Red Thread

Stop Press. FIFA collapse imminent. (not)

Whenever large sponsorship sums are involved, there is so much nonsense talked.

Take the latest news : the absence of national sponsors for the FIFA World Cup in 2018. ForbesSports Business Daily, the New York Times, the Guardian and even the usually right-talking Mark Ritson are all jumping on the bandwagon of karmic judgment. (Top marks to WSJ.)

The collective projection is that FIFA’s history of appalling governance is finally catching up, sponsors are fearful of association and that a cash crisis is looming for Gianni Infantino unless he flees to ignorant sponsors in China. Let’s take a closer look.

The coverage is based on the fact that only one domestic business – Alfa Bank – has occupied any of the 20 slots available to local sponsors. Ergo, 19 slots stand vacant. But, if we look back across the last 20 years of FIFA WC sponsorship, FIFA has never managed to sell 20 national sponsorships, or even 10. The average is six or seven. Now, while FIFA might have shown unpardonable lack of self-awareness in the past, they could never be accused of not keeping their eye on the money – so it’s hard to believe FIFA naïve enough to budget revenue for 20 local sponsors, instead of a prudent five or six.

Besides, domestic sponsors just represent the icing on the cake in terms of FIFA Marketing Rights: the lack of six domestic partners (at US$8m each) equates to less than a percentage point in broadcast rights inflation.

Financially, it really isn’t doom and gloom for FIFA : according to their 2016 accounts, 76% of revenues for the 2015 -2018 cycle were already contracted. And, as FIFA is now adhering to the new International Financial Reporting Standards, and IFRS 15 in particular, its financial reporting is very clear.

The second part of the theory is that local Russian businesses have been deterred by FIFA’s corporate reputation. Seriously?

Two reality checks here. At least.

One: sponsors simply don’t walk away from a major platform such as FIFA WC because they disapprove of the ethics of a rights-holder. Sponsors may disapprove. They may exceptionally go public. But they don’t walk away. An ambassador yes, but not a rightholder. To believe that Emirates passed up another two cycles of sponsorship because of FIFA’s behaviour is just wishful thinking.

Two: there is no evidence that sponsors are negatively impacted by rightsholder reputation. For consumers, businesses are sponsoring the World Cup – which happens to be run by FIFA. Simple as.

It’s a very whimsical notion to imagine that Russian businesses are so brand-conscious that they are turning their backs on World Cup sponsorship because of a toxic FIFA brand. There are three altogether more innocuous and more likely explanations for a lack of local sponsors.

  • the practise of sponsorship is not so developed in Russia and businesses do not fully understand how to generate value. We’re currently working in 15 markets and each market views the value and the practice of sponsorship differently;
  • the political sponsorship which delivered such staggering corporate revenues for Sochi 2014 is not present for FIFA WC 2018;
  • sponsorship of Sochi 2014 did not make for a great case study for sponsorship impact in Russia.

What’s more material – from a sponsorship perspective – is FIFA’s inability to fill its full roster of World Cup Partners, the lower tier global partners. Rights fees for these are more opaque but estimates stand at an average contract value of US$65m.  In 2014, FIFA had 8, now it has 4. So their absence is more significant – because their revenue impact is far higher and because they’re a better barometer of corporate willingness to have FIFA as a bedfellow.

Patrick Nally, who famously helped set up FIFA’s first international marketing program four decades ago, put it bluntly: “Unless you are from China or somewhere like that, …. no corporation is going to consider it safe to get involved with FIFA.”

But quite often what we see in comments like that is nothing but a form of neo-colonialism. FIFA is far from alone in looking to China: many western football teams have welcomed Chinese investment, without attracting the scorn reserved for FIFA. And, as well capitalised, commercially bullish but almost unknown Chinese mega-brands increasingly look for a world stage, FIFA WC provides a platform with incomparable value.

