17 Apr Stoppage time for sponsors: Managing partnerships during a pandemic
Sport’s enforced hiatus has created untoward uncertainty for everyone in the sports industry, not least brand marketers and agencies. The full impact of the Covid-19 pandemic on the sponsorship sector will only become clear in time, but the current absence of live events throws up a host of dilemmas.
If there is one thing the sports industry knows for sure about the current coronavirus shutdown, it is that no one has ever seen the like before.
With rights holders and promoters around the world consumed by unthinkable logistical demands and an imminent existential threat, their sponsors have been left wondering where their own obligations lie and just what, frankly, comes next.
“For the industry and our clients, there was an initial sense of shock which may have also crept into a little bit of panic because what we’re dealing with here is just unprecedented – as everyone keeps saying,” recalls Lisa Parfitt, managing director of London-based marketing agency Engine Sport & Brand Experience.
For Joel Seymour-Hyde, the head of UK at global sponsorship agency Octagon, there had been warnings of what was to come from colleagues to the east in Asia and Italy. Nevertheless, the speed and severity of disruption that hit sport in the US and Europe in the week leading up to Friday 13th March – when a wave of major leagues and competitions came to a halt within 72 hours – was astonishing.
“That Friday was, without question, probably in the top three most challenging days of my career in the sports world in terms of the volume of information and consequence that was happening,” he says, speaking to SportsPro later in the month.
The lockdown measures that followed meant that internal set-ups and communication became an immediate priority. Since then, calendars have been emptying and shifting on a daily basis. What is animating partners most is the difference between a postponement and a cancellation – where the latter means a look at the contracts and the former preserves some chance of recovering lost revenue.
Even then, the uncertainty over when and in what form events can resume is creating its own headaches. Parties on both sides are being advised to familiarise themselves with force majeure clauses but there will be cases in which these may not provide adequate cover over a protracted term.
“There’s definitely going to need to be a conversation around making good on terms, on thinking about assets or benefits that could be substituted in the future,” Seymour-Hyde says. “But it won’t always be as straightforward as that.”
Clearly, not every sponsor will be facing the same set of dilemmas. Some will be midway through the latest three or four-year term of a long-term deal, but others will have just seen one-off investments wiped out. Parfitt notes that brands new to the sponsorship space have tended to be more anxious about their options but that in every case “you’re talking about CMOs, CEOs and heads of brands dealing with a situation that they’ve never been in before”.
Promotional campaigns will be mothballed, some of which will not be relevant when seasons and events do resume. Decisions must be made on whether branded merchandise – even for events like the Olympics and Uefa Euro 2020, the rights to which will be held over to confirmed new dates – are retained or reproduced. Income from pouring and distribution rights will be delayed for food and beverage brands, while traditional hospitality is impossible.
At a certain point, the dates on contracts will no longer match the seasons to which they are connected. Premier League soccer club Liverpool are due to switch kit suppliers from New Balance to Nike this summer. They are also two wins away from becoming English champions for the first time in 30 years but cannot be sure when they will get the chance to lift the trophy. In those kind of transitions, Parfitt expects goodwill, sensible conversations and reasonable solutions to be the order of the day.
Octagon has been performing its due diligence and advising clients on the detail of contracts but, like Parfitt, Seymour-Hyde is clear that this is not a moment for rushed decisions.
“Our broad advice is definitely, at the moment, to take time, take stock,” he says. “Do not go aggressive early, because these are partnerships, they are long-term and everybody is working around the clock to try and make good. I think rights holders in particular have so many challenges at the moment that a sponsor coming in, slightly insensitively, all guns bowed, pointing at clause 11.7 of the contract is not going to be 100 per cent helpful.”
Major sports sponsors like ABInBev are moving budgets towards positive programmes and away from partnerships
International sports marketing advisor Giles Morgan, who led HSBC’s global partnership strategy from 2005 to 2017, insists that stepping away would be an ill-advised move for any sponsor at this point.
“I think right now, if I was doing my old job or if I was working for a company that was in sponsorship, the message I would be saying to those fans is that I would remain strong and we will be aligned with them,” he says. “Because the coronavirus is temporary. We don’t know how long temporary is but it is going to be temporary and there is going to be a return. Being a fan is about being loyal and we respect loyalty.”
