The Great Dilution

By Dan Kozlak, VP of Strategy, IEG

Dugouts, on-deck circles, pitchers’ mounds, umpires, foul poles, backboards, sideline aprons, courts, kick-plates, scorers’ tables, game clocks, blue lines, glass, ice, helmets, divisions, jerseys, and sleeves–all integral to their respective sports, and now all valuable sponsorship asset inventory.

Teams and leagues are going further when it comes to integrating brands into their games. It makes logical sense. So much of the value proposition around sponsorship is the TV advertising equivalency that can be achieved with strategic placements. Loading up highly visible blank spaces with sponsor branding is generating significant revenue opportunities. Over the last decade, this has become an increasing trend, but COVID seemingly kicked things into a higher gear.

Branding opportunities that were once likely considered restricted spaces were now on-the-table to close unprecedented makegood gaps. And now they are here to stay.

You cannot fault leagues and teams, because it is their right to maximize revenue. However, each new additional partner further reduces the value of existing partnerships.?

1. It makes it harder for existing brands to achieve recognition as a sponsor through the clutter, which is necessary to ultimately unlock the full marketing benefits of being a sponsor. Fans’ minds can only absorb and retain so much, especially when their focus is watching a game and not counting sponsors. Furthermore, deals with lackluster or unproven sponsor recognition are difficult to renew.
2. It limits the transfer of favorability and affinity from the property’s brand to the sponsor. The more brands a property has hooked to it, the less that its identity can rub off on its sponsors. If there are too many, the linkage becomes too weak.

Said simply, too much prominent branding with a property limits the likelihood that brands can be recalled as sponsors and reduces the influence from associating with it.

The concern now is once the current asset inventory is sold, will new, more integrated opportunities be created? Is this ultimately sustainable for properties over time?

There is one major league that has yet to fall into?the epidemic of share-of-voice dilution and still seems to be thriving, the NFL.

According to IEG’s Sponsorship Intelligence Database, NFL teams?typically generate more sponsorship revenue than other big 5 leagues’ teams with a fraction of the games, no jersey or equipment branding, and practically no broadcast-visible signage. It’s because on any given Sunday, outside of a few endemic product placements, the only brands they promote and showcase on the field are the two teams and the league. They sacrifice short-term sponsorship revenue gains they could receive from creating in-game visibility opportunities. Instead, they reinvest it in themselves by keeping their space clean and growing their own brand equities. Protecting their unique, revered identities and making the association with it seemingly scarce is what makes NFL deals so valuable. This is not too dissimilar to the Olympics, Masters and NCAA tournament. It’s more about access to the properties’ equities that the assets.

Make no mistake, sponsorship assets are the primary vehicles for affiliating sponsors with teams, and NFL teams certainly sell their share of robust asset packages. However, they have proven to do it in a very prudent, yet lucrative way.

IEG’s Market Meter rates the sponsorship value of MLB, MLS, NBA, NHL, and NFL teams based on the value potential that can be unlocked once fans become aware of a sponsor, rather than appraising the aggregated value of assets that are in place. It’s based on the access and affiliation with these teams, which is what makes sponsorship different and more valuable than advertising. It also accounts for the relative value that can be received from different categories and the demand for its scarcity.

When sponsors contemplate which properties to partner with, they should focus first on how much the sponsorship can positively impact their brands’ reputations and businesses if successfully executed, and then they should focus on the assets and activation that help them achieve this. However, many sponsors only focus on how much exposure value they can get relative to the fee they are receiving, which could result in them overlooking potential higher-return investments.