The extent to which economic uncertainty impacts marketers’ spending on sports and entertainment partnerships becomes a hot topic each time there is fear of an impending recession.
Although there will never be a universal response from brands during a downturn—some batten down the hatches while others look to seize a buying opportunity depending on their specific circumstances—there is plenty of evidence over the past few decades to indicate that overall spending on sponsorship will slow until economic conditions improve.
Just last Friday an example of the economy’s potential effect on deals appeared in the announcement from Manchester United jersey sponsor TeamViewer that it would not renew its reported $57-million-a-year sponsorship when it expires in 2026.
In its second-quarter financial statement, the software firm said, “TeamViewer does not intend to extend the sponsorship agreement with Manchester United beyond its term. While the partnership and its brand-building effect has been positive over the past year, the company has decided to reassess its long-term marketing strategy in light of the current macro environment.”
The idea of a sponsor opting out after the “positive” first year of a five-year agreement must send chills up rights holders’ spines. While it would be impossible to outrun every economic storm closing in on sponsors and prospects, properties should take two steps that will increase their chances of r signing new deals and renewing existing ones.
1. Be proactive in identifying categories on the rise and those in decline.
A pattern emerges when you look at the “most searched” reports from sponsor data providers. The top brands each period are almost always those that have recently announced major deals. Assuming most of those searchers are other properties, this is a passable sponsorship prospecting strategy in good economic times. Perhaps that sponsor is in the market for deals in other cities, other sports, etc.
But tougher times require more imagination when beating the sponsorship bushes. Instead of reacting to signings, sellers must scrutinize a myriad of indicators to identify companies and categories that could be in line for a new partnership or upsell, while weeding out those that are unlikely to be opening checkbooks in the near future.
We will take a look at categories likely to continue or start spending in next week’s post, but properties also must be able to put their finger on those that may be struggling. Otherwise they risk wasting time chasing phantom dollars or neglecting to get creative in their packaging and pricing strategies to persuade reluctant spenders.
This group is sometimes easy to peg by paying casual attention to headlines. Case in point: Watching interest rates rise and reading of a mortgage industry “bloodbath” of layoffs and closures makes moving lenders to the “follow-up next year” file a no-brainer.
But other cases are not so clear. Is this a suitable time to approach sports betting brands? Deals in the category continue to be done, but there are indications that the market is softening, including last week’s comments from Caesars Entertainment CEO Thomas Reeg that the company had drastically cut marketing expenditures. Is Caesars an anomaly or a bellwether? Only deep research into individual brands will tell.
What about the travel sector? Revenues are up as pent-up demand sees consumer travel spending outpace pre-pandemic levels. But despite fuller coffers, most players in the category will be cautious about announcing splashy deals at a time when labor shortages are causing delays, service cuts and other limitations that negatively impact the customer experience.
2. Be generous where they can.
Although rights holders may be facing their own financial headwinds, they would be wise to search for ways they can sweeten packages, provide incentives and otherwise assist partners and prospects whose business is in distress and who, without those extras, may decide to walk away.
While being careful not to give away high-value benefits, properties usually can part with excess ticket and promotional inventory, as well as branded content opportunities.
Such a move would have minimal impact on their bottom line in the short term and stands a good chance of paying off with a new or extended deal, not to mention a ton of goodwill that could cement a relationship with a brand and keep it in the fold for years to come.