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The Ten Percenters

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An example of TSJ’s proclivity for the unexpected, author Brad Melekian’s look at professional surfing’s paid deal-makers would not have been out of place in a business magazine. Except Melekian’s knowledge of the surf territory took this to a far more informed place. The resulting piece offered a previously unstudied segment of the surf experience to enjoy a moment in full light. —Scott Hulet


It’s 2010, and surf industry executives continue to speak about surfing as though we’re all still part of “the tribe,” or “the family,” or “the pond,” or any number of totally inclusive, we’re-all-in-it-together type euphemisms that promote the idea that it’s still a cottage industry plied by “super passionate” surfers with just enough pluck to make it work.

“That’s complete bullshit,” says Kelly Slater’s agent and manager, Terry Hardy. “That idea of family is used in a bad way right now to take advantage of people in order to make business decisions for these corporations. And they’re corporations, don’t get me wrong on that. If you do two billion dollars in business, that’s [an extremely] big corporation.”

There are many such corporations. Even despite the recent economic downturn, the surf industry is a multi-billion-dollar business—estimates vary, but Bob Hurley, founder of the eponymous apparel brand, says that sales of surf-branded merchandise are about 20 billion dollars at the cash register in the U.S., 30 billion globally. That industry is made up of companies that are publicly traded or owned by large companies that are themselves publicly traded.

“Volcom—youth against establishment—is a public company, valued at, I don’t know, a lot,” says Hurley. “And Hurley—we’re the two newest—we’re owned by Nike. Billabong’s public, Quiksilver’s public, Rip Curl’s owned by a big investor, O’Neill’s owned by a real big company. These are real businesses.”

Like any real business, everyone, to use the phrase, wants a piece of the pie. As most of that pie has gone to the companies, increasingly surfers are eyeing the spatula in hopes of getting themselves a larger slice. For years, surfers have been paid on endorsement contracts that represented a tiny sliver of the budgets of these large companies, even as the industry grew on their backs.

“Kelly, Rob, and a few others changed the face of surfing,” says Bob Hurley. “And at the same time the companies grew phenomenally, the companies went public, and the industry became a global business. I can easily make a case that guys like Kelly and Rob and other folks are largely responsible for that.”

And, yet, they haven’t always been paid accordingly, which is why, to help even the playing field, guys like Kelly and Rob—and many less established top-tier, mid-level, and up-and-coming surfers—are increasingly turning to outside help, hiring agents to negotiate their contracts and find other means of profiting off of their talent. And the agents are only too happy to do it, for a cut. The historical precedent is quick and simple: The first agent was Australian Peter Manstead, who represented Tom Carroll and Martin Potter in the mid-80s and who had little discernible effect in changing the rules of the surf industry. Kelly Slater was managed by Bryan Taylor in the early part of his career. Laird Hamilton signed on with Jane Kachmer in 1995, and by the late 90s and early 2000s—as companies begrudgingly accepted the inevitability—a growing number of surfers began to enlist the help of agents.

“To me, it’s just a natural thing that should be happening,” says Hardy. “These guys deserve representation; they deserve to be handled the right way.” Today, Hardy manages only two clients: Slater and skateboarder-cum-pop icon Bam Margera. Like an agent in any industry, his work is to create opportunities for his clients to make money, and he’s unabashed in his earnestness in doing that.

In many ways, the fact that surfers have agents is not surprising—they are professional athletes, after all—but the agents provide a window into a bigger story about how the surf industry grew so rapidly as to outpace itself: Many companies are still loathe to work with surfers who have agents. Meanwhile, some agents, like many of their counterparts in the marketing departments at apparel companies, have few discernible credentials to be doing the work they are hired to do aside from the strength of their carving 360s. On the complete opposite end of the spectrum, many agents come from cutthroat backgrounds of music and film management, a background that does not readily translate to the faux-bro barefoot breeziness of the surf industry. In short, in a surf world that is worth tens of billions of dollars, surfwear companies and surfers are still struggling to come to terms with what the agreed-upon value of a professional surfer is, and who should be included in deciding that value.

Companies want to sell as many shoes and shirts as they can at whatever it takes to reap the greatest profit. If that means underpaying your athletes or models, they’re going to do that.”

