Game-changers – the winning impact of sponsorship in sports

Since 1877, the Wimbledon tennis championship has been not only at the heart of British tennis but also a key event in the global sporting calendar. The global appeal of the sport and the Wimbledon brand has offered sponsors the opportunity to raise their own brand awareness and ultimately boost finances.

The same is said of other sporting events such as the UEFA Euros and Olympics. What better way to get a brand name out in the open than to associate it with an event where potentially millions of eyeballs are watching? The appetite of sponsors has, however, changed, and the rights holders have also become more sophisticated over the years.

Gone are the days when sponsors simply valued having their names associated with an event and a rights holder only wanted money to cover their expenditure.

Over the years, global events have been charging a premium for sponsors to be associated with an event. In turn, sponsors have been questioning the value that they receive and have been seeking a “partnership” instead, where they are able to receive various benefits and develop strategies around the partnership with the rights holder. Sponsors now ask, where does my money go? Is it reinvested in ESG initiatives or grassroots sports? How do we engage with a certain customer base?

Since 2004, nearly two-thirds of the net revenue from the UEFA’s Euro competitions has been invested in football development projects through its HatTrick initiative, including building and improving football stadia and training centres and implementing standards and initiatives relating to grassroots and women’s football.

The benefits of sponsorship arrangements are clear not only for individuals, brands, sports teams, governing bodies and events, but also for the wider sporting industry and community.

What are the key provisions needed in a sponsorship or partnership agreement?

The key provisions to include within a sponsorship agreement are:

Objectives

It sounds obvious but it is vital that the objectives are clear. Is there an awareness campaign? What are the activations available to the sponsor? What opportunities do they have to engage with other sponsors? Crucially, how is the sponsor’s brand going to receive maximum exposure? A lot will depend on the level or tier that the sponsor engages at but an important consideration for a sponsor ought to be exclusivity in its field, at least to some degree. The parties involved need to ensure that their goals and objectives align so that both can share in the success of the partnership.

Fees

These provisions can vary from variable to fixed fees, including timelines for payment, any profit-sharing arrangements, licensing fees and any other incentives. There may also be an element of value-in-kind services being provided by a sponsor in exchange for certain rights. Value-in-kind arrangements can be tricky but when done properly can underscore a true partnership.

Grant of rights

The rights received in return for a sponsorship fee can be wide ranging, depending on the parties involved. Sponsors are more sophisticated and rightly so; events wouldn’t exist without them. As a minimum, a sponsor would want to ensure that it is an “official” partner of an event in some capacity and receive various benefits as a result.

Tickets, attendance at events, player attendances and brand exposure are common. Rights holders and sponsors are, however, free to commercially negotiate other ways to maximise their association, and this usually comes down to the negotiating power of a party.

The rights being granted, including the ownership of any intellectual property rights, need to be clearly defined. This includes how any new intellectual property rights which are created jointly under the agreement are to be dealt with, as well as how each party can use the intellectual property rights of the other during the sponsorship agreement.

As mentioned, any exclusivity provisions should be clear. Sponsors are likely to pay a higher sponsorship fee for exclusivity of rights. A rights holder needs to make sure that it has the ability to grant exclusivity and if not, because of existing arrangements, what can it offer, if anything?

Consideration as to what will happen to any rights granted following termination, and any consequences following termination for each party, is also required.

Advertising

The sponsor, armed with various rights, should ensure that they are able to maximise those rights by embarking on an advertising campaign. A rights holder will want to ensure that such a campaign does not damage its brand.

Again, a partnership approach should be considered, although the sponsor should retain the creative element of the campaign. The extent to which each party can advertise and promote their brand, including any advertising obligations, will need to be considered. Along with this, obligations to ensure the goodwill and reputation of the other party’s brand is not damaged through the sponsorship agreement will need to be considered.

There can be certain rules surrounding advertising certain products and if advertising is aimed at children. This should be considered from a jurisdiction to jurisdiction basis as these differ.

Termination and dispute resolution

A sponsor will want to include provisions which allow them to get out of the arrangement if its association tarnishes its brand. Any negative association with an event or a rights holder can have significant consequences.

Such a provision also keeps a rights holder in check as it acts as a significant sanction to unruly behaviour. In addition, it is key for those involved that they understand how any disputes that arise as a result of the sponsorship will be dealt with. Therefore, careful consideration of the dispute resolution process is important. Do parties want to go public and through the courts or privately through arbitration in case of dispute?

There are many facets to consider when putting together a sponsorship or partnership agreement, from understanding what your goals are to being able to leave the agreement if necessary. It is, therefore, important for parties entering into sponsorship or partnership agreements take legal advice to ensure their interests are protected and the key considerations set out above are dealt with.