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Volume 21 No. 6

In Depth

One of Webster’s definitions for “agency” is a “thing through which power is exerted or an end achieved.” When it comes to negotiating or leveraging sports sponsorships for America’s largest consumer brands, agencies are where much of the strategy is hatched and value ascribed. They are the insiders and often the power brokers, connecting top-tier brands with top-shelf properties. As such, the purview of a sports marketing agency head is unique within the industry. Seeking to tap into their wellspring of experience and knowledge, SportsBusiness Journal invited five agency principals to our New York City office: Octagon Chairman and CEO Rick Dudley; Engine Shop CEO Brian Gordon; Wasserman Managing Partner Elizabeth Lindsey; OMD CEO John Osborn; and Genesco Sports co-founder and CEO John Tatum.

ELIZABETH LINDSEY
Managing partner, marketing
Wassermann
Photos by: PATRICK E. MCCARTHY (5)
During a two-hour-plus roundtable discussion in December with Editor-at-Large Terry Lefton, the agency heads touched on many aspects of the agency business and the sports marketplace they support. Like so many other businesses, they’re finding there’s no status quo anymore. A sector built on the power of any business that is reliant on TV must change as media consumption does.

Americans’ passion for sports has not ebbed, they insisted. Still, finding new ways to reach consumers using sports must now be the top priority for agencies if they will continue to exert power and achieve ends within a shifting sports landscape.

Since we’re doing this at the end of 2107, it seems like a good time to ask how everyone’s year went.

ELIZABETH LINDSEY: Every year comes with a certain amount of hectic, but this one felt that

RICK DUDLEY
Chairman and CEO
Octagon
way from the beginning. We’ve all faced challenging questions from clients about ratings, injuries and league policies.

RICK DUDLEY: The first half was a good time to be in the business, with lots of money flowing. Later in the year, marketing services generally were slowing because of an overall marketing spend slowdown. You saw our holding company [IPG], along with others, WPP, Omnicom and Publicis, all start to slow. There was an overall reduction in marketing spend from clients in the second half, but I haven’t heard a good explanation for why. We didn’t slow down as much as our sister agencies, but it got a little tougher. There are so many options — people are still trying to figure out the best place to spend. When P&G cut $100 million in digital marketing, everyone started to question their own marketing spend.

JOHN OSBORN
CEO
OMD


JOHN OSBORN: We still see a great appetite for digital [advertising], particularly with streaming on the big living room screen … I don’t see a digital advertising slowdown, but the right questions are being asked about it.

Beer and soft drinks have been large sports sponsors forever, and it seems like many consumer packaged goods (CPG) companies are somewhere between concerned and confused when it comes to consumer marketing now.

JOHN TATUM: Basic market dynamics are changing and [CPG companies] are having to readjust quickly, which is difficult for any big brand. We have some clients I wish were having better years selling beer [MillerCoors], pizza [Papa John’s] and soft drinks [Pepsi]. Salty snacks [Frito-Lay] sell pretty well any

JOHN TATUM
Co-founder and CEO
Genesco Sports Enterprises
time … Their businesses are changing and have gotten a lot more complex. Full flavor/full calorie beverages just aren’t being consumed at the rate they were over the last three or four decades, so everyone’s got to pivot. I believe PepsiCo has the most diversified portfolio to deal with these market changes, but then you wonder if the volume in that side will make up for any declines on the other side.

Look at beer: People are drinking Tito’s vodka or some other spirit. The market norms just aren’t normal any more. Some of the CPG brands’ biggest retailers are also having a tough time.

DUDLEY: CPG companies just have this extraordinary pressure on margins. They’ve been grinding out single-digit growth for a long time. Now you’ve got [investor] activists putting a lot of pressure on management, and every dollar spent is being scrutinized.

BRIAN GORDON
CEO
Engine Shop
BRIAN GORDON: Because of fragmentation in spending across media, there’s some level of disruption across categories. Five or six years ago, you had a marketing plan that was relatively formulaic. Now it’s chopped up across channels.

