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 Mondel─ôz 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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