In almost two years, the sports and events world has been tackling a new challenge that no team or sponsor had probably ever anticipated when contracts were signed. It is the long-drawn lockdown caused by COVID 19 pandemic.
Most sporting events were either stopped or cancelled altogether while others were played behind closed doors. However, there are plans to gradually ease the conditions in some countries from the second quarter of 2021.
With all of this in mind, how can sponsorships change and evolve as fans have been locked out of events for a prolonged period of time? Even as partial lockdown threatens to continue with extra waves of the pandemic knocking at the door.
Early reports suggest that this is a big challenge for both the bigger and the smaller players in the events and sponsorship industry. Following the postponement of the Tokyo 2020 Olympics a figure of some £2 billion has been quoted as the cost of pushing back a year. Not to mention the impact on all the other sports events that were already due to take place in 2021. Cash and cash flow are kings for many businesses and sports organizations are no different.
At a certain point in time, so many events were cancelled or postponed during the lockdown. One of the challenges in the modern sports business is the relationships and agreements that have grown over a long period of time and in some ways have prevented drastic change in sponsorship. This is why many rights holders have dissected the unfolding scenario, as the crisis gradually gives way, on how to continue once the outbreak is totally under control and as the world returns to some normality.
Sponsors reactions during the crisis
For some sponsors, especially those with an only one-year agreement, many had allowed the contract to expire as they wait to see what happens before making a new decision. For the many contracts in the sponsorship business that run for three or four years for the established leagues, tournaments and major sports events, termination could prove very costly. It may effectively mean the loss of any future potential rights or benefits and the chances of compensation are minimal to zero at the moment.
Secondly, this opens up the position to other brands who might be in a position to take a risk and get on board. Now, after many years of building up a relationship and huge brand value, why would any visionary sponsor want to give competitors the opportunity to get on board and take away something that they’ve built up for such a long period of time?
Most organizations, rights-holders, federations have considered make- uprights for their sponsors and agreements, and many agreements have been extended by a year or more to allow the full package of rights to be delivered after the lockdown. The challenge sometimes has been at what cost for both parties? Not to mention all the other factors such as the athletes, fans, media partners, catering and hospitality and all those other suppliers who still need to realign with any future agreements to the sponsor and the rights holders might make.
In some cases involving long term sponsors, the dilemma has been deciding whether to cut their losses and exit or take the alternative to stay for the long term and be seen as a real partner of the sport and all the fans that normally follow that sport.
If the benefits of the sponsorship are considered non-essential may be entering a sleep mode for six months is taken as an option. It all depends on the contractual obligations and payments. Many have moved for the option of renegotiating their agreement. Many sponsors that choose to stick with the agreement take it as an opportunity to strengthen their partnership with teams, clubs or leagues and to demonstrate how much they value the relationship, the sport and all the stakeholders
Looking at the Olympics, despite the one-year extension and suspension of external visitors with their concomitant drastic reduction in values and benefits, yet all the major sponsors of their game have remained intact. Obviously, the long term value in the sponsorship relationship compels all sponsors to look beyond the current transitional challenges of the current period.
The Streaming option
Just as television expanded on the capabilities of radio, COVID-19 could lead to teams and sponsors re-evaluating the capabilities of streaming content. Teams and leagues could forge streaming partnerships with various online platforms, although it’s not easy to replicate the experience of being at an event in person.
This year's Olympic game is planning to create one of the most-streamed events ever in the globe as they plan to positively exploit the suspension of visas to visitors by promoting special packages that will make fans follow their stars globally as they compete in the games. The plan will also be to generate solid engagement for the sponsoring brand online. A lot is also planned around television rights.
The locking out of global fans from the Olympics could lead to sponsored activations on streaming platforms that have more engagement than on-site activations, and well as increase the potential streaming audience as die-hard fans seek to support their teams. A prolonged period without fans could really revolutionize sport sponsorship activations for good. It can lead to advancements in streaming and partnership activations during streams and introduce new engagement features to enable sponsor-fan interactions as the streaming audience increases.
Various influencer interactions and social media insights can lead to expanded audiences and increased sponsor engagements and teams and brands may even turn an increased eye to the strategies of eSports brands for new activation strategies.