OSBORN: A trend there we’re seeing is clients telling us they can’t substantiate doing 50 smaller, local executions and having that add up to scale and depth.

I’m sure your clients have called more than once asking about the NFL’s trying times. What have you told them?

DUDLEY: Basically, we’ve told our clients to stay the course. More than any other league, the NFL has a lot of issues. Taking a knee is an issue; media disruption is an issue; CTE is a huge issue. Nobody’s talking about football, they are talking about everything around it. So how do they get the attention back on football? That’s not going to happen this year. Will it happen next year? I hope so.

LINDSEY: Audiences like millennials and Gen Z look to their brands to stand for something, way more than any other generations. They want honesty and transparency, so you’d better damn well stand for something. … Compare and contrast the NFL situation with what happened with Donald Sterling and the NBA. The other thing I will bring up, as the only woman in the room, is “me too” as a movement — sports won’t be immune from that.

TATUM: You know how you win? You stay out of politics. It’s an escape. Every sport is all about the athlete stories … The one thing the NFL is making a mistake: I’ve never seen a league almost vilify, in a way, their biggest attractions. I don’t know that Tom Brady cheated, but why would you be dealing with that before your biggest stage? With Ezekiel Elliott, I don’t know what he did, but I can tell you that all the kids in North Texas — they all thought he was the Pied Piper. We were going to put him in a Campbell Soup ad … but kids’ opinions reversed on him. If I was advising the NFL on PR, I’d tell them to deal with all this stuff from Feb. 15 to July 15. After that, don’t step on your message and just play football.

Photo by: GETTY IMAGES
agency talk: ESPORTS

How meaningful is esports to your businesses?

GORDON: We’re all looking for engagement opportunities and esports is an easier platform to do what we do with than traditional sports are. Looking at the extension of traditional sports titles into esports; “NBA2K” has a million and a half people a day playing over 90 minutes. If you’re looking for engagement, whether that’s content, live events or whatever, you have to consider esports now.

LINDSEY: Someone needs to show me how esports are being monetized in the U.S. In Asia and some parts of Europe, it is unbelievably compelling. In Seoul, they fill arenas with 60,000-80,000 people.

DUDLEY: There’s just [so] much chaos now when it comes to esports in the U.S. That’s a hard and desirable audience to reach, of course, but trying to find a place to land and make an impact isn’t easy. Brands you wouldn’t suspect want to be there, but how do marketers fit in there? You have to be authentic.

TATUM: It’s a tech-savvy, engaged and desirable audience in terms of demos, and I don’t really care whether people fill up AT&T Stadium to watch the Cowboys, George Strait or a “League of Legends” tournament. But, I recall when action sports were booming, and that’s kind of had its day. Maybe this is different …

GORDON: If you look at the investments starting to be made at the collegiate level, that tells you there is something there that’s sustainable. Brands have to add value — in a sport without much infrastructure they can be the ones helping to build it. And for traditional sports, it could be the tail wagging the dog: using esports to get those fans interested in traditional sports. The prime age for lifetime fandom is 8 or 9. What are these kids doing? Playing esports.

LINDSEY: But then, how do you answer my 12-year-old son, when he says “Cam Newton used to be my favorite player, now I can’t even look at him.” [After Newton made light of a female reporter’s question this season.] I didn’t put that in his head.

GORDON: Collaboration with your players association is so critical. Obviously, the NBA has a better solution so they can concentrate on the game more so than the NFL.

TATUM: That’s a tough comparison. The NBA is center-left. The NFL is center-right. The NBA is individual/team. The NFL is team/individual. The NBA would have gotten more traction and community support if they had done those [national anthem protests] than the NFL. The core beer-drinking, Ford pickup truck-driving NFL fan, making fifty grand a year, while some players are making fifty grand a week — they just want to sit down and watch some football for entertainment.

GORDON: Just to lighten it up a little: My sons are 49ers fans, because I am and I took my youngest to Super Bowl XLVII in New Orleans. Naturally, I got him a Kaepernick jersey, and we got it signed for him. Later, we’re walking down the street and Roger Goodell came out of a building. We got him to sign that jersey also. So, now that’s on his wall: a jersey signed on one side by Kaepernick, the other by the commissioner of the NFL.