It is fair to say that FIFA’s reputation could put off western businesses from contracting sponsorship, but, practically, that’s a lag in perception. At Redmandarin, we were openly critical of FIFA under the direction of Sepp Blatter. But so far as reputation is concerned, FIFA is now making all the right noises to be able to claim that poor governance is a thing of the past. Given the strength of the platform it offers, potential partners will be more than happy to believe in FIFA 2.0.

What is far more plausible as an explanation is that the dubious selection of Moscow and Qatar as hosts for the next two WCs substantially reduces the appeal – and to a lesser extent the value – of sponsorship until 2026.

As soon as South Africa was announced, or Rio, it was easy to imagine a colourful, warm and exuberant celebration of world football. The largest association with Russia, on the other hand, is suspected state sponsored violence at Euro 2016. Qatar doesn’t evoke a carnival of football, but heat, bribery and an event devoid of football spirit. And although the FIFA WC is a global property, potential commercial value within the host nation is a very real factor for sponsors. In Russia and Qatar, it’s difficult to see much upside.

FIFA still has a mountain to climb. There are weaknesses with its very sponsorship model which will continue to inhibit sponsorship by B2B businesses. It risks reducing itself to a mere promotional mechanism – albeit the largest on earth. But although FIFA has been guilty of reckless arrogance and appalling governance in the past, it is changing. But large organisations are slow to turn around. Media opinion can be even slower. It’s clear that many people want to see FIFA humbled. (FIFA, a demonstration of contrition would be welcome.)

By all means, let’s keep up the scrutiny on FIFA. But let’s also be clear that sponsorship, properly practised, imposes regular commercial disciplines. And simplifications about toxic brands are rarely helpful or instructive.

Red Thread

the right rights: Beats by Dre – The Game before the Game

Aside from the annual advertising festival known as The Super Bowl; the FIFA World Cup is the next biggest demonstration of creative prowess combined with a fight for share of voice.

And so, as the tournament kicks off, we all get comfy in our critic’s armchairs, yellow pencils in hand, ready to judge the winners and losers in the battle for hearts, minds, eyes, and wallets.

This year, one brand stood up to be counted ahead of the others in an ambush campaign that kicked off in advance of the tournament. Beats by Dre launched their acclaimed ‘The Game before the Game‘ advert by agency RG/A on 5 June, and it has since been viewed over 23 million times on YouTube.

By entering into rights deals with individual players, Beats managed to use their allocated filming time and product endorsement to promote themselves around the key football event, without rights to the event itself. In the words of AdWeek ‘Beats by Dre just out Niked Nike’.

At just over 5 minutes, the advert was already crossing boundaries between advertising, a music video, and a short film, but by weaving together a compelling narrative with impressive cinematography and an engaging soundtrack, RG/A managed to deliver content with emotion, creative excellence, and product placement that didn’t shy away from saying – I’m an advert, this is what I’m selling.

Red Thread

Sponsorship as organisational change-driver

For Redmandarin, a full 90% of client briefs relate to deepening brand engagement. This might be expressed as re-positioning  shift of audience focus, reappraisal, building NPS or advocacy, but, ultimately, it comes down to people feeling warmer about the brand.

But there’s another objective which surfaces much more rarely – organisational change.

And sponsorship’s potential is enormous.

We came across some great examples in our research for Working the Olympics.

Visa and Samsung are the textbook studies for Olympic brand transformation, but a less well known example, is AMP, in Sydney 2000. AMP is an Australia-based financial services company, formerly the Australian Mutual Provident Society, which was a non-profit life insurance company. In 1998, it was demutualised and listed on both the Australian and New Zealand stock exchanges.

American CEO George Trumbull had been employed to manage the listing and drive it hard. In his words: ‘I took Olympic partnership to be a deliberate, all-encompassing transformation tool that would reduce the time I would need … from 10 years down to 5.’ And he used the Sydney Games very successfully to drive the internal cultural transformation from an older style, older world business to a very contemporary, sharp, highly-focused, customer-centric model.

