When it comes to make-goods, prorated refunds and other adjustments to sponsorship deals from the sports properties now on hiatus, there’s only one truism: There are as many potential solutions as there are contracts.
After general health and welfare issues, these are certainly the most-discussed topics by sports sponsors and their agencies. However, contracts are rarely uniform and the adjustments — which can range from an agreed upon ratio of assets for those missed to an entire new season of sponsorship — must be balanced upon yet another pile of variables. Those include the size and legacy of the sponsor with the particular property, how much distress the brand is experiencing (see travel and hospitality), and even whether the sponsorship is up for renewal soon. Add to those circumstances the absolute likelihood that it will be a buyer’s market for everything in sports after an extraordinary event like the coronavirus industry shutdown.
“Even the relationship a sponsor has with a team can dictate how the property handles this process,” said Tony Schiller, executive vice president and partner at Paragon Marketing Group, whose clients include Gatorade, PNC Bank and PPG Paints. “The way properties are engaging on this varies, but no property is prepared yet to engage in substantive dialogue on this, because they don’t know if the NBA and NHL seasons are going to resume or what is going to transpire with the MLB season.”
Peter Stern, president of The Strategic Agency, said that his experience in similar situations was that when stoppages shut down sports, those paying bills inevitably have the upper hand. “In most every case, properties had to do exactly what sponsors wanted,” said Stern, whose longtime clients include New York Life and Labatt. “It could be rolling the sponsorship over for another year, refunding entirely, or finding a value proposition where they’d get credits at 2-to-1 or 3-to-1 that were acceptable. Properties are in it for the long run, so in these situations, the brands that are their clients have the leverage.”
John Cimperman, executive vice president of brand experiences at Fuseideas in East Aurora, N.Y., just had to cancel two music festivals in Colorado planned for May. “The NHL lockouts were the closest situation I’ve ever seen,” he said. “Every circumstance was different, even down to sponsors that also had arena sponsorships. Based on my experience, what you’re going to see is a lot of sponsor relationships being extended and a lot of efforts by properties to create added value for sponsors, to make up for that value that was lost.”
