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SBJ/Dec. 6-12, 2010/Marketing/Sponsorship
Beery theories: What insiders say about the A-B/MLB lawsuit
Published December 6, 2010
Until now, we hadn’t weighed in on the cosmic nature of Anheuser-Busch, long the biggest sugar daddy of American sports, filing suit last month against Major League Baseball, certainly a momentous development within our universe.
Let’s be precise regarding the significance herein. A-B, an MLB corporate sponsor for 30 years, a company with 26 MLB team sponsorships and naming rights in St. Louis, is suing baseball. Recall that beer is the lifeblood of sports. There weren’t any insurance, wireless, banking or credit card sponsors when the first Yankee Stadium opened; the team was owned by a beer baron.
Lawsuits force everyone underground, so unless noted otherwise, assume none of the parties involved would speak on the record. However, that doesn’t mean we can’t pose some questions that might go unanswered unless the case is tried, which happens to litigation with about the same frequency that the Chicago Cubs win the World Series.
What was A-B thinking? We empathize with anyone trying to enforce one of the oldest principals in human dynamics: “A deal’s a deal.” If all A-B wants is its original price, let’s ask another rhetorical question. What’s A-B’s endgame?
“You wonder what St. Louis [A-B] would consider a victory,” said a source close to the case.
What was MLB thinking? A-B paid a reported $1 billion or more in May to wrest NFL league sponsorship rights from MillerCoors. According to A-B’s complaint, that was the impetus for MLB to insist on “an exponentially higher rights fee.”
Whether the two parties signed an enforceable contract is a matter for legal minds. Our expertise tells us A-B believed it had MLB rights locked up or it would not have proceeded with its NFL rights deal. Another important dynamic here is the magnitude of A-B’s NFL rights deal — which hit MLB marketers in a vulnerable area.
“MLB has always had a complex of being ‘America’s pastime’ yet never being able to get the same sponsorship dollars the NFL does,” said a marketer who has cut dozens of sponsorship deals with A-B, MLB and the NFL. “There’s an inferiority complex.”
A sports agency veteran, well-versed in league politics and with MLB and NFL sponsors on his agency roster, said, “MLB believes strongly it just cannot allow the gap in value between them and the NFL to be seen as that big.”
Sponsorship is usually not a litigious business, so the other case that comes to mind is FIFA being sued by MasterCard in 2006 for awarding rights it held to rival Visa. Adam Silverstein, of Golenbock Eiseman Assor Bell & Peskoe, represented MasterCard in the trial, in which it won a $90 million judgment. Since the prior and purported renewal agreements between A-B and MLB were not attached or quoted from in the complaint, Silverstein said it’s difficult to weigh the legalities.
“They [A-B] claim rights of first negotiation, so you’d have to know more about that and the specifics of the new agreement,’’ he said. “If you accept what they say is true, it does smack of bad faith by MLB.”
There are also practical questions. Once the lawsuit is concluded, could A-B (which is actively renewing team deals) still successfully employ national MLB marketing rights? Or, having fractured many of its MLB relationships, would A-B then walk away? This question elicited the widest range of opinion.
“These disputes are often caused by strong disagreements at the top of organizations,” noted Michael Robichaud, vice president of global sponsorships at MasterCard, an MLB sponsor since 1998. “At my level, it would be a matter of professional responsibility to see that it got done — so it would.”
A senior executive at an A-B agency said that while the brewer might be able to activate national MLB rights post-litigation, it wouldn’t be practical. “If [A-B] keeps those rights,” he said, “everything will be dictated to the exact terms of the deal. That’s not an easy way to live.”
The source with inside knowledge of the case was more direct. “Knowing the personalities involved, I don’t see how they could work together again after this,” he said.
“The NFL deal definitely pulled their pants down a little at MLB,” observed a former A-B marketer, based in St. Louis. “There’s the fundamental question of whether these parties can sit across the table from each other anymore. If they [A-B] keep the rights, you have to wonder if it won’t affect the size of their media buy with MLB. That’s where the biggest repercussions may be felt.”
Still another involved party characterized the lawsuit as an attempt to spoil the property for rival brands. “They have turned the page to the NFL and are trying to muddy up the water for interested competitors,” he said. If so, that’s an expensive exercise.
According to the litigation, former MLB sponsorship chief John Brody signed a binding renewal in April. MLB contends it isn’t and was actively shopping its beer rights. Brody left MLB for Wasserman Media Group in August. How much of a catalyst was “L’affaire Bud” in Brody’s departure? We’re inclined to think it played some role; just how much is a matter of rampant industry chatter, and Brody isn’t talking.
The unique and high value of these sponsorship rights, combined with the size and renown of the parties involved, makes this a case worth watching. Everyone anticipates a settlement. Until then, we’ll keep asking questions, the foremost being what settlement would be acceptable.
“Contract disputes normally [are] resolved through monetary damages,” Silverstein noted. “In the MasterCard case, the court recognized that the loss of unique sponsorship rights can’t be fully compensated by money, so if it’s determined that MLB breached, the judicial remedy could include an injunction.”
But that, like so much in this case of longtime business partners resorting to litigation, is about as clear as a pint of fresh stout.
Terry Lefton can be reached at firstname.lastname@example.org.