Sponsorship Fire-sales

Redmandarin explores the recent explosion of last minute fire-sales for rights and the potential impact on the greater value of sponsorship

Were I to decide today to book a flight next year to escape to some remote corner of the globe, there's a reasonable chance that in return for my perceived loyalty to that particular airline, the fact they've banked my money well in advance and that I have, in effect granted them the right to market me all sorts of nonsense in the build up to my Big Vacation, I will get a pretty chunky discount on the list price of my flight. Should I, however, decide that I need that flight tomorrow, I'd be reasonably accepting of the fact that my chance of a cheap seat had gone and I'd have to pay substantially more.

The basic premise of committing early, building relationships and paying less, operates on many levels of commercial life but, as is often the case in this peculiar business we work in, the sports marketing industry and the rights sales sector in particular often operates as a law unto itself. There is real concern amongst a number of major sponsors that the value of their long-term commitment to sports properties is being seriously eroded by the trend towards last minute fire-sales by rights owners and their agents. This year sponsorship deals have been signed within days both of the Olympics and Euro 2000, with zero chance of those sponsors adding any incremental value to the events other than a rights fee substantially less than that paid by a sponsor who signed up eighteen months ago, and very little likelihood of much return on investment for them in that short space of time either.

Indeed longer-term sponsors are finding that by helping to ensure the success of properties through substantially exploiting them through their own marketing initiatives, the price is hiked up substantially when it's contract renewal time. They're effectively paying for improved benefits which they themselves have helped to create. The outcome of all of this? Disgruntled sponsors, a confused, cynical or ambivalent public and fraught agency/rights holder relationships.

Why is this happening? In a bid to boost the bottom line, property owners are accepting extraordinary guarantees for their rights from agencies who then don't necessarily have the interests of the property at heart when it comes to putting together long-term commercial packages. It's a scramble to generate as much revenue as possible, often based on spurious media equivalency figures, and regardless of the tremendous marketing value that sponsors can bring if the deal is signed early enough. As the sellers run out of doors to knock on, panic-selling sets in, the price goes down, and the event appears cluttered and over-commercialised.

Single sponsor properties (soccer shirt sponsors, event title sponsors, and so on) fare better. Demand will continue to outstrip supply for successful properties and opportunities for shared ownership / risk / revenue are greater. But for multi-sponsor properties, increasing numbers of sponsors are saying, enough. There either has to be a far higher recognition of the intrinsic value of long-term relationships with relevant sponsor-partners willing to help grow and develop that sport, or an increasing number of sponsors will pursue the route of event ownership and creation, with or without the jurisdiction and involvement of a governing body. Whilst this may be good for the sponsor, and quench the thirst for sport of the public and broadcasters, without care it can easily result in meaningless "exhibition" events and conflicting and competing interests within the sport itself.

It's difficult to envisage a situation where last-minute sponsors pay more for the privilege, but we live in hope that one day the need for the current fire-sales approach will be eliminated. I'd like to think that properties and their agencies will pursue smaller numbers of sponsors, secured earlier with benefits for being the first on board, using independent valuations to fully assess the potential ROI of a deal, targeting potential sponsors better and acknowledging more specifically the mutual value of a partnership approach. Otherwise more and more sponsors will turn their attentions elsewhere, to events they create and own, to other less cluttered areas of the entertainment marketplace whose commercial potential remains completely untapped, or to that territory that properties would far prefer didn't exist at all - that of the ambush marketer.

Sally Hancock
Chief Executive
Redmandarin