The subject of inflation in the sponsorship industry has been discussed before in this column, most notably the observation that rights fees are polarising between the big properties with international appeal and all of the rest, where values have stagnated.
In the past two months, we’ve seen two massive deals in particular: Toyota and the IOC ($80m p.a.) and Yokohama and Chelsea ($60m p.a.) as well as a series of domestic deals for the Tokyo 2020 Olympic Games that are each worth an estimated $125m between now and the event.
What is becoming clear is that major companies are willing to spend tens of millions of dollars to link their brands to sport, whereas in the past the commitment ran into the millions. While marketing directors have been convincing their boards about projected return on investment, the boards have no doubt had to struggle to convince both shareholders and, occasionally, the public that this is good business. Indeed a paper in this issue considers the impact of sponsorship on stock prices and shows a mixed response from the investment community and a strong sense that it has yet to fully understand our industry.
Brands concentrating on fewer assets can gain huge global exposure and focus their activation resources to making those sponsorships work. The argument goes that if you spend $80m on one major rights holder, rather than $1m each on 80 (smaller) rights holders, you might have less overall brand exposure, but you will have a more consistent message and you won’t have to split your internal team into 80 units to manage each property.
This rationalisation by major companies is contributing to lower rights fees among smaller properties, but does that provide a real opportunity for other brands to make a disproportionate impact to the amount that they spend? For example, Chelsea’s new deal is approximately 80 times greater than that received by the English Premier League’s lowest earning club, Burnley. Yet Burnley has to play Chelsea, Man Utd, Arsenal, Liverpool and the rest twice each season in matches that are televised worldwide. The brand exposure is huge.
Simply taking the on-shirt branding, however, might not do a lot for brands, except to generate a degree of awareness. But given the low cost of rights acquisition, it is a mystery why some challenger brands are not taking these rights and really going to town with their activations. It would be very interesting to see a brand with global resources and a sponsorship budget of say $8m, spend $.5m on rights and $7.5m on activation. The potential for success is enormous if the sponsor were to work with the rights holder to position each as, for example, the friendly but cheeky ‘upstart’. There are plenty brands for which such a strategy could work. Red Bull, for example, spent its formative years sponsoring ‘characters’ in given sports rather than the most successful stars. It cost less and it worked.
To date the same approach hasn’t really been applied to team sports. It certainly couldn’t be a widespread phenomenon as it would quickly become cliched, but there must be a brand out there willing to do something different. Remember the old saying: ‘Everyone loves an underdog’. Surely we don’t want it changed to ‘Everyone loves an underdog – except sponsors’? Michel Desbordes, Editor