Those sponsors who are sticking around will not all be thinking about activating sports partnerships in a time of crisis.
“Our first response as an organisation is not to think about marketing and big wins,” says Amar Singh, the London-based head of soccer content and strategy at beer brand Budweiser, who oversees partnerships with England’s Premier League and Spain’s La Liga.
Having made staff wellbeing its first priority, Singh says, the global shift at Budweiser parent ABInBev has been to redirect “a lot of our marketing resources and budget away from partnerships and towards ideas for good, and positive programmes”. Out-of-home advertising space has also been handed over to public health authorities.
There are other matters that can fill the time. As Seymour-Hyde notes, the enforced hiatus is coming at a point which, for many northern hemisphere markets in particular, “is very, very aligned to the busiest live experiential events season of the year: March to August”. Sponsors are highly likely to have committed “budget, energy, resources, people, agencies” to “some form of ‘real life’ activity”, and now find themselves asking what they can do with all of it.
Core strategic tasks like sponsorship portfolio reviews and value analysis would be high on the agenda. “Measurement is obviously a massive, massive component part of sponsorship,” says Seymour-Hyde, “but it’s also something that, again, if everyone’s honest, is often a bit of an afterthought. And it’s hard to dedicate the time to dig into the detail of: ‘Does this really move the needle for my business?’”
Morgan is currently acting as a consultant for Dallas-based company Pumpjack Dataworks and sees a huge opportunity for rights holders in “owning your data rather than renting it from the likes of Facebook”.
“All of these organisations have that data already,” he adds, “it’s just not joined up.”
If they can make the most of that, Morgan believes rights holders have a great chance to “paint the picture of the fan” that can transform their proposition to brands down the line.
“I found it fascinating because as a former buyer of sponsorship, which I was for many years with HSBC, most of the business cases that came to me from rights holders weren’t business cases at all – they were a kind of emotional case based on a little bit of media data, and that hopefully was enough to do the deals that we did,” he explains. “That meant that the sponsorship world was very much a buyer’s market – ie, the sponsor had the power because the rights holders weren’t really selling a proper value proposition. I think that’s all changing now.”
In the meantime, a number of rights holders have diverted their own energies into activities that can fill the gaps left by live sport and organised participation. Plenty have opened up their archives to allow fans to enjoy classic matches and events or original filmmaking. Set-pieces like British horse racing’s Virtual Grand National have provided another point of focus, while other organisations have pivoted to esports.
In some cases that has allowed brands to experiment with bringing together different parts of their target audience. Red Bull, for example, pressed cricketer and brand ambassador Ben Stokes into unlikely service as one of its drivers in the Formula One Australian Virtual Grand Prix in early April.
“Ultimately, sports marketing and the use of sport in marketing is a brand’s opportunity to connect with culture,” argues Parfitt. “And this is a cultural moment that we’re going to remember and is going to change generations. This is a great opportunity to continue to be creative and come up with great ideas.”
Engine has been helping its clients identify opportunities in different channels, “doing a bit of education” on webcasting and toolkits for virtual events while also exploring voice and podcasts – a rapidly emerging area even before the coronavirus outbreak confined people to their homes. Content ideas can date or be reproduced quickly, which is why Engine is also advising partners to look ahead at plans that “have the right tone and authenticity for those brands a little bit further in the future”.
For Seymour-Hyde, brands also need to be conscious of how the mass audience for sport – “the group that turns it from being a niche experience into a mass experience” – will dissipate. Younger fans may be attracted by esports and gaming, while a hardcore might enjoy servings of social or archive content. The rest may be scattered and “drift into the ether of other content, whether that’s OTT platforms or whatever it may be”.
As Morgan sees it, though, the fact the usual channels are closed is all the more reason for brands to show empathy for the plight of fans. In that context, he believes sponsors can get through the interruption by getting back to best principles.
“Communicate with them,” he says. “Talk to them. Everybody’s feeling that same sense of confusion and fear and uncertainty about what’s going on.”
