Feature
The Covid-19 pandemic forced
a rethink of sponsorship value across the board in 2020
Technology-led solutions
have presented an opportunity to “rewrite the sponsorship rulebook”
With a better outlook for
2021, the industry is well-placed for a return to normal business
The sports sponsorship
market was never so contingent on one overriding external factor as it was in 2020
with the Covid-19 pandemic.
Across all commercialised
sports areas, the health crisis required rights-holders and sponsors to review
their contractual obligations – those that were met and those that could not be
met because of cancellation, the absence of spectators or the main
star-organiser falling sick mid-series.
Take a bow Novak Djokovic
for the four-event Adria Tour tennis exhibition tournament, which was
part-sponsored by the Novak Djokovic Foundation but also included an array of
commercial brands. No doubt, some got their money back.
In general, where sports
events were still able to take place and broadcast arrangements maintained, the
reductions to rights fees in contracts with visibility rights at their core
were typically marginal or managed without financial exchange. Where
sponsorships depended on hospitality and on-site promotions, the changes tended
to be more significant.
Contract negotiations
One of the earliest
manifestations of fee renegotiation was in motorsports, where fashion brand
Hugo Boss asked for a 50-per-cent discount on its central Formula E deal
because the races would be staged without spectators, hence no hospitality
benefits from the ‘Boss Emotion Club’ – the place for VIPs to see and be seen
at every ePrix.
With the 2020 motorsports
season revving up at roughly the same time the pandemic took hold, experts said
that motorsports stakeholders were tending to drive the hardest bargains in the
renegotiation of sponsorship contracts.
As Robin Fenwick, founder
and chief executive of the Right Formula agency, told SportBusiness in June,
some sports were easier to work with than others. “Take golf, for example,
which [during this pandemic] has adopted a super-flexible approach [to rights
discussions].
“Football has been more half
and half, depending on who you’re speaking to. Motorsport [from a rights-holder
point of view] is noticeably driving a hard bargain in any discussions.
Naturally, however, it does differ depending sport by sport, series by series
and team by team.”
Across the sports universe,
long-term sponsors tended to be more willing to support rights-holders than
shorter-term partners. Liverpool’s main shirt sponsor, banking group Standard
Chartered, for example, announced early on that it would pay its rights fee in
full and used digital activations to engage its Asian-based customers in the
club’s Premier League championship-winning season.
Other brands were more
cautious. Barcelona’s main shirt sponsor, Japanese online retail and technology
company Rakuten, negotiated an extension of its agreement for a rights fee that
was adjusted significantly downwards – to an estimated €30m ($36m) for the
2021-22 season from the current value of €55m per year – to reflect the wider
economic situation caused by Covid-19.
Creative thinking
More positively, the year
has shown how flexible and creative right-holders and sponsors could be.
Contract variations have
included making good arrangements such as offers of additional inventory,
rolling rights on to the following year, or simply skipping the year
altogether.
In Aussie rules, AFL clubs
were allowed to offer their principal partner an additional branding position
on the neck of the back of the shirt for the first time. This didn’t work for
the Sydney Swans, which embroiders its former identity as the South Melbourne
Football Club with the initials SMFC on the exact spot where the insurance
company QBE sponsor logo could have gone. But others were quick to take up the
opportunity.
In the PGA Championship golf
major, carmaker Cadillac opted out of this year’s sponsorship because of
Covid’s impact on car sales. The brand will be back again next year, and with
signage rights too – the PGA of America allowed brands to advertise on the
course for the first time in 2020.
The more far-reaching
consequence of the pandemic however is that it has accelerated the uptake of
technology-led solutions and innovation for sponsors around digital packaging
and activation. Gareth Balch, co-founder and chief executive of Two Circles,
argued that Covid-19 had given all areas of the industry “an opportunity to
rewrite the rulebook”.
Sports sponsorship’s digital
revolution will see it thrive long-term across data, content and fan
engagement, he said. Some properties will go to the wall, but the biggest, most
innovative and creative can survive and thrive.
New business
For many sports, Covid-19
forced a pause on new business. When new deals were contemplated, rights-fee
reductions were built in because of the sporting and economic uncertainty.
That said, important deals
were done this year. This was particularly true in esports, which relies on
live audiences for its showcase events, but offered some immunity from the fall
out of Covid-19 because events can also be staged remotely.
