BY JOHN LAUARENT – Partner
Forge Sponsorship Consulting
It’s as tough as you assume.
As with any economic downturn, marketing and advertising is being slashed and burned by most all companies.
Sponsorship is usually lumped in with advertising, and probably first on the budget chopping block, creating an environment where there is a ton of supply from the properties (teams, athletes, leagues, etc) and almost no demand. That scenario is where the sponsorship industry stands now.
2009 is going to a brutal year for properties. Their most profitable inventory – signs, rights, team-owned media – has little to no cost to them and that is the toughest inventory to sell right now.
What does this mean for Sponsors?
If you want to be an intelligent opportunist
If you are fortunate to have some marketing dollars available, the sponsorship industry is literally conducting a foreclosure sale of assets. You can purchase rights and assets at deeply distressed prices.
- NASCAR teams that wanted $8M/year for 18 races can be had for $2M – teams just want to race.
- NBA/MLB/NHL teams have almost no prospects and are actually more worried about their clients paying on their existing deals. New deals are invaluable to the team and for the job of the person selling it.
Ask your sports marketing agency to kick the tires on categories that interest you and if things line up, cut a sweetheart deal and be smart about activating.
If you have deals in mid-term
Make sure that the properties deliver all rights and assets that you have in your contract. Teams are cutting back, and if they cut a program that was a deliverable to you, make sure you get fair value for the replacement asset. Or if you are smart, take it back in fee reduction.
Go thru a quick audit of your contract and make a list of the team’s deliverables and keep an eye on them. If you are happy with your deal, consider extending it beyond current expiration date, as you can get spectacular terms.
Get your media or sports marketing agency to help value of undelivered assets as they are not menu priced in your contract.
If you are looking
There are not many of you that are not opportunists at this point, but really do your homework and shop your dollars. If you want the NBA team, talk to the NHL team, and let the NBA team know you are talking to them. That approach will quickly force out the best pricing.
You can literally get properties to bid on your business, a stark reversal of the past ten years where deals went to the highest bidder.
Negotiate hard and use all your resources. Properties have been playing hardball with sponsors for years. Enjoy the upper hand.
If your deal is expiring
Know that you hold the absolute and almost total upper hand. There is probably no one else right now in your category looking for fill your space. It is not out of the realm of possibility that you can double your value for even a reduction in fee. Figure out exactly what you want and go name your price.
If you have to get out of a deal
If you absolutely, positively have to get out of an existing deal – there are ways to do that. The easier way is to assign the deal to a third party and have them pay the fee in exchange for media exchange, i.e. you use existing media to pay for the sponsorship.
The hard and very suspect way is to stop paying your bills and wait to be sued.
- Some existing NASCAR sponsors with multiyear deals are telling teams, take 50% reduction in fee for full value of deal, or sue us and not go racing, and meet our team of Fortune 1000 lawyers. Which will take five years.
If possible go the easy route and talk to an Agency to explain the process. Hard way requires your company lawyers and makes no friends.
Bottom Line – No matter your situation, times are tough, but sponsors have the upper hand for the first time in a long time.
