Under the Radar: Issues Arising from Sponsorship and Endorsement Agreements

Negotiating sponsorship and endorsement agreements in the sports and entertainment industries is somewhat formulaic, but without knowledge of such industries’ specifics, a brand marketer could face a number of risks.  Things to think about beyond the basic deal terms:

1.  Make sure you are obtaining the appropriate rights.

  • Understand what rights are and are not being granted
  • Does the property control marketing/media rights for the event?  Does the property have a relationship with the teams/athletes?  Will third parties have superseding rights?

2.  Make sure you can terminate, or if things are going well, extend the relationship.

  • Options / Right of First Negotiation / Right of First Refusal
  • Minimize risk – shorter term with options
  • Types of termination for the brand:
    • Due to breach
    • Without breach – a simple opt-out
    • Not delivering assets/hitting targets
    • Resulting from morals clause or public denigration clause

3.  Mitigate business risks to the extent possible.

  • Fee reduction or termination for changed circumstances (e.g., athlete is injured/traded, team does not qualify for an event, specific metrics (like attendance) are not hit)
  • Space payment out over time to ensure compliance
  • Have more than one sponsored property or endorser

4.  Make sure that the sponsored property allows flexibility.

  • Ability to modify assets (especially digital and/or in long term deals)
  • Ability to modify fees (if brand is not getting the value it expected: e.g., not hitting targets or category creep); performance-based adjustments

5.  Consider hidden costs, such as:

  • Having to pull down and replace marketing materials
  • SAG-AFTRA pension and health costs
  • Third party IP licenses (for music, logos, video clips, etc.)
  • Compliance with state laws for promotions (contests/sweepstakes)
  • Data security

6.  True exclusivity is difficult to obtain.  Consider owning a platform.   Also, make sure the property minimizes clutter and also enforces against ambush marketing.