Brands to ‘Hit Pause’ on Sponsorship

19 Mar 2020

Leading sponsorship industry figures expect unprecedented disruption to the sponsorship ecosystem over the coming months and a break in deal-making because of the coronavirus pandemic.

As one of various agency executives and sponsorship consultants to feature in a round-up of opinions, independent consultant Giles Morgan told SportBusiness that the pandemic represented “the greatest single challenge to the modern sports industry as any in the past 50 years”.

Morgan, formerly Global Head of Sponsorship at HSBC, said: “The historic commercial landscape of sport was already in a state of flux and uncertainty – with the disruption of the TV broadcast model over the past 15 years creating massive revenue challenges. But the societal fallout across the COVID-19 virus in every country in the world may well be the moment when the sports industry stops ineffective and inactive navel gazing – and is forced to start proactively facing the reality of an entire financial reboot of the whole commercial landscape and existing financial model. Even the very concept of globalisation is now being challenged in society and the knock-on effect for international events will be affected for months and years to come.”

Meanwhile, Dan Haddad, Head of Commercial Strategy at Octagon UK predicted that, from a commercial perspective, it is “highly likely that the majority of brands will have hit pause on any ongoing sponsorship discussions related to both renewals and new investments. The broader economic disruption caused by a prolonged period of social distancing will result in a higher likelihood of incremental sponsorship spend being cut over the short term. Looking at the sports marketing industry as a whole, the biggest threat is that many campaigns and activations planned around major events like the Euros, Olympics and Champions League will now be pulled, reflecting a broader theme of brands pulling non-essential/committed media spend. The knock-on effect on the wider industry – production, experiential and creative services companies is huge, with freelancers and smaller businesses, in particular, facing significant financial pressures due to cancellation of major events.”

Rob Mills, Global Chief Executive and Director at the Gemba agency warned that, apart from the obvious financial impact on sport organisations, “we are entering a period of ambiguity relating to sponsorship contractual obligations between rights-holders and brands. We have already been asked to consider the impact on sponsorships arising from matches cancelled at the Rugby World Cup due to the typhoon and this current situation will dwarf the Japan scenario. Our experience is that ‘force majeure’ clauses are often ambiguous and may be interpreted differently depending on postponement or cancellation of events. The need to better understand the component value of sponsorship contracts will never be higher.”

If there are opportunities amid the destruction, Tim Crow, an independent consultant and former Chief Executive of the Synergy agency, said that the crisis may lead to a better understanding of the interdependence of interests within the sports industry.

Crow remarked: “What has been revealed is that the strength of the ecosystem of sport – that it’s a giant joint venture – is also its fragility. We’re going to find out not just how resilient that ecosystem is, but how collaborative it needs to be for everyone to get through this. That might turn out to be a good thing. I feel for sports leaders right now. Every sports leader is now trying to find a way to hack the programme.”

From a commercial perspective amid the wreckage, Haddad sees two opportunities for brands – firstly, that the situation will create a buyer’s market for sponsorship rights.

“There will be huge value in the market for brands brave enough to commit budget rather than wait until a return to normality….for instance, the ECB’s ‘Hundred’ competition still lacks a presenting partner and [assuming the competition can go ahead] is against the clock at the worst possible time,” said Haddad. “Secondly, there is a clear opportunity for brands to support the sporting organisations/properties that will be most affected financially by prolonged disruption to the calendar.”

From an activation perspective, he said brands should be looking to shift spend into digital media “where eyeballs and engagement will be more concentrated than ever”. Brands should, according to Haddad, also be thinking about planning campaigns that maximise the ‘return’ to sporting competition.

Both Morgan and Mills suggested that the period may bring some good by allowing time to assess and connect with the most valuable asset for any rights-holder: the fan. Morgan said it was time to build up a new view based on ownership of data, engagement, and real-time information.

Mills said: “We may look back at this period as the ultimate period for innovation. How can we connect with fans in different ways? How can we harness the massive fan bases of sports organisations to help people during this global health challenge?”