Is the national anthem controversy impacting the NFL’s business?

TATUM: Papa John’s doesn’t have the media budget of Pizza Hut. So they’re trying to say: “The NFL is No. 1 and … we’re with them, so we’re No. 1.” Any kind of negativity will impact that. We’ve done research showing that in some markets, it’s not the association as much as it is the specific offers or promotions … Some incidents are small things, like customers complaining after seeing an NFL banner in a store, but I think there has been a negative impact. You look at college football and it seems like a rising stock. They seem immune.

LINDSEY: We’ve all dealt with clients who’ve had problems with [it], but the thing to remember is that nowadays, marketing is inherently risky. The pace and the style and the social nature of it, they are transcendent of the issues with the NFL. You could have issues with Pepsi and Kendall Jenner or Budweiser and the “Official Beer of Turning No into Yes.” These aren’t necessarily issues you see only in sports, and you don’t have sponsors dismissing entertainment marketing or TV advertising altogether. This doom and gloom for the entire sports marketing industry is a bit extreme.

Do any of you think the NFL has peaked?

OSBORN: It’s going through its moment right now … There’s nothing quite like the NFL, but right now, the passion it’s built on has been muted. One is media fragmentation, which has splintered viewer attention. The second is what I’ll call “regulation.” It’s resulted in a game that’s less exciting. The return of end-zone celebrations is fantastic. The league needs to do more of that to bring excitement back. There are some very real issues that will define whether this is a moment in time or something that has a lasting impact. I have a 12-year-old son who’s decided not to play football, and he’s not unique. Clients are asking a lot of questions.

If the NFL hired you and asked for advice, what would yours be?

DUDLEY: The trend you hope they can avoid is the silent sponsorship. Right now, everyone’s got everything on a short leash. That’s where financial institutions were in the 2008-2009 recession. They went quiet. Now, the NFL has to depoliticize and get back to what made it great: It’s a great sport and it is quite literally made for TV. I don’t know if they can depoliticize, because there are big social issues and players want to use that platform. They have to understand that it’s not really their platform. … But the league has got to get off Park Avenue and talk to the fans.

“I’ve never seen a league almost vilify, in a way, their biggest attractions. I don’t know that Tom Brady cheated, but why would you be dealing with that before your biggest stage?”
  
John Tatum
If the NFL were a stock, would this be a good time to buy?

DUDLEY: I’d rate it as a hold.

TATUM: Sure, there are splits between owners and players, but there are also splits between owners and owners, and owners and the league, in some cases.

GORDON: Stakeholder alignment is inevitably the most important objective and it just doesn’t seem to be there now, with the NFL.

Is the overall sports sponsorship model broken? What will the new model look like?

TATUM: The days of sponsorships where you are paying a big chunk of it just for the association with a particular property is going to be gone. Twenty or 30 years ago, you might have been able to elevate your brand, just by borrowing equity, but now there are just too many choices. You’ve got to get something proprietary, whether it’s content or placement of some kind. There’s more scrutiny ­­— showing that a dollar invested here is going to drive three dollars over there.
You can do an awful lot with the appropriate content rights. Look at State Farm: They aren’t an NFL sponsor, but they sure look like it with the assets they have, which include [Green Bay QB] Aaron Rodgers. You have to look at the most cost-effective way.

DUDLEY: There’s still a lot of sports being consumed, it’s just being consumed differently, especially by millennials. What’s going to be increasingly competitive for the leagues is brands putting together programs to hit their target audiences without the IP. You can do a lot with content, whether that’s a tweet, or short or long-form video. You can get a lot of eyeballs on it if you’re good at amplification. Generally, that’s the new thing clients are looking for — after saying they want more for less (laughs).

“The work we did evaluating the NBA patches taught us that while you run the numbers on the exposure, they’ve got to have a real story behind them to be effective. They are essentially little naming-rights deals unto themselves. … You should consider those the same way you would any other piece of signage — the contextual relevance is what matters.”