In Budweiser’s case, the crisis is being seen as a moment to step up. As well as handing over key advertising space, it is among those major companies to repurpose its manufacturing chains to support healthcare needs. It has converted surplus alcohol removed from non-alcoholic beer into 50,000 litres of disinfectant for hospitals across Europe, and has also created 26,000 bottles of hand sanitiser. In the US and Canada, meanwhile, it is hosting blood donation drives for the American Red Cross.
“We do feel like this isn’t a time to be screaming about partnerships and sponsorships,” says Singh. “It’s more about channelling our energies and our resources into making a difference and doing our bit at a time like this.”
Closer to its usual setting, Budweiser is also running the #SavePubLife campaign in the UK, “inviting pub goers and consumers to buy redeemable gift cards for their favourite pubs” and matching funds in a bid to raise UK£1 million for venues closed due to social distancing measures.
A thriving pub scene is obviously desirable for a company selling beer, but Singh also believes the brand can “galvanise” relationships with the Premier League and its teams through the campaign.
“In my role as head of football content and strategy, I’m looking to leverage some of our connections in football with the clubs and supporters groups to make sure that the pubs around stadiums and the pubs that are beloved by football fans are also part of this as well,” he explains.
More widely, Morgan argues that sponsors should be thinking carefully about where they can make meaningful, logical positive contributions during the crisis.
“You’re seeing this in life,” he says. “Round the corner from me there’s a coffee shop that can’t serve people coffee right now, so it’s completely changed its business to delivering fruit and vegetables round the community. That’s fantastic. When they come back to being a coffee shop, I can guarantee that the people of Wandsworth, where I live, will be the most advocate, loyalest, most supportive customers to that coffee shop because of what they’ve done.”
The media activities being trialled now could inspire concepts that change the industry, or they could shrink from view once live sport reappears. One trend that both Parfitt and Seymour-Hyde see persisting is a bolder, more creative use of athlete talent.
Leading stars have been turning to social platforms as a means of self-expression in their inactivity while conversations on channels like Instagram Live have also thrown up unusual, compelling combinations. Highlights have included the NBA’s Stephen Curry interviewing key US infectious diseases advisor Dr Anthony Fauci, and Fifa Women’s World Cup winner Megan Rapinoe shooting the breeze with Democratic congresswoman Alexandria Ocasio-Cortez.
“You’ve got real interaction between global talent and the general public,” Parfitt says, “and I think it’s actually really proved what’s possible using talent that we know we’ve got access to through sponsorship agreements or ambassadorial agreements.”
For all that, this long period of inactivity will be incubating enormous financial difficulties that are likely to outlast the current crisis. Parfitt notes that even those brands who choose to spend their way out of any economic downturn may well be set to deprioritise sponsorship.
“That ultimately undermines the value in sponsorship as a platform to build brand equity,” she adds. “So while some rights fees might have been committed, the activation budget might get cut along with all the marketing spend.
“The ones that are probably at greatest risk is that combination of sponsorship that’s approaching renewal, and probably paired with brands that have been impacted by Covid-19 – so the airline industry, travel industry, restaurants, manufacturing. It’s going to be really, really difficult – nigh-on impossible – for those that are reaching the end of their sponsorship agreements to make the case for investment going forwards.”
The reckoning has already come for some and Morgan concedes that the ramifications will be wider in the long term, with parts of the industry set for “one hell of a kicking”. Despite that, he still sees cause for hope elsewhere – particularly for those who can adapt their thinking to new conditions.
“Right now, if I were a rights holder, I’d be thinking about who the smartest people are I can hire to help with the commercial modelling in the brave new world,” he says. “It’s difficult to entirely fortune-tell. I think there will be casualties. But if you think about 2021, what it looks like the diet of sport is going to be, we’re going to be inundated with sport around the world. And I think that’s very exciting.”
Already, brands and rights holders will be thinking ahead to the grand return of something like business as usual. Seymour-Hyde points out that “there could be a lot of people who will be in difficult situations come that point”, which might leave brands best advised to row back on hospitality and the “lavishness around the edges of sport”.
“That moment when ‘the sport’ comes back is going to be a hugely significant cultural moment,” he says, “you could argue, the likes of which we won’t have really ever seen. Across any metric: anticipation levels, live attendance figures, TV audience figures.
“That first weekend could be phenomenal. So the opportunity for brands to capitalise on that is massive – if you get it right.”