sticking by him. Swiss watchmaker Omega said Phelps' actions were a private matter and a "nonissue," while swimwear manufacturer Speedo called him a "valued member of the Speedo team."
Mazda, which signed Phelps to a $1-million-plus deal last month, will also continue to use Phelps to promote its Mazda 6 car in television and print ads, Dynamic Marketing Group's DMG Entertainment said Monday.
"We definitely stand by him," DMG CEO Dan Mintz told FOXNews.com. "We're not jumping to any knee-jerk reactions. He's never failed a drug test, he's not a cheat. Not that we condone this, but that's the reality of it."
Mintz said an official Mazda statement will be issued shortly.
"This is not the time to turn your back on people," Mintz said. "It's going to be very interesting to see how other brands react to him, and, really, what he does about it at the end of the day."
Phelps also endorses Kellogg's Frosted Flakes, a breakfast cereal that is marketed largely to children. Officials at Kellogg's did not respond to requests for comment Monday regarding Phelps' future with the company.
Andy Appleby, chairman of General Sports and Entertainment, said the incident's lasting effect on Phelps' career as a pitchman largely depends on the Baltimore native himself.
"From now on, he's going to have to be spotless," Appleby said. "If anything happens again, his whole career could go up in flames."
Appleby said Phelps should use the misstep as motivation for even better performances in the water.
"He can go about his training at a stronger pace than ever, maybe even do the talk show circuit," Appleby said. "He needs to work hard on improving his image now, and the best way to do that is in the pool."
Bob Dorfman, executive creative director for Baker Street Advertising, said Phelps has handled the situation perfectly thus far.
"You admit your guilt, apologize profusely and say it's never going to happen again, which he has," Dorfman said. "[But] this is his second strike. He has one more to go."
Phelps, who plans to compete in his first post-Olympic swim meet next month in Texas, was arrested in 2004 for driving under the influence, not long after he won six Olympic gold medals in Athens. With the eight gold medals he won in Beijing last summer, Phelps has won 14 golds in all, a record for Olympians. He also won two bronze medals in Athens.
According to World Anti-Doping Agency rules, an athlete is subject to sanction for a positive marijuana test during competition periods only. Phelps has never tested positive for any banned substances.
"Michael is a role model, and he is well aware of the responsibilities and accountability that come with setting a positive example for others, particularly young people," a statement by the U.S. Olympic Committee read. "In this instance, regrettably, he failed to fulfill those responsibilities."
Phelps' agent, Peter Carlisle, did not return multiple requests for comment, but a statement was issued through Phelps' representatives at Octagon Sports.
"Michael takes this very seriously and has spoken with his sponsors to personally apologize. We are encouraged by their support."
Another source said the outlook was less bright for Phelps.
"The inside word is that his current sponsors are reviewing this incident and will then decide," a source close to Phelps told FOXNews.com. "He will lose a few. Corporate America is not looking favorably at this."
Additional reporting by Hollie McKay.