NBA jersey ads not an easy sell
The idea of NBA jersey patches was met with great promise when it was finally approved after years of debate. Nearly six months later, the reality has been more problem than panacea.
The NBA authorized a three-year test for teams to sell 2.5-by-2.5-inch advertising patches on jerseys in April. Evaluations reached $10 million and beyond annually for larger markets.
|The Kia patch was on All-Star jerseys in 2016.
“It’s a real challenge,” said Milwaukee Bucks President Peter Feigin, who’s also concerned with selling title and top-level sponsorships to the Bucks’ new arena and practice facility. “We’ve put a big value on a new piece of inventory, like $3 million to $5 million for small to mid-market teams. So, we’re spending a lot of time educating on this, which we usually don’t have to do.”
“I’m questioning what the value is,” said a senior sales executive at a large-market East Coast team. “We’re all out there selling it at once. One big brand told us they’d received [jersey patch] proposals from 18 NBA teams.”
The Philadelphia 76ers in May became the first team to secure a jersey patch deal, signing StubHub. Sources said a few NBA clubs are closing in on deals, but others have concerns about value and the lack of a benchmark.
The NBA champion Cleveland Cavaliers are hoping to have a deal completed by the end of the year. The Cavs are looking for at least $10 million annually.
“We have a number of strong candidates,” said Brad Sims, chief revenue officer for the Cavs. “The reason it’s taking so long is that it’s like having 30 naming-rights deals coming on the market at the same time.”
Disagreement, if not confusion, about the value of a minuscule billboard on an NBA jersey is evident in the way different clubs are bundling the new asset. In their pitches, teams are packaging patches with everything from arena naming rights to branded bench towels.
Measurement analytics agency Navigate Research, working with five teams, estimates that teams will get 30 to 50 percent less for patches than originally projected.
“A healthy amount of teams won’t even do deals the first year,” said Navigate President AJ Maestas. “But remember, only about two-thirds have sold apron signage.”
The sponsor-logoed jerseys will be sold only at team-controlled retail.
“The most common questions are where jerseys with the patch will be sold,” said Brooklyn Nets CEO Brett Yormark, who’s seeking a high-seven-figure deal and says he has four brands interested. “So we’re offering presenting sponsorship of our arena store to reinforce that sale.”
With the Sixers’ early deal largely viewed as an anomaly, the lack of a benchmark has also slowed the process. “Teams are scared to get X for the patch only to be trumped by 3X later,” said a senior NBA team executive.
Added Michael Neuman of Scout Sports & Entertainment: “Everyone’s waiting for the next deal before they do theirs. I’m curious to see if this will be sold with naming rights, like in the EPL.”
High-profile teams like Cleveland and Golden State should have little problem finding suitors but are being cautious.
“We’d rather see how it shakes out and jump in when we are ready,” said Golden State CMO Chip Bowers. “There has been very real interest.”
A potential deal through which Emirates airline would sign five or six team patch deals also is delaying others, since both buyers and sellers are looking at it as a benchmark.
Teams also are hoping to use the patches to attract new money. Accordingly, many teams are looking overseas, courting sponsors accustomed to buying jersey ads. Noting his team now has a Chinese national as a minority owner, Minnesota Timberwolves President Chris Wright described China as a huge target.
“Don’t be surprised if the Timberwolves may be one of the teams down the road that has the first Chinese partner as a jersey patch sponsor,” he said at last week’s Sports Facilities & Ticketing Symposium in Minneapolis.
With an eye toward foreign money, some NBA teams have hired outside sales agencies. WME-IMG is selling for the Atlanta Hawks, Boston Celtics and Los Angeles Lakers. Lagardère is selling for the Cavaliers. However, like the ad patch itself, offshore sales are no sure thing. For a foreign sponsor to activate the uniform patch in its home market, it must negotiate an additional NBA international rights deal, which adds an incremental seven figures to the package. Compare that to European soccer “kit” deals and it’s easy to see why there hasn’t been any overseas buyers yet.
“This just isn’t apples to apples when it comes to [soccer] jersey rights,” said an agency source working on international team jersey deals. “So many other global properties can provide as much, if not more, exposure for half the price. … The [NBA] rights restrictions are significant and scaring potential interest away in initial pitch meetings.”
Many club sales executives were sanguine about the jersey patch opportunity. “Our research indicates the value is there for advertisers and we really like it as a revenue opportunity,” said Pete Guelli, Charlotte Hornets executive vice president and chief sales and marketing officer.
Still, it was hard to find a sports agency executive with much enthusiasm for NBA ad patches — and they are one of the guardians of the biggest sports marketing budgets.
“So far, these have been priced aggressively, not attractively,” said Randy Bernstein, president of property sales firm Premier Partnerships, adding that he’d turned down offers to represent teams selling the patches.
“You look at MLS or EPL jersey deals — there’s 10 or 20 times bigger branding, and retail sales are included,” said Brian Cooper, CEO of S&E Sponsorship Group, Toronto, who said he preferred the NHL’s jersey patch for SAP in the World Cup of Hockey. “For the amount of money, I just don’t think it’s worth it.”
“Ultimately, these things will find their level and get sold,” said another agency source working on ad patch sales. “But I believe there may have been some initial fantasy as far as what they were really worth.”