From the Field of Information Management End the one-size-fits-all approach How brands can reach the two Brazils Cartoon: Anticipation Fanaticos are the ‘more’ consumer Industry could learn from scholars Cartoon: Draft in the Windy City Sutton Impact: Check thermostat From The Executive Editor: An AD's life How you see it
Upcoming Conferences and Events
SBJ/May 30 - June 6, 2011/Opinion
How to validate jersey sponsorship value
Published May 30, 2011, Page 22
Small- and midsize-market teams are under tremendous economic pressures. Sponsors continue to seek new channels of fan engagement and better ways to immerse their brands in the game experience. Jersey sponsorships offer a potentially fresh alternative to both challenges. But what will be the industry’s basis for jersey sponsorship value?
MLS started selling the front jersey sponsorship in 2007. A dozen MLS teams have front jersey sponsorships this season, with most of those clubs earning $2 million to $4 million per year. Clearly, brands have established a consistent market value for what they’re willing to pay MLS clubs for this asset.
Who will be the first to break this ground in the NFL, NBA, MLB or NHL? It’s fair to point to MLS and say jersey sponsorships will be worth what brands are willing to pay. But these four leagues are different, with long histories and rich traditions. Brands will need to validate the price.
Guidelines drawn from three areas can help minimize the risk associated with assessing the value of jersey sponsorships.
Research: Horizon Media recently released a study suggesting the projected value for jersey sponsorships across the NFL, NBA, MLB and NHL was $370 million. The study used the cost of a 30-second spot as one factor in calculating value. As a client, I used this same factor to value branded college football coaches headsets but with a heavily discounted formula. Similarly, to effectively use this research study as a basis of valuation, it will be critical to understand how the study uses ad value and balance that with the brand objectives for the jersey sponsorship.
Naming rights: By comparison, and based on today’s standards, naming rights are arguably a team’s most integrated and valuable asset. In 2009, stadium naming rights across the 122 teams in the big four leagues generated $187 million. By comparing a jersey sponsorship and naming-rights deals in the same market (possibly even with the same team) using common base metrics such as CPM, attendance, fan base, etc., a rationalized range in benchmarking jersey sponsorship value can be established.
In addition, comparing stadium with jersey sponsorships with respect to reach implies an external/internal exposure trade-off. Brands associated with stadiums are routinely referenced in external media reports, whereas the jersey sponsor typically is not. Of course, media reports may also contain pictures of game play, including a jersey sponsor. Conversely, although the stadium sponsor may appear on the field of play, brands on jerseys are the focus of fans throughout the event, whether viewed live or televised. Given the active focus of fans on the players — and the jersey — one might expect more effective brand recall and association from the jersey sponsorship.
International markets: International jersey sponsorship deals offer a relevant basis for valuation. The EPL may be the industry standard for jersey sponsorships. Liverpool and Manchester United have reported $32 million (all figures in USD) annual deals with Standard Chartered and Aon Corp., respectively. The EPL earns $160 million annually in jersey sponsorships across 20 clubs. Excluding these two top-level deals, the league still averages about $5.3 million annually per jersey sponsorship.
However, it’s important to remember that stadium naming rights in Europe are less common because municipalities own many stadiums. Absent a corresponding stadium naming-rights deal (except for three current EPL clubs), the jersey sponsorship has been an EPL team’s most valuable asset, much in the same vein as naming rights are in the U.S. Undoubtedly, this has enabled EPL clubs to maximize jersey sponsorship value, a critical point in any comparison.
MLS jersey deals offer a starting point for value, and common EPL properties go a step beyond. But the value of jersey sponsorships will indeed be determined by what brands are willing to pay. That is inevitable. If brands pay without validating value, that will be unthinkable.
Bill Glenn (email@example.com) is a senior vice president for The Marketing Arm. Follow him on Twitter @Sponczar.