Mitch Varnes

Terry Hardy started as an agent in traditional entertainment management, working he says, with a lot of big Hollywood firms to do deals in music and film. But, Hardy says, he switched over to action sports in 1999 and hasn’t gone back. The work is essentially the same, but the heavy lifting has been in getting the surf industry to accept real-world business practices in dealing with “talent.” According to Hardy, part of getting his clients “handled the right way” has been changing the ways in which surfers agree to work for companies.

“These guys were signing contracts that, quite frankly, were not contracts. They were being told and asked to do things four or five years ago—some guys are still in these contracts—that you can’t put in a legal contract. I’m not bagging on the brands. For the most part, they didn’t know, and some of them still don’t know, what they’re doing. It’s not malicious, but you can’t force people to do things in contractual relationships in the United States.”

This type of ignorance is institutional at many companies, says Hardy. “There are people in positions [at surf companies] that have no idea what they’re talking about when they’re working on these contracts—absolutely. They don’t understand the metrics and the dynamics and the relationships at work.”

Because the surf industry has typically been an incestuous business, wherein ex-pro surfers are hired on by their former companies to work in positions of power, those same ex-pros-turned-marketers are often operating in situations for which they have neither the education nor the experience to be doing.

And the gate swings both ways. Surfers, too, typically lack an advanced education, particularly in an era when the surf culture tacitly endorses home schooling for kids who show promise as amateurs. Few surfers attend college, and, so, with a sub-par high school education and no advanced degree, most are woefully under-equipped when it comes to handling their finances.

“They’re not experienced or schooled or skilled in negotiating their own contracts,” says Laird Hamilton’s agent, Jane Kachmer. “They don’t research the marketplace. If they are really succeeding at what they do, with the training and the work that it takes to be at their level, they don’t have time to be sitting on the phone trying 
to garner media and tell stories about themselves and their brand and their sponsors. They don’t have the wherewithal. More than that, I don’t think anyone can negotiate for themselves as well as someone who is educated and schooled.”

Like Hardy, Kachmer was a manager in the entertainment industry—a long-time manager of Mickey Rourke. She left the film industry in the early 1990s, began managing Hamilton’s wife, Gabrielle Reece, and then began managing Hamilton in 1995. Today, she continues to manage Reece, Hamilton, and Dave Kalama.

Kachmer, like Hardy and nearly every other agent, says that the biggest difference in making the switch from the entertainment industry to surfing was the resistance she faced from the surf industry. “The reaction I got was not positive, let’s say that,” she says today. “Particularly in France where Laird’s primary sponsor, Oxbow, is. They were used to just dealing with him and thought, well, who is this woman?”

While that resistance is dissipating, it is still palpable. “Part of it is this mentality that, ‘Oh, it would just be easier for us if we didn’t have to deal with agents,’” says Kachmer. But also, the need for a surfer to have representation is not always obvious. But agents—according to agents—provide a valuable service to their clients in being able to attribute a value to something that is amorphous and defies valuation.

“Surfers just want to surf,” explains Floridian Mitch Varnes, who manages—among others—CJ and Damien Hobgood, as well as current wunderkind Clay Marzo. “They want to be everyone’s friend, and they want to surf. They’re buddies with their team manager; they’re out there surfing with them and traveling with them. They don’t want to get into big pissing matches over ‘am I worth “x” dollars or “y” dollars?’ They need somebody else to do that.”

That, says Varnes, is the work of an agent, and this is the value he believes he provides his clients. “People that think it’s all bros and family, that’s bullshit. Business is business. Companies want to sell as many shoes and shirts as they can at whatever it takes to reap the greatest profit. If that means underpaying your athletes or models, they’re going to do that. So where I come in, you know, I got along fine with pretty much everyone that I dealt with, but I understood that it was business. This is not bro-ing down in the water, this is business. I represent my clients, and I have no doubt that I have made some of the best deals ever made out there in the surfing world for my clients. You can quote me on that. I have no problem with that. And I think if I had not been there representing some of these clients, they may have a gotten a half or a third less than they would have gotten, I mean a significant difference.”

Other agents are similarly confident of their impact. Bryan Taylor, for instance, who manages a client list that includes Bobby Martinez, and who’s very assertive and concrete in what he believes he provides for his clients.

Some of them shoot themselves in the foot. There’s nothing I can do about that. I’m just saying, that I can lead a horse to water, but I can’t make him drink.”