The esports market grew its
proportion of overall sponsorship spend in 2020, increasingly from non-endemic
brands looking to reach younger audiences.
In September, games
publisher Riot Games signed up luxury car brand Mercedes-Benz as the latest
sponsor for its League of Legends series. Other League of Legends series’
signings in 2020 included technology company Cisco, music streaming service
Spotify and electronics brand Bose.
It should be noted that
esports games built around traditional sports also provided those
rights-holders, like the NBA, Uefa, the FA and Formula One, with valuable fan
engagement platforms for sponsors who were unable to activate their rights
because of event cancellations or stadium shut outs in 2020.
In women’s sports, the
investment of food and beverage company
PepsiCo in a sponsorship package across Uefa’s major women’s club and national
team competitions until 2025 was another vote of confidence. In making the
deal, PepsiCo became the first brand to unify the men’s and women’s Champions
League main sponsorship rights, following Uefa’s unbundling of the men’s and
women’s rights in 2018.
The growth of women’s sports
sponsorship, particularly in football, was interrupted by Covid-19, but will
likely start-up again quickly once sports returns to normal, driven by greater
media distribution, support from major governing bodies like Uefa and Fifa, and
the investment of sports brand like Nike, adidas and Puma in women’s sport
related to growing sales.
Sector variations
Of course, the economic
fall-out from Covid-19 impacted on some sponsorship sectors more than other.
Airline and travel
businesses inevitably scaled back during the pandemic, as did car and car hire
businesses. In contrast, many consumer-focused companies (like Mondelēz
International and Kraft Heinz) benefited
from the crisis, as did digital entertainment (like Amazon and Netflix), food
delivery services (like Deliveroo and Uber Eats), contactless payment providers
(like Apple, Samsung and Google Pay) and video communication providers, like
Verizon (BlueJeans), Microsoft (Teams/Skype) and Cisco (WebEx).
Other new economy sectors,
like financial trading brands, have also taken on new users in the pandemic and
used sport sponsorship to raise brand awareness.
Looking forward to next
year, the deregulation of the online gambling sector in the US will continue to
create new opportunities in US sport, where sportsbook operators and daily
fantasy sports brands have taken sponsorship positions among the major team
sports. In August, the PGA Tour joined the NFL, NBA, MLB and NHL in mining the
betting and fantasy sports sectors for sponsors, signing four Official Betting
Operator deals over the summer, with DraftKings, BetMGM, FanDuel and PointsBet.
In contrast, prohibition on
betting brands advertising in some European markets (notably Italy and, by the
end of this football season, Spain) means that betting operator spend will
contract in Europe. The UK could be next, with calls for a ban on gambling
companies advertising on the shirts of sports teams set to be considered as
part of a wider review of betting laws by the UK government.
Digital overlay technology
could keep the betting market alive however, with major sports brands able to
grant regionalised sports sponsorship, particularly in relation to Asian brands
looking to leverage relationships with major western rights-holders.
Prospects of recovery
With the apparent success of
global efforts to find a vaccine, the signs are that a recovery is already
underway. There has been a noticeable upswing in business among continental
European properties, with rights-holders in basketball, handball and winter
sports filling out their portfolios in the final weeks of 2020.
The five-year commitment of
German motor oil brand Liqui Moly, replacing supermarket chain Lidl as the
principal partner of the French National Handball League, stands-out given that
second-tier sports were considered most under threat when the pandemic hit.
In the UK, there is also a
surprise good news story brewing related to The Hundred short-form cricket
competition, which gets underway next summer. In December, consumer goods group
Unilever was added to the new England and Wales Cricket Board-operated league’s
portfolio. Other sponsors of the tournament include kit supplier New Balance,
shirt sponsor KP Snacks, headwear specialists New Era and health and lifestyle
brand Vitality.
Finally, the outlook for
2021 will surely be influenced by a successful staging of Uefa’s European
Championships across 12 European cites in June-July and the Olympic Games in
Japan in July-August. If these mega-events can be carried off without interruption,
it will restore buoyancy to the sports sponsorship market and present more
evidence of what we all hope – that normal sporting service has resumed.
Credit: https://www.sportbusiness.com
(Photo by Giuseppe
Cacace - Pool/Getty Images)
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