Business plans for new sports and entertainment properties typically include sponsorship dollars as a revenue line item, along with ticket sales, media rights, merchandise, etc.
But those who are counting on brand partnership income to fund early-stage operations are playing a dangerous game. Marketers are not seeking to underwrite a new venture. Brands are risk averse out of necessity. Marketing expenditures need to see a return, if not immediately then certainly in the near term, to satisfy the finance department, senior leadership and corporate owners, whether public or private.
Experienced rights holders understand this. As NBA senior vice president and head of global event strategy & development Joey Graziano said on the All Access Interview Series podcast:
“We need to push to build new profitable businesses so that we can offer opportunities to our partners. But one of the things I have always found challenging in the partnership world, and one of the hard parts of the job for my colleagues in Partnerships, is the idea of “Do you have a partner for me, because I can’t do this if not. I’ve never believed that’s the way the relationship should work. The way my team works is that we want to build a standalone profitable business. When we do the financial modeling, I don’t want to include sponsorship. That should not be required for us to get the idea across. I want to show the business’s unique value and trust in my Partnerships colleagues that in time the business will find its right corporate partner who will be able to amplify that business. That may mean waiting until year two or three of the business.”
The recent histories of pickleball and esports offer concrete evidence that “sponsor” does not equal “investor.” Despite the sports’ dramatic growth in both the number of participants and significant capital infusions from deep-pocketed individuals and corporations into teams, leagues, events and other properties, sponsorship activity remains relatively low, particularly among non-endemic brands.
Their interest in reaching hundreds of millions of desirable consumers notwithstanding, marketers remain largely on the sidelines due to a number of factors that make pickleball and esports sponsorship too risky. In esports, sponsors appear to have made a wise decision, as the competition for fan loyalty between game publishers, teams and players/streamers has severely limited the prospects of any single entity or structure, with regrettably no clear path to success going forward.
With pickleball, brands are still waiting for the dust to settle amid the sport’s “tour wars” between the Professional Pickleball Association and Major League Pickleball, which announced a proposed merger over a year ago that has yet to come to fruition, not to mention seeking proof points that the pro game can attract enough fan support and viewership to make sponsorship worthwhile.
While there will always be opportunities for a brand seeking a “ground-floor” opportunity to grow with an event or property by becoming an inaugural sponsor, rights holders should remember that that does not equate to marketers seeking to become financial partners or literally wanting skin in the game.