Bryan Taylor

 

“If my clients want me to hang out on the beach, I don’t surf. If they want me to go hang out at a video premiere, I don’t smoke and I don’t drink. If they want me to go to a born-again Sunday morning worship, I don’t pray. What I do do, though, is provide the infrastructure of a lucrative career with the end goal of having them retire by their 30th birthday. That’s always been my bottom line. I would like to get these kids from the time they’re 17 to 19—they need to help with how they perform; the companies need to help with how they promote—to get them to the point when they’re 30 and they can say, I don’t need to make another dime the rest of my life. I can live in my house that’s paid off, and I have enough money in investments for the next 60 to 70 years that I don’t have to work.”

The fact that so many surfers are signing on and staying with so many agents is testament to the fact that the agents must be doing something. But do they really do what they say they do? Is Varnes really doubling or tripling the earnings of his clients? Are Taylor’s clients really living in paid-off houses at 30, with enough residual income to last a lifetime? Or are they just skilled in talking about it?

I put this last question—about the paid off houses and retirement at 30—to Taylor. A simple question: Have any of your clients actually retired at 30? Here’s his answer:

“I would say that many of them are—without mentioning names. Some of them shoot themselves in the foot. There’s nothing I can do about that. I’m just saying, that I can lead a horse to water, but I can’t make him drink. I try to the best of my abilities, and I’m not always right. I’ve certainly always tried to attain that goal for them. I can’t say that I’ve been 100 percent, and I think there’ve been a few cases where I’d be a lot closer to 100 percent if different decisions were made on their part, but then again, it’s their lives, and what they do is their business.”

So, while it’s undoubtedly true that the business acumen that many agents bring to the table is valuable to their clients, it’s also true that we can’t overstate the case. Further, it’s important to note, Bryan Taylor, like many agents, doesn’t surf. In no other industry would such a detail matter, but for an industry that prides itself on being conceived for surfers and by surfers (however disingenuous that notion is, it is still prevalent), the notion that outsiders are driving change in surfers’ compensation may explain some of the animosity that exists between agents and apparel companies.

But perhaps it’s simpler than that. Perhaps companies just don’t like to work with agents because of their approach. “I think it’s important in some cases for the manager to go in there and be the bad guy,” says Varnes, “represent the surfer. Because the surfers don’t want to do that.

“I’ve had some very contentious negotiations,” he continues. “I’ve had some that went smooth as butter, and others where we could have gone to fisticuffs. There are some marketing managers out there that don’t understand this is a business. And it’s because they don’t have, in my opinion, the education or experience to understand that. I’m not afraid to say that either; that’s just how it is.”

Taylor, who attended the Stanford Business School and is a former employee of the William Morris Talent Agency, says that agents themselves bear a burden of responsibility here, and that the lack of credentialing prevalent in the surf industry is also a problem in the world of managing surfers.

“I’ve seen many managers come and go over the years, and now I’m a manager, and a year later I work for an optic company, and then I start working at the magazine. It’s a mess. I think that’s probably what you attribute it to. I don’t think these executives are anti-agent; I just think they’re anti-idiots.”

Whatever the reason, the distrust can run deep. Bob Hurley, for instance, has refused to do business with agents in the past. “I don’t think agents are necessarily different than other folks,” says Hurley. “There’s good ones, there’s bad ones, but I have told a surfer or two that they can’t work with us anymore because of their agents. And they look at me like, are you serious? And I say I’m dead serious. I just want to work with fun people. But sometimes you don’t have a choice.”

Whether or not it is “fun” to work with an agent may be irrelevant, and it’s possible that much of the contention that exists between agents and surfwear companies stems from the fact that establishing the value of a professional surfer is not an easy thing to do.

There is no doubt about Kelly Slater’s value in the surf world, for instance, and if there was, Terry Hardy is quick to dispel it. “Kelly Slater is a vital employee of Quiksilver. I can argue that he’s the most important employee of that company. He’s a very unique talent and he’s a very unique person, and at the end of the day I can find another CFO who’s incredibly qualified to work at Quiksilver. I can find you 100 right now that could do that job. I can’t find 100 Kelly Slaters.”

