Any manufacturer, distributor or retailer who wants to sell a
product or service knows that association with a successful
athlete, team or sports event will help to sell what is being
offered and build its brand reputation. This article looks at value
and sports sponsorship.
Sports sponsorship is often referred to as an "indirect"
form of marketing. It seeks to create an association in the minds
of the potential consumer between the brand and the admirable
qualities of the team or athlete.
Whilst the potential consumer is unlikely actually to believe that
if he, say, wears a particular brand of t-shirt he will perform
like the best tennis player in the world, nonetheless when he comes
to make his purchasing decision he may well be influenced to
purchase that brand of t-shirt because he saw that tennis player
win a tournament wearing the same brand.
The UAE Government, the Governments of the seven UAE Emirates and
many international and local companies know that by sponsoring the
best of world sportsmen, sporting teams, sporting events,
musicians, concerts and other events, they enhance and build the
reputation of the UAE, their Emirates and their companies on the
world stage. That enhanced reputation can sell more airline
tickets, fill more hotel rooms and restaurants, create more jobs,
attract investors and quality business partners, and stimulate the
wider economy.
Many companies operate entire sponsorship departments and have
sophisticated teams managing their sponsored properties. The
purpose of sports sponsorship is, one could say, well known and
understood. However, the value or benefit of sports sponsorship is
not always recognised or monitored, and is even harder to measure
at a single point in time or across a relationship lasting years.
For instance, the New Zealand Rugby Union recently announced an
11-year sponsorship by adidas, one of the longest sponsorships ever
at that elite level. According to media reports the terms of the
relationship are confidential, but no doubt one of the key ongoing
issues will be how do each of the parties ensure that they continue
to receive value as the markets, team prospects, television
audiences, results and crowds change over time?
It is the authors' experience that traditional sponsorship
agreements provide for a fixed sponsorship fee, normally payable
annually for the term of the agreement, and a set of sponsorship
benefits, some expressed in general terms (using phrases like
"opportunities for brand exposure") and some specific
(100 tickets, for instance). However, it has also been the
authors' experience that this traditional model is increasingly
inadequate for sponsors and right-holders alike, particularly where
sponsorship budgets are under scrutiny in difficult economic
times.
Two key issues have emerged. First, ensuring that a sponsorship
agreement incorporates an agreed means for valuing the ongoing
benefit of the sponsorship for both parties. This includes the
incorporation of periodic key performance indicators so that the
parties can keep track of progress either during a season, during
the course of an event, or over the course of years. Second,
ensuring that a sponsorship agreement incorporates mechanisms which
allow the parties to alter their respective rights and obligations
depending upon the performance of the sponsorship. The mechanisms
might be either or both of pre-determined "step-ups" or
"step-downs" on the one hand, and a general structure for
re-negotiation of key terms during the period of sponsorship on the
other hand.
Each sponsorship arrangement is different and has to be assessed on
its own merits. However, it is interesting to recount a few
examples of matters in which the authors have been involved to
illustrate the above points. In one case a sponsor, an
international fast food chain, agreed on a mechanism by which the
value of its sponsorship of a cricket series was to be assessed on
an ongoing basis using an "eyeball test" - how many
viewers were watching each of the matches at the venue and on TV.
In another case a sponsor agreed to a tiered sponsorship fee for
each of the four years of the term where the fee went up or down to
agreed levels depending on the assessed "penetration" of
the sponsor's brand in its target market. In yet another case,
a sponsor insisted that it have the immediate right to terminate if
any player on the sponsored team engaged in public immoral
behaviour, because of the perceived adverse effect on the
brand.
Sports sponsorship generally had a tough year in 2009. Perhaps it
was as a result difficult circumstances, coupled with an increasing
range of diagnostic tools, which are compelling sponsors and rights
holders to want more from their sponsorships. As lawyers our role
has been, and will continue to be. to assist the client with the
negotiation and documentation of these sometimes complicated
arrangements in terms which will serve the parties for years to
come.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
