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Sponsorship Market Dynamics Favour Premium Sports Brands in Pandemic

There is an expectation that sponsorship sales at premium sports properties tend to be more resilient during economic crises. Sportbusiness.com’s Matthew Glendinning looks at whether big really has proven best during the pandemic.

In tough economic times, high-end sellers like to present their products or properties as exceptional. It’s no different in sports sponsorship, where there is an expectation that sponsorship sales at premium properties – those sport brands that combine prestige with big audiences – will come through whatever the macroeconomics.

Some would argue this has been the case in the pandemic – that the big have survived, thrived even, while lesser properties have suffered.

But sports marketing experts paint a more complex picture. Premium sports have indeed shown greater resilience during the pandemic, but their relative success has been driven not just by their innate attributes, but by their ability to respond to the new market conditions.

Market trends

Tim Crow, a sponsorship consultant and former Chief Executive of the UK’s Synergy agency, says the ‘flight to quality’ concept mischaracterises the market over the last 12 months.

“There have been two big trends. Demand is down overall because so many traditionally high-spending sponsor categories have been hit hard by the pandemic, but brands from categories having a good crisis have come in and spent at all levels, not just premium. So the dip has been much smaller than the forecasters predicted.”

Others agree there has not been a major differentiation in the volume of deals at all levels of sponsorship, but that rights fees for lesser properties have been hit disproportionately. Phil Carling, Managing Director of Football at the Octagon Worldwide agency, explains: “It’s certainly the case the secondary and tertiary-level properties have had to work harder to attract sponsorship than they’ve ever had to do before, and I think they’ve also had to be very flexible in terms of price.

“For premium properties, our experience has been that, whereas for the last probably five years we’ve seen rights fee inflation between cycles of between 15 and 20% – sometimes higher with the really elite properties – that is not currently the case. With the premium properties, flat is the new good and the further down the food chain you go, they’ve had to put more inventory into the deals, or they’ve had to trade on price.”

Premium variations

According to research by the European Sponsorship Association and research firm Nielsen Sports, the European sports sponsorship market shrank 9% in 2020.

Nielsen Sports told SportBusiness the effects of the pandemic on smaller sports have been more pronounced, partly due to the greater relevance for sponsors of spectators, who have been shut out of stadiums and arenas around Europe to safeguard health: “Whereas in football, [for example], media presence is more relevant, the smaller sports’ visibility for on-site spectators plays a greater role,” the company noted.

Yet there are also wide variations at the premium end, with some of the biggest sports properties in the world registering double-digit falls in value.

Properties like the main shirt deals at Manchester United and Barcelona – two of the most iconic in sport – were sold or extended over the last six months at discounts of 18.4% and 45.4%, respectively. German software company TeamViewer will pay United $65m per season, compared to the incumbent, car brand Chevrolet’s $79.8m per season. E-commerce brand Rakuten will reportedly pay Barcelona $35.2m for the 2021-22 season, reflecting the wider economic situation and a change in asset mix, where its currently pays the club $65.4m per season.

Crow sees the results of each deal through the lens of the club’s specific circumstances rather than their premium context.

“United went to market at the height of the pandemic, had multiple bidders at the table, and achieved a number that most of their peers could only dream about before the pandemic hit. By any standard that is good business, and the contrast with Barcelona, in particular, is instructive. Barcelona has been a club in crisis on and off the field for some time now, so it was no surprise to see them come up short: no-one new was ever going to come in and buy the level of risk they were selling, which the pandemic exacerbated. They’ve become a price-taker rather than a price-setter and it will be a long road back to re-build the balance sheet as well as the team.”

B2B upgrades

Carling also views the United deal as indicative of a trend that has emerged in the pandemic, of B2B companies taking up positions formerly held by B2C companies.

“Historically, the big premium properties have been the home of the B2C brands because the primary benefit is the eyeballs and the media-facing inventory,” he says. “What you tended to find was that technology companies, because they are essentially B2B businesses, would go for quite low-key supply level deals or partnerships with a premium rights-holder. If you look at the Man United deal being a bellwether for this transformation, you’re now getting technology companies who are prepared to swallow the inefficiencies around some of the consumer-facing inventory. They’ve seen this as an opportunity to build fame and to build a brand with a wider consumer base than would have been historically the case.”

