Make-up game: Sponsors seeking clarity on assets
On March 10, the day before the NBA suspended its season in a move that catalyzed the pandemic sports shutdown, Golden State Warriors executives met with the team, telling them that their next home game was going to be played in an empty arena. President Rick Welts and Senior Vice President of Partnerships Mike Kitts recalled the reaction from a group of players — many of whom had appeared in the past five NBA Finals — as being somewhere between disbelief and stupor.
Three months later, there’s a markedly different perspective. “At that point, playing without fans was the worst option possible,’’ said Kitts. “Now, with perspective, getting back to playing, even without fans, is our best-case scenario.’’
For those selling sponsorship assets across sports, the pandemic shift has been similarly jarring. Normally, arena sports would be well into their championship rounds and assets would be at a premium. Shifting from no games to no home games has transformed the process from selling sponsorship marketing assets to one of fulfilling make-goods.
Credit offsets. Replacement value calculations. Made opportunities. Re-expressing your spend — there are many euphemisms. By whatever term, restoring assets lost to the pandemic is a problem that will plague the industry well into every sports property’s 2021 season.
“A large percentage of our professional lives will be about make-goods for the next 18 months,’’ said Peter Feigin, president of the Milwaukee Bucks, which had the league’s best record at 53-12 when the NBA season was suspended.
“We’re all trying to figure out value in this new, no-fan world, and nobody has a baseline yet.’’
Like every company, Anheuser-Busch InBev started scenario planning just after the sports shutdown. None of those original scenarios envisioned games without fans. At that point, every property was planning for neutral-site contests in regions then-unaffected by COVID-19. Now, “Challenging isn’t even the right word,” said A-B’s U.S. sports chief, Nick Kelly. “It’s like we’re renegotiating every team deal. Every property is telling us they can provide all this value without fans at a live event. Then what have we been paying for?”
As a senior sales executive at one of America’s biggest arena companies said, “There’s no bigger story in sponsorship now — it’s all make-goods, all the time and we’re all trying not to give money back. But you’ve got some categories — like airlines, hotels and cruise lines — we’re not expecting to pay us anything until 2022.’’
From the sponsor side of the equation, while metrics are more advanced than ever, “Quantifying the value difference between a home and a neutral site for a naming rights or founding partner of a venue is just really hard,” said Matt Pensinger, senior vice president and managing director at IPG’s Jack Morton agency, with heavy sports-spending clients including Chevy and MillerCoors. “The larger issue within sponsor contracts is that many assume maximum results as a baseline against which fees are determined. So now you wonder about other boilerplate elements, like automatic annual fee escalators and playoff clauses. You wonder if they should even be part of a new partnership model.”
On the agency side, with activation now limited to low-margin social and digital efforts, “the sponsorship consulting side of our business is holding up largely because of make-goods and some smart clients who are investing in sports assets when it’s a buyer’s market,” said Chris Weil, chairman and CEO at Momentum Worldwide, with a client roster that includes big sports spenders like Verizon and American Express.
Sports and sports marketing went from an environment with proscribed rules — in which predictability off the field was relatively assured — to one where even the sites of contests were in question. At a time one might expect a champion to be holding the Stanley Cup aloft, at press time the NHL still hadn’t finalized the neutral sites of its playoffs, nor the sponsorship assets that will be added to those broadcasts to service make-goods. The NBA seems headed to its Disney World bubble, but the mixture of incremental assets to be added — virtual and physical — are still being decided. And there’s the not inconsequential matter of MLB missing at least half its usual schedule — if it solves its contentious labor issues.
“It’s a long game, without much clarity right now,’’ said Mike Bucek, Kansas City Royals vice president of marketing and business development, who gave MLB headquarters kudos for “frank and open discussions” over the past three months with teams about incremental marketing inventory. “Once we get the word, it will be a mad dash to take care of every partner.”
That’s left some big sponsors on the sidelines awaiting clarity.
“Until I see them on the field, I still won’t know what our make-goods should look like,” said Charles Greenstein, sponsorship chief at Bank of America, which boasts a large portfolio including MLB league rights and deals with seven teams, including the Boston Red Sox, Los Angeles Dodgers and New York Yankees. “When we understand when the season will be and what the impact of having no fans will be, we’ll have a conversation. We still don’t know if fans will consume sports to the same degree.’’
“The standard benchmarks are gone for now,” said Troup Parkinson, executive vice president of partnerships at the Red Sox. “We have a lot of people wondering if their assets need to change based on how people will be consuming the sport. But because everyone’s been impacted, there’s been this feeling of ‘we’ll get through this together.’ It’s a time when you get to see how strong your partnerships are, not how strong your contracts are.”
Added Jim Van Stone, president of business operations and chief commercial officer at Monumental Sports and Entertainment, “You could really say that we’re feeling the pain together. Sometimes we’ve got both sides working to keep their businesses going. Even travel clients are being empathetic, knowing we are in the hospitality and live event business.”
There’s a wide range of sponsorship enhancements under consideration by every big property, ranging from additional camera-visible signage on and around the field of play, to incremental virtual signage, uniform patches, and an extensive menu of broadcast enchantments, including commercial bumpers.
Expect an equally wide range of opinions on how much all the new TV signage is worth — especially without fans to witness it.
“Another Bud Light sign on TV games isn’t going to drive sales at home like it does in a stadium or arena,” said A-B’s Kelly. “We’ve always paid significantly more than other categories, because our product is sold at venues. For someone to say they can replace all that value is crazy.”
Added Bank of America’s Greenstein: “We’ve got the No. 1 share of voice with media-centric signage in some MLB stadiums. Do we need more? And even if I got more [branding] would it really have the same value? Will my original signage be worth less? The more signs there are, the less value as a make-good.”
“We’re all looking to define value in this fanless sports economy,” said U.S. Tennis Association Chief Revenue Officer Lew Sherr. “After a certain point, there’s diminishing returns and it’s about finding a unique activation, not just cramming in more signage.”
With league, team and broadcast rights-holder assets mixing as never before, confusion is anticipated.
“Delineating between team and league partners, and who gets what inventory is going to be one of the biggest challenges,” said Marc Bluestein, president of sponsorship agency Aquarius Sports & Entertainment.
The pandemic itself has changed corporate strategy when it comes to sponsorship marketing. “Some of our biggest clients are now asking us after three months off, ‘Is all this worth it?’” said the head of one of America’s largest sports marketing agencies. “For sponsorship assets, it’s going to be a buyer’s market for some time, so we’re going to see brands putting more pressure on properties to deliver value than ever.”
Corporate marketing priorities have also been reshuffled. Marketers will want to borrow some of the joy that will naturally accompany sports returning to the fields of play, but many are also likely to have large cause-related efforts supporting COVID-19 relief and racial relations, which may understandably take precedence. Bank of America’s $100 million commitment to help fight COVID-19 and $1 billion donation over four years to fight racial injustice, are some recent, but not isolated, examples.
Whenever they return, teams will be facing a new reality that could linger well past the end of the pandemic.
“There’s actually a lot about this situation and its challenges that’s new and intellectually stimulating,” said Welts, “as long as you don’t look at the P&L.”