PHELPS IMAGE AS HERO HURT BY PHOTOS

During the Beijing Olympics, Michael Phelps's sports agent said the
gold medalist could earn $100 million in endorsement deals over his
lifetime. Now, with Mr. Phelps photographed smoking marijuana, that
figure may have to be adjusted, though for the time being most brands
say they are standing by the swimming champion.

Mr. Phelps was caught up in a torrent of bad publicity Sunday when
photos of him appeared in a British tabloid.

Although he apologized immediately for the incident, sports-marketing
experts expect some fallout.

"There is no arguing that this will definitely impact his future
earnings and marketing," says Kevin Adler, chief solutions officer at
Engage Marketing, a New York sports-marketing firm. "The guy has been
marketed as Captain America, and now this has materially damaged that
image." Drew Johnson, a spokesman for Mr. Phelps's agent Octagon, a
unit of Interpublic Group of Cos., said the swimmer has spoken with
all current sponsors and apologized. "The response we've received has
been very positive, and we are encouraged," Mr. Johnson said.

Mr. Phelps earns an estimated $5 million a year by endorsing big name
brands such as Visa Inc., Nike Inc., Speedo International Ltd.,
Kellogg Co., PureSport and Doctor's Associates Inc.'s Subway
restaurants. Sports experts point out that marketers have the legal
right to terminate their contracts because most endorsement deals
contain a "morality clause." Subway is planning to use Mr. Phelps in a
high-profile marketing event this summer and is now monitoring the
situation to see if the sandwich chain will have to scrap those
efforts, according to a person familiar with the matter. A spokeswoman
for Subway declined to comment.

Many of the companies whose brands Mr. Phelps endorses have expressed
support for him. Watchmaker Omega, owned by Swatch Group AG, said the
"story in the press involves Michael Phelps's private life and is, as
far as Omega is concerned, a nonissue." But many also remained
tight-lipped about whether the incident will affect the contracts they
have with the swimmer. "Speedo would like to make it clear that it
does not condone such behavior and we know that Michael truly regrets
his actions," the swimwear maker said in a statement. "Michael Phelps
is a valued member of the Speedo team and a great champion.

We will do all that we can to support him and his family."

Still, a spokeswoman for the company declined to comment on whether
its contract with Mr. Phelps, which comes up for renewal at the end of
the year, would be affected.

Speedo has been sponsoring Mr. Phelps since he was 16 years old.
Speedo gave him a $1 million bonus for his record eight gold medals at
the Beijing Olympics.

The photos appeared in News of the World, which is owned by News Corp.
News Corp. also owns Dow Jones & Co., publisher of The Wall Street
Journal. This isn't the first time the 23-year-old Mr. Phelps's image
has been dented. In 2004, he pleaded guilty to drunken driving and was
sentenced to 18 months' probation.

But sports experts say this incident could be more damaging because it
was caught on camera.

It also broke on Super Bowl Sunday, the biggest sports and advertising
day of the calendar.

Some fans have expressed their disappointment on the Web. On Mr.
Phelps's site, swimroom.com, one commenter said: "And I look up to u??
As a little 13-year-old girl I'm now very sad." Others expressed their
support.

One wrote: "In bad times is when you know your true friends, you are
an ordinary human being and as such can make mistakes."

PureSport, a performance-drink brand, said in a statement that it
isn't going to discuss the terms of its contract with Mr. Phelps.
"Suffice to say, Michael is one of the best performing athletes in the
world and we are very proud that he believes strongly in and endorses
our product," Chief Executive Mike Humphrey said in the statement.
"While we certainly do not condone his recent behavior, he is a key
part of our PureSport family, will remain a member of our family and
we are supporting him during this difficult time.