Carling adds that this trend had built on an already growing interest from technology companies in marketing platforms from sports, entertainment and leisure: “A lot of technology companies are seeing sports, entertainment and leisure as a key sector to develop their own position within the marketplace. What they see in terms of the benefit of working with ‘quality rights owners’ is that they can build up a proof of concept around the use of their technology and sell the story around that to potentially 2,000 other businesses. The higher up the food chain you can go in terms of getting a flagship property as a showcase for your technology, the better.”

There has also been a groundswell of B2C new economy companies, from food delivery services to online car retail, entering sport at the premium end. Last summer, for example, online used-car sales portal Cazoo became Premier League club Everton’s main shirt sponsor and followed up in the same role with rival Aston Villa. Carling believes that Premier League clubs from the mid-tier upwards should be considered premium and that brands like Cazoo on “a pathway to becoming bigger businesses” may next set their sights on clubs in the top six.

US perspective

For the CAA Sports agency, working out of New York, the past 18 months have seen the agency complete more than $1bn in sponsorship transactions on behalf of its clients, which include Formula 1, Red Bull Racing, Golden State Warriors, NCAA, Riot Games, USTA and USGA.

Sponsorship sales executive Rob DeAngelis, recently appointed Co-Head of CAA Sports’ Global Sales and Partnerships, told SportBusiness the agency defines premium by “the quality of the property, not necessarily the dollar value assigned to that property”.

As in the European context, the rise of technology company sponsors has been a key factor in US sales for premium properties.

“Within the last year, there’ve been certain categories, such as technology companies, which had a pretty strong year and where their desire to innovate within sport did not change,” says DeAngelis. “We weren’t able to do business as usual but were able to find unique and different ways for them [technology-based sponsors] to show up.”

DeAngelis cites the example of video communication platform Zoom, which became one of the stand-out brands during the pandemic from a business standpoint. Zoom, he says, “became a verb for video communication” and was therefore less concerned with brand building, and more invested in showcasing what it could do in new and engaging ways with activation-led programmes such as the Virtual Paddock Club in Formula 1.

DeAngelis mentions one other factor in the agency’s favour relating to its premium sports sales not to be dismissed – timing. He says it takes the agency, on average, one year before a partnership is brought to execution, so some of its major deals have roots in 2019. Meanwhile, as the calendar has turned this year, there has also been a wider market pick-up: “I think there’s some psychological element to the fact that companies are really looking to put themselves in a position to be the winners when we all come out of this mess.”

Major league flexibility

New York-headquartered Excel Sports Management, a full-service sports management and marketing agency, also works with premium sports, primarily the NBA, MLB and PGA Tour.

Emilio Collins, the company’s Partner and Chief Business Officer, and a former Executive Vice-President of Global Marketing Partnership at the NBA, believes the flexibility of premium rights-holders in terms of inventory has been key to keeping the deal pipeline open.

He points to the NHL’s response to the pandemic, which has been just as instructive as any of the initiatives led by the NFL, NBA and MLB.

“I have thought for a while that the NHL doesn’t really get enough credit in North American sports,” Collins says. “Obviously, a lot of the attention goes to the ‘big three’, but I think NHL is maintaining and even growing its value proposition. The NHL has been able to focus on innovation while building authentic stories with brands that enhance fan engagement, which has attracted new sponsors, even in the pandemic. For instance, if you look at their roster of technology partners, they have developed authentic integration stories with some of the best in the world, from Verizon to SAP, as well as the recently announced deal with AWS [Amazon Web Services], and, one that doesn’t get enough attention, Apple.”

Like his European counterparts, Collins concludes that lesser properties have not profited from the technology sector’s resilience in the same way.

“To a lesser extent, fringe properties have also benefited from the new economy marketplace, but generally speaking, brands placing sports marketing bets in these sectors are looking for highly-prominent positions with the potential to drive real market share.”

Sport Industry Group
Sport Industry Group

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