And on this point, Hurley agrees with Hardy. “I’ve said it over and over again, I think Kelly Slater’s underpaid,” says Hurley. “I honestly believe that. I’m not saying he doesn’t get a fortune for surfing, but when you think of the business he drives, it’s disproportionate compared to other sports, and God bless the guy who’s driving revenue; he should be compensated accordingly.”

But what about the mid-level surfer. Does he really sell boardshorts? Does he drive revenue? What value, really, is there in a professional surfer outside the top one percent?

“What’s the value of a house?” asks Hardy, rhetorically. “The value of a house is whatever you can sell it for. And that stands here. The value of somebody working for your company as a paid talent athlete is what the market will pay. I’m using this as an example—but if Billabong wants to pay $200,000 to a rider and Hurley wants to pay $100,000—guess what, the kid’s going to Billabong.”

I can find another CFO who’s incredibly qualified to work at Quiksilver. I can find you 100 right now that could do that job. I can’t find 100 Kelly Slaters.”

Terry Hardy

It’s in this sense that it becomes painfully apparent how much of a business the surf world has become. Surfers are commodities, and while the negotiations of their worth between agents and the companies who pay them are neither inherently good nor inherently bad, the tenor of such negotiations only supports the point that the sport has been commoditized intensely.

Of course, this line of argument presupposes that agents are always acting in the best interests of their clients. It should be noted that agents take an often substantial cut of their clients’ earnings, and, unlike other industries where that cut exists at an industry standard rate (15 percent in book agenting, for instance), the world of surf agenting is so nebulous and amorphous that there is no standard rate. This, says Hurley, is where he becomes skeptical.

“So let’s say you got the best surfer in the world and he’s 16 years old, and you get a guy who isn’t a taker, right, he’s a giver, and he says, ‘I’d like to help this guy with his career, and I’d like to get him with the right company to create some magic and do something special.’ Now, that’s a fantastic situation. But if you get a guy who looks at so-and-so who just won the NSSA nationals, and you get a guy who goes, ‘You know what? I’m going to make a lot of money off a lot of companies with this guy right here.’ That’s a horrible situation, and those people don’t provide any value at all. They probably actually lose money for their clients.”

Agents, meanwhile, have their own skepticism rooted in the fact that the top-level executive positions at surf companies are increasingly being manned by businessmen with advanced degrees who are often shrewd in their own business dealings. “I used to say to a lot of these people at these companies, ‘Do you negotiate your own contracts?’ And of course the answer is no,” says Jane Kachmer. “No, they would look for expertise and the best resources they can, and they have lawyers to look over their deals.”

Or, as Bryan Taylor puts it: “I remember back in the old days, ’88, ’89. I remember there was one kid I had at the time, very young. He had just won a very prestigious title, and he was making pennies a month. I think it was something like $500 a month. It was ridiculous, and he said to me, ‘I went to my sponsor, and I asked them for a raise.’ He said, ‘I just asked so and so if he could give me another $200 a month, and he just gave me this lecture on how dare I, we’re surfers, we don’t think about money.’ And I said to this kid on the phone, ‘Did you happen to see what kind of car he pulled up to the meeting with, or what beach house he happened to drive into?’”

The example holds extra resonance because, increasingly, young, amateur surfers are seeking the help of agents, says Kachmer. “You’re seeing kids getting representation now younger and younger. If it’s not their parents, then it’s someone, and I think that really freaks out the companies, because they kind of start to go, ‘Oh, my gosh, it’s happening at a younger and younger age.’ To me, I think that they actually need it more at a younger age, only because they’re so vulnerable and have such little knowledge. All of the clients I work with are highly intelligent and they have a grasp of the business, but when it’s a kid, they can’t be expected to know.”

As these kids grow up with agents representing them, surf companies either begrudgingly or willingly are accepting that the agents aren’t likely to leave. Which really makes this more of a coming-of-age story than anything else. Companies deliver quarterly earnings to shareholders; CEOs’ compensation packages are publicly disclosed and, yes, as surfers hire representation to help them get the money they believe they’ve earned, the surf world can less convincingly make the argument that it’s still a small, plucky “tribe” that needs to look after its own best interests.

“I think the surfing world likes to view itself as this hallowed area, and it’s not,” says Terry Hardy. “It isn’t what it used to be. It’s a ten-plus billion dollar annual worldwide industry, and I think this is just one of those things that has to happen. The top athletes have to have representation.”