Sponsorships in the sports industry are nothing new. Teams, athletes, events and stadia have all attracted significant sponsorship interest over the years and it has been reported that business spending on sports sponsorships is set to grow by another four per cent to £35bn globally in 2019. However, while the overall outlook is healthy, sponsorship deals are becoming increasingly complex. This article will explore some of the notable trends and key contractual clauses and sticking points as all parties look to protect themselves and maximise their return from a sponsorship.
A tailored and flexible partnership
Sponsorships in the sports industry are continuing to evolve into richer, two-way relationships. The days of rights holders offering up a simple menu of fixed sponsorship assets and inventory to potential sponsors are largely behind us. These days, brands have a clear objective for any potential sponsorship opportunity, whether that be related to brand and product marketing, corporate social responsibility or employee engagement. In turn, rights holders often expect more than a cheque as part of the sponsorship arrangement, whether through positive PR or engagement with fans, even if the number on that cheque usually remains the most important factor.
Leading rights holders have realised the importance of initiating sponsorship conversations by seeking to understand brands’ strategic aims and challenges. This enables them to think creatively about the assets they control and how these can be leveraged to extract maximum value for both parties. Nowadays, the success of a sponsorship activation is often assessed by the content that is created and the return on investment that can be demonstrated through user engagement.
The net result of this is that two aspects are playing an increasingly central role to all sponsorships: content and data. For brands looking to protect the value of their investment, it pays to be specific about these concepts in the contractual documentation.
However, there is a delicate balancing act to play. While there is value in including specific details about how campaigns will be delivered, the 24/7 news cycle makes it more important than ever to ensure that the sponsorship agreement allows – and encourages – the parties to be flexible to change plans and execute new ideas quickly to take advantage of opportunities as they arise throughout the course of the partnership.
The changing role of brand ambassadors
The proliferation of social media, OTT platforms and gaming, has led to individual athletes transcending entire teams and sports to an extent that brands (and sports organisations) have never had to contend with in the past. Indeed, even the biggest and most popular football clubs in the world, from Manchester United to Barcelona, have individual players with larger social media followings than the clubs themselves.
Athletes have started to realise their own value and the demand for them to feature in original content. Rights holders often have a myriad of different commercial obligations and relationships at any one time that require careful balancing to ensure that they comply with the various category exclusivity restrictions. Many athletes, across different sports, now engage specialist digital media companies to advise and assist them with their personal strategy and to liaise with brands on their behalf. In the US, the biggest stars, such as Lebron James, have even created their own production companies, adding yet another layer of complexity when working with these individuals.
If the involvement of particular athletes in a campaign is of particular importance to a brand, it is vital to address this at the outset. Quite simply, the other party may not have the rights to involve particular athletes in a campaign and if this is central to the value of the deal, it is important to understand any limitations before it is too late.
The new digital landscape has also given rise to a new type of ambassador: the micro-influencer. These are individuals that are usually not leading athletes but have large social media followings (often between 5,000-50,000) and are active and engaged around a particular passion or niche. Many brands have understood the value that these individuals can bring, especially when activating a sponsorship and demonstrating fan engagement in particular geographic markets.
Protecting the brand
One of the risks of any sponsorship deal is the reputational damage that can arise from one party’s actions. One of the most important contractual protections, in this respect, is the right to walk away from the agreement entirely in certain events. Traditionally, sponsorship agreements have included a ‘morality clause’ that enables the sponsoring company to terminate the sponsorship arrangement if, for example, the sponsored individual or company does something that damages the company’s or the athlete’s image or brand; think of Lance Armstrong or Tiger Woods.
However, more recently, athletes and rights holders have been seeking to re-balance this dynamic by seeking to include ‘reverse morality clauses’ that enable them to terminate the agreement if the sponsoring company is caught up in a corporate or PR scandal or illegality. This is particularly pertinent in long-term endorsement deals and for deals that will involve a deep association between rights holder and brand.
In a world in which sports are on the front pages of newspapers as well as the back and in the context of the portrayal of sponsorships as ‘partnerships’ as described above; it is likely that these types of mutual rights will become increasingly prevalent.