My Plea to Sports Rights Holders

Key Takeaways:

• As the advertising world continues its digital transformation, marketing decision-makers are becoming more and more accustomed to flexibility, cost-effectiveness, measurement thoroughness, and executional speed from all channels and platforms that they consider investing in as part of their marketing mix.
• For small and medium-sized sports organizations, this means that significant change is needed across their sponsorship sales and fulfillment practices.
• Unification and collaboration in order to share associated costs and to build scale should be strongly considered by these organizations as they make the transition towards being “analytically competitive” from “analytically impaired”.

The Importance of Sponsorship Revenue for Sports Organizations

For many sports organizations, sponsorship revenue is crucial to their financial stability and health. One?PWC study reports that sponsorship rights fees represented 24.2% of revenues for North American sports organizations in 2018. As a notable example, for the FIFA World Cup, sponsorship makes up 26% of the organization's revenues (via Ricardo Fort).

In Canada, publicly available financial statements provide us with some sample data to draw similar conclusions - a typical national sport governing body in Canada generates between 5% to 30% of its revenues from sponsorship.

How Is Sponsorship Spend Being Allocated by Brands?

Ultimately, these investments by sponsors are made based on their ability to help their business deliver on key objectives - mostly (though not exclusively) marketing objectives.

According to Nielsen, approximately 15% of companies’ brand marketing budget is allocated to sponsorship opportunities.?In a nutshell, sponsorship is used by marketers to influence one or more of brand awareness, brand attitude/affinity, purchase consideration, conversion/sales, retention and loyalty (or variations of these depending on the industry/business). One recent Nielsen article indicates that sponsorships drove an average 10% lift in purchase intent among the exposed fanbase.

The Emergence of Marketing Technology and Programmatic Media Buying

But how brands' marketing teams and agencies go about achieving these marketing objectives, outside of sponsorship, has been changing for the past decade or so... and even more rapidly in recent years.

Marketers are investing in administrative approaches to their marketing efforts that enable speed, efficiency, real-time analytics, and even automation. And many of these approaches are only achievable by spending their dollars on more "digital" marketing channels and platforms.

A recent study showed that marketing technology (known as “Martech”) has become the largest marketing expense for CMO’s – ahead of agencies and personnel. “More digital and analytics” was the theme most commonly cited by CMO’s surveyed as part of a recent Forbes study as the thing that has changed the most over the past few years for the CMO role.

According to Zenith Media, advertising across all digital channels will exceed 60% of global adspend for the first time in 2022, reaching 61.5% of total expenditure; (expected to grow to 65.1% by 2024). And programmatic, or automated, advertising drives much of brands' digital marketing spend. For digital display ads, it makes up well over 80% of all spend. And it's expected that next year, the amount of money US advertisers spend on digital video programmatically will surpass linear TV ad spending.

Digital and programmatic advertising is not just for online display ads. It's rapidly being adopted in audio streaming, digital video / Connected TV, and in the Out-of-Home (OOH) advertising (yes - billboards can have digital/connected infrastructure).?Spotify now allows for more targeted ads to be inserted in podcasts and music playlists, companies like Hivestack allow brands to change billboard ads in real-time across global markets, and Bell Media now allows for targeted brand integrations to be overlaid on TV shows (similar to what sports broadcasters and leagues have been doing for years).

Ever heard of the companies in the below graphic? These are just some the companies that help advertisers spend, measure, and optimize their modern marketing investments.

What Does This Trend Mean for Sports Sponsorship?

Brands now have marketing personnel and executives who are living and breathing digital media every day. The use of Martech to buy, manage, and measure marketing assets is now common practice for marketers. This is changing how sports properties should be approaching sponsorship sales because digital advertising is changing the norms and expectations across all marketing investment decisions - in terms of cost-effectiveness, measurement thoroughness, executional speed, and flexibility.

In the early 2010’s, digital integration was included in sponsorship deals as a value-added offering, and was never at the forefront of the partnership. Now digitized assets widely known to drive some of the most value for sponsors. An example of this trend can be found in a 2018 AI-powered media equivalency value assessment by GumGum (now Relo Metrics) around NBA jersey patches ( new asset offered by NBA teams to sponsors beginning in 2017). According to the assessment 76% of the media value of NBA jersey patches in 2017-18 came from social media compared to just 24% from games’ TV broadcasts.

Further evidence of digital media’s impact on sports sponsorship is found in the growing emergence of performance-based agreements. Brewing giant AB InBev, for example, deployed a new approach to sponsorships in recent years - overhauling its 90+ U.S.-based sports team and league deals so that each one has performance-based compensation clauses - relating to performance indicators such as attendance, team performance, social media, and fan engagement metrics. This approach can be compared to the well-established digital media buying approaches of paying per unit of exposure, engagement, conversion, and lead (Cost-Per-Impression, Cost-Per-Click, Cost-Per-Engagement, Cost-Per-Lead, Cost-Per-Conversion).

For years and years, sponsorship marketers have claimed that there is a growing need for improved sponsorship measurement and ROI validation. Despite there being this overwhelming sentiment that measurement and accountability around sponsorship investments needs to be prioritized, there has been little progress to evolve practical measurement solutions in practice. One study found that just 37% of sponsors have a standardized process for measuring return on sponsorship, and that 43% of sponsors don't have, or are unsure of, a defined measurement budget for sponsorships.

Acknowledging and Embracing Change...

So what happens when every other form of marketing and media is utilizing new technology to facilitate micro-transactions and measure results in real-time, but many sponsorship assets - especially the more manual sponsorship assets delivered by small and medium-sized sports organizations - are delivered and measured with the same approaches that were deployed last decade?

What happens if the decision-makers responsible for allocating and assessing the effectiveness of marketing investments notice that one particular type of marketing spend can't deliver the same sort of flexibility, cost-effectiveness, measurement thoroughness, and executional speed as the other types?

You get the idea. The way in which sports sponsorships are administered needs to change.

Getting There Together

Sports organizations, especially small and mid-sized sports organizations, need to evolve if they want to continue to rely on sponsorship revenue as a major driver of their financial health.

This evolution means investing in modern skillsets and tools that allow them to replicate the approaches of media companies. I encourage those who work in sport to explore how modern sports media companies are tailoring their advertising offerings to modern expectations. This Overtime article paints a good picture, as one example.

This does not mean that the specialness of sports sponsorship, in comparison to media advertising, should be ignored. The passion that fans have for a sports property, the ways that brands can be integrated into relevant and engaging experiences among fans, the hospitality and business-related benefits that are included in sponsorships - these are all strengths of sponsorship compared to pure advertising. By addressing a weakness - elevating the way that sponsorship assets are delivered and tracked - sports organizations do not take away from these strengths.

In getting from the current state to a more modern level of sophistication in revenue generation from brands, small and medium-sized sports organizations should consider the benefits of collaboration. The investment requirements in technology are substantial, and the value that scaled benefits, across multiple properties, can bring to prospective partners will do much more to legitimize sports sponsorship from an advertiser's perspective. For two decades, programmatic advertising has managed to harness the collective value of many publishers/media platforms in order to deliver scale to advertisers - the same can be done for sports sponsorship!