If you’re involved in the sports sponsorship industry, you can feel the changes in the wind. Some are easy to see and understand. Others are less apparent and much harder to interpret. But the changes are coming--and increasing. Some will have stand-alone effects. Others will converge, fueling one another, and have more complex impacts. Here’s our take on 10 of the changes you should be thinking about.
OTT and the explosion of alternative media. The exponential growth of over-the-top video and multi-screen viewing habits is having a dramatic impact not only on where we get our sports content but also on the diversity of what we watch and when and how long we watch it. Thanks to technology and the efforts of major global tech companies to gain market share in sports, we have more options and we are interested in more of them than ever before.
Proliferation of sponsorship opportunities. Social media, streaming technology and changes in consumption habits are also making it easier for smaller leagues and teams to deliver value to sponsors. Just as these factors have enabled smaller company startups to build effective businesses, they will enable smaller rights holders to achieve an effective place in the sponsorship ecosystem. An interesting question is whether a consolidator following the IMG College model will look to package up rights from some of these smaller players to make the logistics easier for larger brands.
Content commoditization/overload. The consequences of more media options and more rights holders are still largely unknown. Stable sponsorship relationships and pricing are likely to be disrupted as rights holders and brands experiment with new delivery methods and partnership opportunities and major new players enter the field. The real risk may be the commoditization of content. If fan access to live-streamed content becomes so universal, and viewing habits become so fragmented (and short-term), will brands see a reduction, rather than an increase, in customer engagement from these sources?
The E-Premium: Engagement and Exceptional Experiences. Sponsors are increasingly demanding—and willing to pay a premium for—real evidence of customer engagement. One of the best ways of creating engagement is to deliver exceptional, personalized experiences that offset the mass-market anonymity of the Internet where we are all treated the same. Whether it’s attendance at a special event or activity, preferential access to insider content or participation in a special contest, consumers will tweet and write about it. While the value of that social leverage is real, the downside risks are also great if the experience is poor.
Demand for “data-based” marketing. You don’t have to look past Google or Facebook to see the value that brands place on data-based marketing. Leading rights holders are spending millions trying to understand their ticket holders and other fans. To be competitive, they are going to need to spend that much and more to show how that fan data can be sliced and diced to create engagement for their sponsors. And just as “personalized medicine” is changing how we treat disease, personalized fan engagement, designed for the specific brand, is the future of sponsorship.
Data privacy transparency and informed consent. Fueled by the Facebook data debacle and the European Union’s adoption if its GDPR privacy regulations, the rules and best practices associated with personal information are changing. It’s a complex topic, but the key concepts can be summed in one sentence: If you are going to collect or use personal data from someone, you need to be very clear about what you are doing and why, and you need to obtain informed consent to do it. In practical terms, this means that historical data lists assembled by third-parties may become unusable. Rights holders and brands that understand this reality can and will create significant value by properly curating personal data from sponsorship experiences.
Results-based pricing. AB InBev shook the sponsorship world earlier this year by announcing that they would be applying incentive-based pricing to their sponsorship relationships. We expect to see more of that, particularly between the most successful properties and the most successful brands. But we see “pay for performance” results-based pricing going much further and eventually encompassing lead generation pricing. As brands demand evidence of customer engagement (above) and the lead generation business model continues to grow, paying for warm or hot leads delivered via a sponsorship relationship could make sense for the rights holder and the brand.
Cafeteria pricing. With the proliferation of sponsorship opportunities (above) and the increasing availability of asset valuation data, more and more brands are demanding greater choice in designing sponsorship asset packages that meet their needs. Why pay for an entire sponsorship if you only need part of it? We see this move accelerating, potentially resulting in a broader mix of sponsorship options as larger rights holders offer more limited packages to compete with smaller upstarts and reallocate assets that more sophisticated sponsors no longer want.
Globalization. As IEG’s respected SVP Jim Andrews says, we are seeing sponsorship growth in “uncharted places”. Areas like Asia, the Middle East and Russia are experiencing increases in foreign and domestic sponsorships of properties within their markets. At the same time, brands from their markets are sponsoring properties in other global markets. While some of this can be attributed to the host country selections made by world sanctioning bodies (FIFA 2018 in Russia, for example) and a global trade war based on tariffs could derail the increases, the trends toward the globalization of sports and sports sponsorships are strong.
The rise of e-class/tech-oriented sponsors. Driven by the rise of leading tech and e-retailing companies, the historical dominance of consumer goods, financial and brick-and-mortar retail companies in sports sponsorships is changing fast (and fueling part of the increased globalization noted above). It’s also adding B2B sponsors to a sports sponsorship market traditionally led by B2C brands. The impact of these changes goes well beyond swapping a few companies or market categories in or out. The new e-class sponsors are technology savvy. They know how to use customer data. Many have global markets and customer bases. Some are among the largest and richest companies in their countries and, in a few cases, the world. Their business goals and sponsorship expectations are different from the companies that have traditionally dominated sports sponsorships. It’s early to assess how they will change the market for sports content and sports sponsorships, but it will never be the same.
These trends will increase the potential risks and rewards of sports sponsorship. In the process, they will create opportunities for the brands and rights holders that have the foresight to see and understand the impacts of the changes—and have the creativity, resources and drive to take advantage of them in the marketplace.
The first step in planning and adapting to change is to see it coming. Sports sponsorship is no exception.