2011 was again a fascinating year in the world of sponsorship. While much of the world goes into economic meltdown, it is one industry that remains buoyant with many rights fees increasing and indeed, many new rights being created. But lurking in the background are some serious challenges that will be posed irrespective of the global economy. We won’t spend too much time reviewing the year – that’s not much fun, instead we analyse the dangers and make some predictions about the future.
Sport is strong
There are two key reasons why the sponsorship industry is bucking the global trend and emerging stronger than ever in 2011. The first is that sport has remained resilient to global economic decline. A look at major TV rights deals suggests that viewers and broadcasters are willing to continue paying significant sums for the opportunity to either broadcast or watch live sport.
Record deals, for example, have recently been signed in Australia for Rugby League and Aussie Rules which both achieved more than $1 billion and in Italy Serie A’s live football rights grew by 5% at a time of severe economic hardship for the country. There is also no suggestion that when the world’s ‘mega’ deals are up for renewal, there will be any drop in fees.
Similarly, attendance levels at major events show no signs of haemorrhage despite falls in consumer spending elsewhere. Indeed many clubs and tournaments have seen a slight increase in attendance during 2011.
Brands need access
Sponsorship spend is also being supported by the need for brands to utilise electronic, and in particular, social media, in its marketing. To be able to do this, brands need either access to content or a credible link to popular culture. Sport and music offer this opportunity.
The BRIC factor
The final fillip to the industry comes from the emergence of the BRIC nations and in particular the deals signed in Brazil and Russia for future World Cups and Summer and Winter Olympic Games. Domestic companies have paid record breaking sums to be part of these events and, given the laws of supply and demand, this will help to maintain high value sponsorship fees for major events.
On the face of it, therefore all is good news. But there are potential problems lying in wait and they don’t just concern the global economic situation.
First, social media is still in its infancy and although sponsoring brands have broadly found that it has enhanced the power and scope of their activation programmes, there are dangers for rights holders and sponsors alike. The pace of technical change means that there is great uncertainty about how the various media is best used. There are two concerns here for rights holders. One is that the public controls one section of the media – the peer-to-peer section in which fans swap news, stories and gossip etc. A football club website, for example, is the last place many fans go for day-to-day news and rumours. Sure the club site will be accurate but it’s generally full of dull platitudes and if fans want speculation about the next transfer target, the official site is the last place they will find it. The result is that most fans prefer blogs, Facebook or online fanzines. Sponsors have no rights to these communication channels – but this is increasingly where the passionate fans congregate.
The second issue is that non-sponsoring brands have the potential to impact on the higher quality productions that we expect professionals to deliver for us. No longer is such content the preserve of the media or rights holders; Red Bull creates its own events, Bacardi has signed up bands and acted as a record label, Carling created a social networking site for amateur football, Nike creates fan experiences and very high quality TV ads and viral content.
What this shows is that brands are quite prepared to invest in areas that go beyond their traditional marketing remit. They are not simply buying sponsorship rights and media space – they are creating content and distributing it. When a major brand sees the rights to a global event costing in excess of $20 million per year, they are beginning to consider how far that budget could go if they put it towards creating content rather than owning rights.
That doesn’t mean to say that the rights fees charged for sponsorship are too high, but it does mean that they are going to be scrutinised more carefully by major brands to ensure that the price is justified.
This leads us to predictions as to where the industry is heading:
Prediction 1. Individual endorsements will grow. Take the world’s leading sport – football (soccer). Live and recorded TV rights are sewn up among broadcasters and sponsoring brands have little, if any, access to live or even recorded content. In the past this didn’t matter because media exposure was limited to sponsor’s branding, TV advertising, print (ads and PR) and on pack. Sponsorship rights allowed delivery across all of these. But with new media it leaves a huge gap which requires filling and sponsors’ rights generally don’t greatly exceed those of non-sponsors.
It is possible to create compelling content without having individual endorsements but consider the results of the following two pieces of activation: One is the brilliant Heineken Champions League activation on YouTube http://www.youtube.com/watch?v=M_URyWFBOy4. The other requires much less production and features Roger Federer during a Gillette TV shoot: http://www.youtube.com/watch?v=cTl3U6aSd2w. Heineken’s content received just over ½ million views, whereas the one that featured the star achieved more than 9 million. This is obviously not scientific proof that brands must align themselves with stars – but it does show the power they have – how many people would have viewed the Federer trick shot had he been an unknown player?
Sport and music stars also have huge followings on e.g. Facebook, Twitter and their own websites, which brands can only tap into if they have an endorsement deal. It will, therefore, become more important than ever add endorsement deals to taking rights to major events.
Prediction 2. The big sponsoring brands of the future will come from the BRIC nations. OK, this is an easy prediction because these are obviously big economies that are producing big companies. But there are two specific reasons as to why they will choose sponsorship of major events. First, these brands need to go through the process that major western brands have already taken. Consider, for example how Samsung, Hyundai and Emirates have used sponsorship to establish awareness and reputation. This can’t be done so easily by going straight down the individual endorsement/social media route. That would not create the same level of awareness and nor would it create a credible reputation. Put simply, if you see a consumer electronics or footwear brand on the perimeter board at the World Cup finals or its communications carrying the Olympic rings, you trust it to be a major player and believe that its products have quality. Having a relationship with FIFA, the IOC, UEFA etc. gives a credibility that takes a long time to achieve through other routes – even widespread TV advertising.
The second reason is that Western brands will become slightly less keen to take the major rights. Western brands have already established themselves as credible, they are also ahead in the use of social media and they will increasingly use alternative tactics, including what we consider to be ambushing, to meet objectives. There is also an