Elizabeth Lindsey
LINDSEY: In evaluating property value for our clients, we completely took IP rights out years ago. There may be a halo effect and some associated value, but that’s not what we’re there for. It is STILL stunning to me how many properties sell by taking one brand name out of a proposal and inserting another. We did a survey among clients asking how many had experienced that: 81 percent had, and 67 percent said they’d had that happen more than once. Numerous properties have taken me and my American Express client out to dinner and paid with a Visa card. I’m equally as astounded on the brand side at how many big-name brands with nearly ubiquitous awareness are still buying signs everywhere.

On the client side, it should be about figuring out up front who you are, what you’re trying to say, and what will move the sales needle.

GORDON: Half of our business is in entertainment. It would be really interesting to see clients push sports properties into more of an entertainment model, where there is true partnership marketing and brands receive real credit for their investments. If a brand is investing millions in a sports property and it drives engagement, why aren’t they receiving credit for that? Up until recently, ratings weren’t a problem, filling stadiums wasn’t a problem, but all that is starting to change. I’d like to see properties say “we care less about the $5 million rights fee and more about a creative campaign that will drive mutual objectives.”

“There’s nothing quite like the NFL, but right now, the passion it’s built on has been muted. One is media fragmentation, which has splintered viewer attention. The second is what I’ll call ‘regulation.’ It’s resulted in a game that’s less exciting. The return of end-zone celebrations is fantastic. The league needs to do more of that to bring excitement back.”

John Osborn
OSBORN: The conversations we’re having are about how the leagues, and sports in general, is cannibalizing itself because of over proliferation. It’s starting to eat itself from within. Using the NFL as an example: you’ve got RedZone, “Thursday Night Football,” Game Pass, and NFL Network. There’s going to be a reset. It’s already happened with NASCAR.

Every sponsor is insisting on content, but they all seem to mean something different when they say that.

LINDSEY: Passion for sports hasn’t gone anywhere, but consumption patterns have gone everywhere. The need to keep up with that is what’s driving this fetish for content.

Where does everyone see growth coming from in 2018?

TATUM: If the Supreme Court sides with Gov. [Chris] Christie, we’ll have a whole new world of opportunity out there with [legalized] gambling. Elsewhere, one of our biggest opportunities for growth is with health care: It’s one-sixth of the GDP and probably will only increase as we age.

DUDLEY: People are thinking more states will have legal gambling soon. If you watch a football match in England, it’s dominated by betting. You can bet on-site and there are any number of ways to bet. I heard [NHL Commissioner] Gary Bettman say there isn’t a lot of betting on hockey, but they will find ways to do it, and it will connect and engage more people to sports.

“You’ve got to be careful that you don’t let that quest for measurement run everything you do. Do you really want to go in and tell someone on a pitch that they shouldn’t have done the deal they just did? Or sometimes, you’ll show them a ton of analytics, you’re feeling smart, and at the end of the meeting, they tell you, ‘We really just wanted to go with motorsports.’”
  
Rick Dudley
You had the NBA with uniform ad patches this season. How far will that go?

DUDLEY: If you remember the furor when MLB tried to put Spider-Man on the bases [in 2004], it’s clear [MLB] will probably be the ones that follow here … As an American, sometimes it’s hard for me to tell which [European] soccer team is playing on TV, because the corporate logos are so prominent. We even recommended, and it still may happen, to a new company that they buy a [jersey] sponsorship from one club in every division and don’t put anything on them. Our thought was: Do that for a year and you will stand out.

LINDSEY: The work we did evaluating the NBA patches taught us that while you run the numbers on the exposure, they’ve got to have a real story behind them to be effective. They are essentially little naming-rights deals unto themselves. … You should consider those the same way you would any other piece of signage — the contextual relevance is what matters. So, for AmEx, I don’t want to see signage at courtside, but I do want to see that at the point of sale.

TATUM: I can’t think of a number large enough to convince the Cowboys to put another brand next to the star. I’m sure there is one. … I would expect the NFL to come up with more camera-visible signage first, and I would look for that to be a health care partner.

