Since 2020, the sport sponsorship landscape has gone through radical change and instability. The list of events canceled, postponed, relocated, and played behind closed doors includes some of the world’s largest competitions — and has therefore touched almost every major brand involved in sport sponsorship. The Tokyo 2020 Olympic and Paralympic Games were played behind closed doors, Wimbledon was canceled, three consecutive UEFA Champions League Finals were moved, and the Super Bowl was played to reduced capacity.
For brands, these times have required a re-think of how they justify sporting event investment — the rights acquired, the mandatory inclusions in any contract, and the way contractual rights are activated.
The lockdowns may be mostly easing, but with enduring uncertainty brands must plan for eventualities that may affect their sponsorship investment.
Based on our experience, we’ve outlined some key considerations that brands should bear in mind when entering sponsorships today.
Creating a business case and acquisition strategy
Sport sponsorship remains an incredibly powerful platform to engage with fans on a global scale and has been impressively resilient through the COVID turmoil. Additionally, factors such as growing advertising avoidance and sport being one of the few remaining appointment-to-view occasions means that it continues to deliver for brands.
However, when entering, or renewing, a partnership it’s essential the business case is robust and can face the ongoing uncertainty.
In the past, some sponsorship agreements have been justified because of where an event was taking place or that it aligned in the calendar with a major product launch. With uncertainty around events and within many brand businesses, an over-reliance on any single part of a sponsorship could risk projected ROI.
When looking at the rights you want to acquire, it’s important that you secure rights that will work efficiently against your business objectives. We often see sponsorships agreed with rights included in them that the sponsor never intends on activating because they do not align with business objectives. In times of uncertainty, it’s important that partnerships and sponsorships are as efficient as possible to maximize ROI.
Engaging with rights holders
Since the start of pandemic, rights holders have responded to a range of compensation claims, contract extensions and negotiating of new contracts. We have seen many rights holders and brands engage in productive discussions to work through the challenges faced by postponements or events behind closed doors. But not all rights holders have been accommodating — some have taken a more aggressive approach asserting that an event happened and their commitments were met, regardless of where, when or the presence of fans.
Transparency is needed when working with rights holder partners both before a contract is signed and during the contractual term. To mitigate risk, engage rights holders to outline where and when the sponsorship ROI is coming from for your brand. If you’re primarily sponsoring a competition for the B2B relationship opportunities and hospitality access, that needs to be clear to the rights holder from the outset with sufficient contractual protections built in.
Similarly, it is worthwhile being very clear at what point the partnership value is received for your business. Some partnership opportunities such as the Olympic Games or FIFA World Cup may cover a multiyear term, but the majority of the value is derived from the Summer Olympics or the FIFA World Cup as opposed to other competitions within those agreements. The ROI delivered from sponsorships is rarely linear, so both parties need to align on where and when the value is being delivered. Failure to do so could result in a rights holder overvaluing the unaffected period of the sponsorship term while as a sponsor you may lose significant value.
Last, there is a growing trend toward the inclusion of performance-related conditions in sponsorship contracts, with sponsor brands demanding that payment, or part payment, is linked to minimum performance levels of the rights being offered. While rights holders have traditionally steered away from including these clauses, the past couple of years have seen brands requiring assurances on the partnership performance from the outset.
Having discussions around the expected ROI will ensure a smoother, more productive dialogue if there is disruption during a contractual term.
After a brand has entered a sponsorship, attention quickly turns to the way it will be activated and, again, planning for uncertainty is key.
Every project needs to have clear budget planning and milestones for when the next round of financial investment is required. By having this mapped out from the start, you’ll have a series of go/no-go decision points based on the current climate. This is as important for internal audiences as it is with suppliers and agencies.
Rights holders are taking a similar approach in planning for multiple scenarios, as we experienced in the lead up to the British and Irish Lions Tour in South Africa for which Fuse’s client Vodafone was a sponsor. Lions managing director Ben Calveley said in a recent interview: “We were running three or four different tours simultaneously. It was never certain until about March in 2021 that we were going ahead in South Africa.” Likewise, from an activation standpoint we were contingency planning for each of these different potential outcomes.
Activation ideas need to be adaptable to last-minute change. Take the UEFA Champions League opening ceremony, presented by Pepsi in 2021. The host city was changed on two weeks’ notice from Istanbul to Porto. Pepsi had planned a digital opening ceremony in place of a physical one because of COVID-19 uncertainty which meant the ceremony itself would be more inherently flexible. The digital-first activation plan allowed Pepsi to adapt quickly to reflect the new stadium hosting the final.
As we enter the summer sporting calendar, brands can take the lessons learned from the past two years to ensure they are well equipped to address any uncertainty that lies ahead.