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14 January, 2021

New opportunities in the day after: sponsorship contracts in 2021

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2020 was going to be a historic year for sports sponsorship. It was estimated it would reach 50 billion dollars for the first time, distributed among the NBA, NFL, and MLB in the US, the European football, and the Tokyo Olympics. But today analysts estimate that this amount has not exceed 28,900 million. A reduction that must be analysed and correctly interpreted. Major sponsors have kept their investments, while companies that were most affected by the pandemic have drastically reduced their advertising and sponsorship budgets. This gap has allowed new players to intervene, such as companies that had never taken part in the sports industry before.

Europe is one of the markets where we can verify this trend, due to the business distribution of its sponsorships. According to UEFA, 17% is provided by retail companies, (clothes, beverages, etc.), 13% by sport betting companies, and another 13% by airlines, tourism, and the automotive industry. Retail companies have not changed their rank for the 2020-21 season. The two major investors, Nike, and Adidas will disburse 794,75 million dollars for the main football leagues: LaLiga, Premier League, Bundesliga, Serie A and La Ligue 1. The advancement of Puma has been surprising in this context; they will allocate 158 million dollars in sponsorship to English, German, Italian, and Spanish clubs, and have signed a new endorsement contract with the Brazilian footballer Neymar for 29 million dollars. Therefore, these three brands cover 55% of the football sponsorship market.

The counterpart for the European football is the 13% of its sponsorship which depends on airlines, tourism, and the automotive industry. The pandemic has negatively affected their sales and they have withdrawn from many of their sponsorships. The same has taken place with financial institutions in 2020, which have disbursed half of what they did in 2019. This is happening in all sports and all over the world, according to the Two Circles agency report, who are specialised in this field.

On the other hand, there’s been sectors that have stepped forward to actively take part in new sponsorship contracts. This has become very clear in Asia, where cricket championships are reaching historic figures. The Indian Premier League (IPL), will reach 140 million dollars this year, thanks to the fact that their 5 main sponsors correspond to online gaming, distance learning, telecommunications, and mobile phone payments. Business sectors that have benefited from confinement and restrictions due to the virus. However, the other big cricket championship, the T20 World Cup, has suffered a reduction in the number of sponsorships. In this case, they mainly depend on Nissan, two beverage manufacturers and a smartphone manufacturer. Even though their business is shrinking, as it is a world championship they have long-term contracts, and their transaction-related contingencies have saved their profits.

But assuming that sports sponsors keep their positions only because of their legal agreements would be a mistake. The relationship between a brand, its sponsored party and their followers is built on a long-term basis. Companies are sure this situation is transitory, and they put their trust in the future. We can see this with Movistar, a telecommunications company, that renewed their deal with Rafa Nadal for five more years this autumn. Heineken has also closed a deal with UEFA’s second biggest tournament, the Europa League, until 2024.

It is in the North American market where the entry of new actors is soon to be noticed, in this case due to the large debts their leagues are facing. The NBA has made a historic decision by allowing their teams, for the first time, to be sponsored by alcohol manufacturers, casinos, or sport betting companies. The NFL, with a similar approach, has closed a deal with 888sport for their sponsorship in the United Kingdom and Ireland. The MLB faces the problem of not having renewed their contract with their main sponsor, Coca-Cola. Their big competitor, Pepsi, is interested, although no brand will decide before they know the modality of the new season, if the audience will be allowed in the stadiums or if they will have to follow the bubble model already established.

We are facing a new scenario in which big brands are more selective, and they allocate their budget to the most popular teams and leagues. At the same time, smaller brands find these new gaps to enter that did not exist before, and so now they are taking advantage of this new situation. Other brands which are exclusively focused on one sport, start sponsoring other disciplines in order to reach new audiences. This is Hyundai’s current strategy; they used to focus on football, and they are now present in popular races and rallies.

Termination clauses, which used to be unusual, have started to be considered in new contracts. This is a direct consequence due to the panic of new cancellations, such as . The sponsor’s expectations from a team is also changing. Having their logo on their jerseys is not enough, now they demand to have access to their fans. The sports Big Data is an aspect yet to be utilised, and a relevant source of income.

What’s most important of all, sports continue to be highly appealing as a communication platform for businesses. Only 7% of brands will withdraw from sponsorship due to this crisis in 2021. This shows that the opportunities which will arouse after the pandemic will still be the same or even more interesting.

 

Martín Sacristán

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