OSBORN: It’s inevitable we will see more proliferation of logos on and around the playing field, but I think there’s a real danger. Becoming part of a sea of logos just isn’t special.

“It would be really interesting to see clients push sports properties into more of an entertainment model, where there is true partnership marketing and brands receive real credit for their investments. … I’d like to see properties say ‘we care less about the $5 million rights fee and more about a creative campaign that will drive mutual objectives.’”

Brian Gordon
TATUM: I’m not always a proponent of naming rights, but it occurs to me that if the broadcasters are using the sponsor’s name, it is more valuable. And now I’m seeing some teams getting or asking as much for those patch deals as some are getting for naming rights.

Is there growth left in NASCAR?

LINDSEY: If you go trackside at NASCAR, you can still see growth and potential. Their challenge is a content challenge. They need to build up the stories of their players. When you’ve got Dale retiring and other major stars as well, they need to invest in telling fans about what is a fascinating young class of drivers … If you are going to spend three or four days at trackside, you have to be invested about who’s behind the wheels, and they’ve not done enough there.

DUDLEY: The interesting question is: Can Formula One, with new leadership, make some headway in America?

TATUM: Long-term, I’m wondering if the better bet isn’t Formula E. They seem to be heading in the same direction as all the auto manufacturers: the “clean energy” space.

OSBORN: NASCAR’s going through a huge reset now, and probably appropriately so. All the personalities you know are gone or leaving.

agency talk: 
DATA AND ANALYTICS

Every client is asking for analytics but they may expect entirely different things from it, right?

LINDSEY: It’s a requirement now, not just something that’s nice to have. “Execuwhim” is dead when it comes to sponsorships: Too many procurement departments, too many CFOs, too much public scrutiny.

GORDON: I don’t know that it’s totally gone yet.

TATUM: Trust me, I can tell you some stories where “get this deal done” still came from the top.

LINDSEY: OK, it should be dead, how’s that? One of our single fastest-growing sectors is analytics for the properties themselves. They have to justify the price they are asking for and need verifiable third parties to do that. However, in every single property consulting project we’ve ever done, what the team wanted to sell their inventory for and what we told them it was worth never matched, not once.
On the brand side of the house, the biggest trend is that people now believe sponsorship can be measured. It takes a commitment, and for some brands or categories it can be difficult … It takes a commitment, but at American Express, a 20-year client, we have a model that’s almost predictive. However, if you are dealing with brands or categories that change CMOs more often than most people change their socks, that’s problematic for measurement.

DUDLEY: It used to be considered a unique capability, now it is expected … You’ve got to be careful that you don’t let that quest for measurement run everything you do. Do you really want to go in and tell someone on a pitch that they shouldn’t have done the deal they just did? Or sometimes, you’ll show them a ton of analytics, you’re feeling smart, and at the end of the meeting, they tell you “We really just wanted to go with motorsports.”

There’s big data and there’s good data, right?

LINDSEY: We hear it all the time from clients: “We’re drowning in data, but starving for insights.” I don’t give a damn how many people are walking down Super Bowl Boulevard, but I do care about how their perceptions of a particular brand was changed by what they experienced there.

GORDON: Brands still want creativity from their agency. Insights help you get to those ideas, data can help figure out how and who you target those ideas. With content being the buzzword that it is and the imperative on effective social campaigns and cutting through clutter, it all gets back to creative ideas. That’s what creates emotional connections or engagement, which is another of the big marketing buzzwords now.

TATUM: Even with a million ways to find and distribute information, it still gets down to finding that true north of your brand and being authentic to that. The ones that can do that will succeed in the end. The ones that don’t will become extinct. The NFL is at a crossroads. At 98 years old, they have to decide: Do they want to be like Amazon or like Sears? Of all the MillerCoors brands, the one that’s doing really well is Coors Banquet. They keep it simple with their western heritage — that’s their version of authentic.

Which second-tier sports properties would you recommend to a client?

GORDON: I’m not sure there’s any one I would recommend, without knowing the client specifics, but that’s an increasingly viable option. That can be far more impactful than going with larger, more traditional sports.

