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Volume 23 No. 18
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Time to upgrade the sponsorship model: Pricing, contracts should reflect performance

When AT&T and CBS resolved a contract dispute in early August, football fans were relieved. For weeks, CBS and CBS-owned channels were blacked out on DirecTV and AT&T U-Verse. Because CBS is one of the NFL’s broadcast partners, millions of football fans across the country were facing the possibility of missing out on CBS-aired NFL games. Thankfully, the two parties were able to come to a new multiyear agreement just in time for football season.

NFL fans were lucky. It’s a clear fact that masses of fans hungering for sports content are no match for suitably intractable competing communications monoliths: For six straight years, swaths of Dodgers fans in Los Angeles have been denied televised games due to prolonged contract gridlock between Charter Communications, which owns the team’s broadcast rights, and DirecTV or other local cable providers. 

The media has made frequent use of the fan’s plight as the “why it matters” centerpiece of its coverage of these corporate standoffs — and for good reason. The fans are innocent victims. 

But there are other victims who nobody talks about. 

During the three-week blackout of CBS content across AT&T-owned television providers in July and August, the brands that sponsor NFL teams and stadiums must have been biting their fingernails.

Sponsors pay millions of dollars for multiyear agreements with NFL teams with the expectation that their logos will be seen in-stadium and, more importantly, by the millions of eyes tuning into game broadcasts each week. As AT&T and CBS started butting heads, those sponsors could easily have lost half of those eyeballs — and half the value of their sponsorship investment.

It really shouldn’t be that way. Brands spend big on sponsorships. They should have the right to know what they’re paying for and demand some remuneration if they don’t receive it. As things currently stand, they don’t have that right.

The reason for this is relatively simple. When sponsorship first came to sports it was impossible to measure or quantify how much exposure a given sponsorship placement — in-stadium signage, for example — might deliver. Thus, while teams and brands could agree that sponsorship placements had value, they had no way of knowing how much. 

Though some analog guesswork could be applied, the lack of certainty fomented a sponsorship marketplace culture rooted in more or less arbitrary, gentlemen’s agreement-style price setting — and the sponsorship business developed a vaguely no-strings-attached feel marked by a loose interpretation of deliverables. 

Today, while some teams are employing more holistic and deliberate approaches to rate valuations, most only obliquely acknowledge how stadium attendance and television viewership may affect sponsorship value. Sponsors must generally operate on faith and guesswork to determine how much eyeball exposure they’re paying for. The old-fashioned, patronage-like culture and character of the sponsorship business means that when something goes wrong and exposure isn’t there, sponsors typically have to just grit their teeth and bear it. That’s what NFL sponsors were preparing to do this past summer. 

We live in a different world than the one in which sports sponsorship business practices were formed. Evolutions in technology, media, and distribution have eliminated all of the uncertainty and guesswork from sponsorship valuation. There’s no longer any excuse for denying brand sponsors pricing and contractual frameworks that are fair, transparent, flexible, and informed by performance. 

Computer vision technologies can not only spot sponsor logos when they appear in sports broadcasts but can also identify the exposure’s duration, size, clarity, quality, and share of voice. Digital broadcasting mediums, smart televisions, and streaming platforms deliver precise audience metrics that can offer even more than basic viewer counts to include targetable demographic and behavioral data about audiences. And the internet, social media in particular, extends the reach and shelf life of content from sports broadcasts and captured by fans at games. 

All of these advances have made it possible to determine how much sponsorships are really worth. If that valid value information were made its foundation, sports sponsorship could finally become a free-market model. 

Doesn’t that just make more sense? Wouldn’t it be better if brands could make informed sponsorship buys with reasonable contractually guaranteed deliverables? Shouldn’t teams get more when they deliver audiences and less when they don’t? 

That’s how most of the world does business — and it’s time sponsorship caught up. 

Brian Kim is general manager at GumGum Sports, an innovator in AI-powered sports sponsorship and marketing technology.

Questions about OPED guidelines or letters to the editor? Email editor Jake Kyler at jkyler@sportsbusinessjournal.com