Several recent changes are likely to affect the cost and value of sports sponsorship tickets. Here are five that deserve your attention:
Loss of deductions under new U.S. tax law. Under the new U.S. federal income tax law, tickets to sporting events and concerts will no longer be deductible. Previously, businesses could take a 50% tax deduction if business was discussed at the event. The net financial impact of this change will be partially offset for businesses subject to the new lower corporate tax rates (although the offset will be less beneficial for small businesses subject to the new pass-through rates). Beyond the financial impact on the net cost of sponsorship tickets, the loss of the deduction may also carry adverse psychological consequences for sponsors whose boards or CFOs find it hard to justify any expense that cannot be deducted at least in part.
Changing guest priorities and expectations. The book about declining live event attendance is still being written. Regardless of how you assess the evolving details, several trends are becoming clear. People are busier. They have more entertainment and viewing choices than ever before, both in person and on multiple devices. They increasingly value and expect experiences that are special and personal, where they can stand out from the crowd. Not many years ago, the opportunity to attend a major sporting event carried value across a sponsor’s customer list. Today, less so, for at least some customers. Suite tickets with special activities at the best championships probably still stand out for most. General admission without so much as a hot dog at more routine events may still offer value for some, but to whom and at what cost and ROI? Assessing the impact will require multi-layered analysis, by sport, league and event, as well as by customer category and guest generation.
Increasing activation costs. Activation costs for assets and events have been increasing as a percentage of asset costs for several years, despite the recent low interest rate environment. With inflation finally returning, the increase in activation costs is destined to accelerate. These inflationary trends will almost certainly be exacerbated by the need to spend more to make the events special and personal for the sponsor’s guests, to meet the changing guest expectations discussed above. Bottom line: Event activation will be more important and more expensive, adding to the total cost of event sponsorship tickets.
New data protection legislation. New data protection laws are changing the rules for storing and using personally-identifiable information, including information about guests invited to sports sponsorship events. Although much of the current interest is on how the EU’s new General Data Protection Regulation (GDPR) will affect U.S. as well as European companies, additional state and federal legislation in the U.S. is likely. Sponsors and their software vendors will be obligated to be much more transparent in telling their event guests such things as why the sponsor needs the information it is collecting about them, how it is securing the information, what cookies, beacons or other tracking tools it may be leaving on the guest’s laptop that was used to register for the event, how the guest can access and update a copy of the guest’s information and how the guest can ask for that information to be deleted. The exact rules and penalties for non-compliance will vary (e.g., by the residence of the guest or other jurisdictional requirements), but for those subject to the GDPR, fines up to 4% of annual turnover will be applicable. Complying with the data protection requirements involved will add costs and annoyance to the guest management process. The more interesting question is how sports sponsorship event guests (especially VIPs in the suite seats) will react to candid disclosures about how their personal information will be used by the sponsor or its vendors after the event is over.
Changes in rights holder strategies for monetizing tickets. With the changing environment for sporting event attendance, in-venue experiences and ticket distribution, many rights holders have been evaluating their attendance-based business strategies. If former Ticketmaster CEO Nathan Hubbard has his way with his new company called Rival, a significant number of these properties will be willing to break the mold and adopt sweeping changes. While it’s too early to know whether the next generation approaches to tickets being advocated by Rival will affect sports sponsorships as well as broader ticket distribution, we believe sponsors and agencies, as well as properties, should pay close attention to the potential changes that Rival may bring to the industry. Impacts could range from how sponsors need to distribute tickets to guests, to the value of the event attendance experience, to how properties value the various ticket components in a sponsorship proposal.