VW China, similarly, used Beijing 2008 to drive dramatic internal culture change. VW China began as a joint venture with the Chinese government, which saw its market share drop from 50% to 15% as it emerged from the aegis of government protection into a new commercial landscape – with the liberalisation of the Chinese market.

So VW China used the Olympics as a tool to rally the organisation, 40,000 people, to a new level of competitiveness – in what they actually called the Olympic restructure programme, embedding Olympic terms, thinking and targets across the entire business to increase responsiveness, flexibility, customer-centricity and raise performance levels. Again, with great success.

Redmandarin’s main experiences of sponsorship as a lever for OD were with UBS, and Philips Electronics. UBS explicitly used their sponsorship of Ernesto Bertarelli’s entry into the 2003 America’s Cup, Team Alinghi, to cement their global brand. Their sponsorship, which ended in the victory of Team Alinghi, was notably successful in leveraging relationship-building opportunities across the various divisions – and grouping employees around a single, global objective.

We helped Philips use the FIFA World Cup to accelerate their ‘one Philips’ philosophy as an operational reality across their  (then) five business divisions, even bartering rights with Toshiba to ensure every Philips division had skin in the game (semiconductors, actually).

Tail and dog? It feels almost hubristic to suggest sponsorship could be considered as organisational change-driver… why can’t it just stay in its box?

David Aaker, when we interviewed him in 2009 for our first publication, Defining Sponsorship, correctly identified one benefit of sponsorship as ‘spanning organisational silos’ and this particular dimension of sponsorship certainly supports organisational change – but David’s point (which was not specifically addressing questions of OD) overlooks some powerful intrinsics of sponsorship.

What enables sponsorship to reach target audiences so well is its ability to sidestep emotional resistance – conscious and unconscious . It’s a psychological truth that people, we I should say, don’t like to feel unseen, unheard, or unvalued, which, I remember one of my teachers once telling me, is the single greatest cause of anger on the planet. When we’re objectified (be it as consumers, voters, readers, shoppers, subjects or employees), we resist: in fact, we’re endlessly creative in our resistance. We look for ways to subvert systems and ‘policies’. We switch off and zone out. We kick. Or play dead.

But sponsorship has the ability to sidle up to people gently, engage them in conversation, and creative an affective relationship – without provoking resistance. From that perspective, it’s the ultimate route to reach the hard-to-reach – and that can include employees.

Much of current attention on resistance to organisational change focusses on affective, that is, emotional processes, recognising that we as human beings have the tendency to populate areas of unknowing with the products of our own imagination: ignorance is fear, in other words. And what sponsorship can do is engage with and validate employees’ emotions through a clear demonstration of corporate empathy: we understand you. Instead of asking employees to adopt corporate values, it makes the clear statement: we share yours.

What Alinghi, interestingly, had in common with the Olympics was a clear sense of shared and public purpose – and adventure: for Alinghi, the sense of purpose was almost crusading – to bring the America’s Cup to Switzerland. For those who have lived it, this feels very reminiscent of start-up energy, a time of ambition, when everything is possible, regardless of the odds, with a unifying, motivational sense of organisational purpose that can be buried beneath layers of operational procedure.

David Aaker was entirely right of course to highlight  sponsorship’s ability to span silos, cross-functions and create fresh conversations.  And when these conversations are around, for example, the sort of innovation required to grapple with an out-of-corporate-body experience – such as the Olympics, it’s easy to see how this can be used to support change.

Relationships, both internal and external, become fixed, just like neural pathways – with the danger that one’s universe becomes very limited. Organisationally, businesses naturally like to operationalise – to harness extensive workforces. But the danger is that your relationships, your business model and your thinking become fixed – and your systems become as much of a limitation as a support.

Intelligently crafted, sponsorship offers an opportunity to reconfigure your system.