For the most part, sports leagues, teams, events and venues have weathered the economic turbulence unleashed by COVID relatively well. But the pandemic opened the industry’s eyes to the possibility of cancelled seasons, empty arenas and the drying up of all major revenue streams.
Certainly in COVID’s wake, contingency planning for all businesses and organizations has taken on greater urgency and importance as they seek to identify the measures they would need to take should something catastrophic happen again.
Inside professional sports and entertainment enterprises with valuations in the billions of dollars, the stakes are higher than most. How would they recoup nine- or ten-figure losses?
Among the multiple financing options that can answer that question is an intriguing one for sports marketers: Making previously untouchable inventory available to corporate partners for a premium price.
Rights holders considering such an option already have an example to point to: FC Barcelona will soon open the La Liga season sporting a new sponsor—Spotify—not only on its jerseys, but as the naming rights partner for its legendary stadium, Camp Nou. The price to put the audio streaming service’s name on a temple to soccer, in addition to the deal’s other benefits, is a reported $308 million over four years, an average of $77 million per year.
That compares favorably to the club’s previous largest brand partnership with Rakuten, which has been estimated at $60 million a year. (As Barca’s main partner, Spotify will have front-of-shirt branding for both the men’s and women’s teams and will also sponsor the club’s training shirts for the next three seasons.)
That cash infusion was necessary, as the club was $1.56 billion in debt as of last October and even after signing the Spotify deal in March has continued to explore sales of future media rights, the securing of loans and other ways to get out of the red.
The naming rights portion of the sale has set a precedent for financially struggling properties. As one of the most historic locations in world football, the renaming to Spotify Camp Nou can be seen as the European equivalent of the Bronx Bombers selling naming rights to Yankee Stadium. If Barca can do it, why not others who might find themselves in dire straits in the future?
For properties looking down the road and considering a similar sale if times get tough, two key questions should be addressed:
First, will the parting with tradition and heritage be worth the short-term revenue fix if it diminishes the organization’s long-term value and its relationship with fans and supporters?
Second, can you guard against a deal being made out of desperation that amounts to a fire sale of rights that potentially are worth much more? (Many in sports marketing believe the fair market value of the bundle of rights Spotify obtained from Barca is actually much higher than $308 million.) Plenty of buyers will see a “motivated seller” and seek to take advantage of the situation.