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Media Releases
2005

13 June
2005

New challenges mean new rules for big brand sponsorships

With sponsorship becoming an increasingly common occurrence across a range of sports, the potential benefits as well as the potential hazards to both brands and sports organisations increase. Here, David Graham, head of Shepherd and Wedderburn's sports business group, examines the issues facing a new breed of big name, big brand sponsorships.

"This summer's close season has already seen the start of some of the UK's largest ever sponsorship deals. Chelsea FC put pen to paper on a reputed £50M five year deal with Japanese electronics giant Samsung and a £90M shirt and stadium sponsorship deal between Arsenal and Emirates started just days after Arsenal lifted the FA Cup.

"Sponsorship has become an inevitable part of football and it is a trend set to continue, with even lower profile clubs such as Coventry now obtaining £10M stadium naming rights from sponsors Ricoh. Where football goes, other sports are keen to follow. Land Rover recently extended its involvement with British rugby through its sponsorship of the British Lions, while the Team GB Olympic squad just confirmed a deal to make Michelob Ultra its 'official beer'.

"When a club, or a sport, is at the peak of its popularity, bidding wars between rival companies can make the potential value of a sponsorship deal astronomical. However, teams that don't win trophies don't get the same media profile. Speculation has mounted in recent weeks that Nike may exercise a 3 year option break in its £300M sponsorship deal with Manchester United. This approach is not an unusual one for many sponsors to take. While many sponsors agree deals of up to 10 or 15 years, they will often include a provision in their contract allowing them to terminate for convenience if the deal is no longer valuable to them. Manchester United agreed a 13 year deal on the back of their victory in the 1999 Champions League. This is now threatened unless the team can revive their winning ways.

"Sponsors must also ensure that their sponsorship remains exclusive and their link to the sport or club is not weakened by a host of periphery sponsorships. Several brands attempting to grab share of voice from the same club can often result in low sponsorship awareness and poor value for money. Contracts between brands and organisations must remain cast iron, ensuring back door sponsorships are disallowed and value for both parties is reviewed on a regular basis.

"While money flowing into sport is welcomed by the governing officials, ultimately there is also a price to pay for the sport in question. Although sponsors were once content to get their names on shirts, they now seek to get as much value from their involvement as they can. This can range from branding on tickets to stadium naming rights. When boards accept huge sponsorship deals, they must bear in mind that they also have a duty to protect the sport, the club and the fans and not leave them open to exploitation.

"Sports organisations, and football clubs in particular, must also be aware of the adverse effect that a brand may have on its image if it is remotely controversial. There is a sustained and growing campaign to have alcohol advertising banned from sport, and football clubs with alcohol sponsors are already facing a backlash from certain groups of fans. Rangers recently announced that they would be making shirts available without the logo of their sponsors, Carling, after Muslim fans claimed it went against their beliefs, while parenting groups want to see alcohol brands banned from all children's replica shirts.

"In the age of international marketing campaigns, global brands and super star sports men and women, the attraction of sponsorship deals is both irresistible and inevitable. As the value of these sponsorships increases, campaigns become increasingly sophisticated and the marketing potential of a sport, club or individual becomes increasingly tied up with a brand's values, it is vital that everyone's rights within a partnership are given the protection they deserve."


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