LINDSEY: I’m fascinated with where tennis is heading. It still needs more American success stories, but I am seeing that it is finally adapting.

DUDLEY: I’m tracking the “diaspora” sports: cricket and rugby, which are starting to pick up audiences here because of greater exposure and immigration patterns. There’s a play there for the right brands.

OSBORN: This is more of a wish maybe, but women’s sports generally. With more female executives running companies, and their audiences, I think there’s a market for it.

TATUM: These aren’t the niche sports, but I just look for the sports with the young faces and stars. In golf, you’ve got Rickie Fowler and Jordan Spieth. I’m also bullish on Major League Baseball and college. MMA seems to have tailed off, after they lost some of the stars.

DUDLEY: IMG made a large bet there with UFC. Whether that pays off or not is a big question.

No one mentioned lacrosse, which is interesting.

GORDON: It’s got great grassroots support, and there’s a couple of leagues, but … from a brand perspective, it’s just too far out.

Which stories would you expect to dominate the industry buzz in 2018?

DUDLEY: What’s going to happen with the NFL and ratings will continue to be huge. You’ve got the Winter Olympics and the questions there. Within the sports marketing universe, the question will be whether we will continue to pay more for rights, whether that will moderate at all or at least see less of a steep trajectory in pricing.

LINDSEY: Olympics will be interesting as the year starts, and the NFL will still be a focus. There’s also a lot to be discussed within American soccer, given everything that’s going on there and leading up to the World Cup. From an industry insider perspective, we’ll continue to be talking about changing audience dynamics and we’ll continue to be confounded by millennials and Gen Z.

GORDON: Not to be redundant, but gambling is going to be a big story to watch. As we anticipate the arrival of the NFL in Las Vegas, that’s going to be an increasingly big story, as will esports, with the pro sports leagues launching their efforts.

OSBORN: Because there’s this proliferation of sports and sports marketing, I believe some of the leagues could use this moment in time to rediscover what their reasons for being are. They’ll rediscover core value and push back out from there.

TATUM: Politics will continue to be a big issue. Look at audience erosion in sports and then look at cable news. They get free content, too (laughs). But in a lot of ways, that’s a competitive threat, when you look at how well cable news is doing.

When it comes to sports, all the leagues need to get back to their base and their mission.

DUDLEY: And get their players to buy into that. Teamwork, dedication, hard work. Those are all still there and they’re brand values that should be talked about.

GORDON: What should be the mission of any league? If you’re not talking about cause or social consciousness, it should be about growing their particular game. Golf is, soccer has always been invested in grass roots. You look at football and that’s missing. The NBA has done so much to grow their game overseas.


Photo by: GETTY IMAGES
The FedEx-PGA Tour partnership was the most recognized brand-property alliance in sports, according to surveys conducted in 2017 for SportsBusiness Journal by Turnkey Sports & Entertainment. Across the eight sponsor loyalty surveys that measured fans’ awareness of 83 official league-brand relationships and nearly 600 brands (official and nonsponsor), it was the PGA Tour’s long-standing relationship with FedEx that stood out.

Fifty-nine percent of the 400 PGA Tour fans surveyed during last season’s FedEx Cup Playoffs correctly identified FedEx as the property’s official shipping partner when presented with a list of competing companies in that field.

The sponsor loyalty series, which debuted in 2007, includes annual studies of MLB, MLS, NASCAR, NBA, NFL, NHL, PGA Tour and NCAA fans.

Overall, NASCAR had three partners ranked in the top 10 of the most recognized partnerships — Goodyear, Monster and Coca-Cola — the most of any property.

Among avid fans across the 2017 surveys, the NFL’s partnerships with Papa John’s (since 2010) and Gatorade (1983) were the most recognized. The league has two of sports’ most-recognized relationships.

Additionally, 52 percent of the NHL’s casual fans knew that Gatorade was the league’s official sports drink, a status it has held since 2006. NASCAR’s longtime Goodyear partnership (1997) and the NCAA’s Capital One deal (2010) were the only other relationships to top the 50 percent threshold among that fan segment.

— David Broughton