In addition to the many long-term effects of COVID-19 on live events, the pandemic is having a near-term impact on sponsorships across sports, entertainment and other types of properties, most notably in downward pressure on the value of sponsorship rights.
Compelled to bring in revenue absent the ability to sell tickets, many U.S. properties—particularly those below the top-tier national pro sports level—have reportedly agreed to sponsorship deals at rates 50 percent less than what they would have garnered pre-COVID.
Although those conditions will ease with the expected return of fans later in 2021, previous experience with price elasticity in sponsorship indicates fees will not immediately bounce back to pre-2020 levels.
The silver lining in this situation is that it opens a lane for opportunistic buyers attracted by suddenly affordable opportunities and/or the chance to step into a vacuum created by the departure of previous sponsors. The longer-term upside should be an influx of new partners that otherwise would have spent money elsewhere and that have the potential to stick around if they find success and earn a return on their new investments.
Faced with this new terrain, rights holders must position themselves to defend their sponsorship valuations, offer benefits relevant to current conditions—such as digital content and activations—and identify potential partners that previously might not have been on their radar screens. This includes:
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- Paying attention to industries that have managed to thrive during the pandemic
- Identifying more obscure types of businesses that previously would not have been candidates for sponsorship
- Targeting challenger brands that previously may not have had the means to commit to a partnership
- Focusing on categories that have recently emerged as active players in sponsorship
Regarding those new kids on the block, lists of emerging categories differ somewhat from country to country, but here again COVID-19 exerts its global influence this year.
To be certain, national and regional trends remain. In the U.S. for example, the legalization of both cannabis and sports betting has created new active sponsor categories, while historically low interest rates have spurred sports and event marketing activity by a host of mortgage brokers and lenders. Meanwhile, in the U.K., the advent of online used-car sales has seen two of the segment’s major players—Cinch and Cazoo—sign high-profile deals with tennis’s Queen’s Club Championships (Cinch) and Rugby League World Cup, Premier League clubs Everton and Aston Villa, and The Hundred cricket tournament (Cazoo).
But the pandemic has had a near universal impact in select industries that are in turn increasing sponsorship spending across multiple countries.
These categories were in position to take advantage of stay-at-home orders and work-from-home policies at the same time others experienced a “pause” and still more have been devastated by shut-downs and restrictions. (Dine-in restaurants, bars/pubs and travel to name just a few.)
No doubt the results of the recently published Onside Irish Sponsorship Industry Survey will be echoed in most other countries this year. In order, respondents identified ecommerce/online retail, supermarkets, food delivery, pharmaceutical and banking as the sectors most likely to increase spend this year, with a surge in activity among IT/tech firms also possible.
The top three categories benefitted from the shift in consumer spending caused by the closure of bricks-and-mortar stores and limitations on sit-down dining, gaining vast numbers of new or more frequent customers, many of whom will continue to spend with these businesses even as restrictions are relaxed.
In addition to the Irish findings, U.S. reports point to a COVID-influenced spending uptick from health and wellness products, especially at-home services and apps such as telehealth provider Roman and online prescription eyewear brand Zenni, along with digital fitness trackers such as WHOOP, which kicked off 2021 with a PGA Tour partnership. Additionally, makers of products for entertaining at home, such as grills, fire pits and gaming systems have entered into new deals.