If Covid-19 has torn up the sponsorship deal playbook, Premier League clubs find themselves in the unenviable position of trying to decipher and apply a new set of rules just weeks before English soccer’s top flight returns for the 2020/21 campaign.
Several studies made for grim reading during the league’s three month suspension from March to June. Deloitte predicted teams were set for a permanent revenue loss of UK£500 million (US$661 million) in their 2019/20 accounts due to the pandemic, made up of rebates to broadcasters and the loss of matchday revenue.
The financial services firm added clubs are forecast to earn around half of what they normally would in matchday revenue in 2020/21, with that estimate of UK£350 million (US$463 million) set to be lost if supporters cannot return to stadiums during the season.
Sports marketing agency Two Circles also rubbed salt into the wounds, stating that overall global sponsorship spend this year could suffer a US$17.2 billion hit. That represents a 37 per cent year-on-year decrease, dropping from US$46.1 billion in 2019 to US$28.9 billion in 2020.
Despite the ongoing uncertainty, 72 per cent of brands want to extend their sponsorship contracts, according to the ESA
During the height of lockdown, Premier League clubs moved to take stock of their three core earners – commercial deals, broadcasting contracts and matchday income – and reassess fiscal projections for the financial year. Maintaining and brokering partnerships in an effort to offset losses were also top of the to-do list.
A shred of comfort for the league has come through new Covid-enforced branding opportunities on netting in the lower tiers of closed stadia. As the 2019/20 campaign resumed on 17th June, commercial partners of clubs were expected to receive global value between UK£700,000 (US$926,000) and UK£2 million (US$2.6 million) for each game played behind closed doors, according to research and consulting company Nielsen Sports.
Adding to the cautious optimism was a survey by the European Sponsorship Association (ESA), which found that 72 per cent of brands are looking to extend their sponsorship rights despite the ongoing anxiety. A later ESA survey also showed that 23 per cent of European sponsorship industry executives estimated an increase in revenue in 2020.
The power of the brand will usually win out and the Premier League’s status as the most-watched soccer league in the world cannot be underestimated. But amid a stack of varying studies, uncertainty, as overused a word it has been, continues to stand out.
Like it or not, clubs will be living with Covid’s commercial consequences for the foreseeable future. Perhaps indefinitely. Focus on the solution, not the problem, as the old business cliché goes. Certainly no small task.
To shed some light on Premier League teams’ next steps, Spencer Nolan (pictured), Nielsen Sports’ managing director for UK and Ireland, breaks down his key pointers to SportsPro for sponsorship success.
1. Rethink the model
“To start with, we know that teams have to enhance the behind closed doors environment and recognise that there are going to be remote fans,” says Nolan. “Clubs need to know how they are experiencing the game now, whether that’s through, for example, augmented reality (AR) or virtual reality (VR).
“You're looking at exclusive remote tickets, and, if you like, digital tailgating which is a preshow from former players, musicians and other influencers. How are they going to tie in with other physical venues?”
A return date allowing fans back into stadia remains unclear after the UK government scrapped further pilot sport events with spectators for the first two weeks of August. According to the PA news agency, Premier League clubs had been hoping to admit supporters at pre-season friendlies on a socially-distanced basis.
Regardless of when, or if, fans come back, Nolan adds that teams must prepare their grounds to improve both the viewing experience and commercial offering.
Nolan believes clubs need to have a better understanding of fans not attending games
“Every club will have to rethink their stadia and attendee design – optimising the footprint of stadia, a contactless environment, how food and beverage is delivered. Can they have gatherings in certain areas, do they partner with other venues?
“There needs to be more of an understanding of fan behaviours. It's not just about the direct fan attending the event. It's very much about that wider fanbase and how to continue that engagement and how to understand the behaviours of the non-direct fan.”
For ventures such as advertising across seating, Nolan states those have had “mixed results” due to teams having to give some of that income to existing partners. This has made it even harder to recoup matchday revenues, though it has helped “to ease some of those difficulties”.
“I think the other element is how clubs have been able to engage with their fanbase during these games,” he continues. “Whether it's through the broadcast, and with what Sky, BT, and Amazon have done so that the viewing experience is good, there's certainly been different attempts to try and engage their fanbase, which leads to that monetisation of sponsorship and media rights for the Premier League.
“Revenues are reducing for matchdays and there's going to be an expected reduction in media rights revenue next season. Sponsorship, licensing and merchandising are now more important than ever, so clubs understanding how they can go to market effectively, how to put a proper value on what they are contributing to a partnership is crucial.
“Teams have to focus and double down on their efforts around sponsorship. Retention of partners is going to be key in the ‘new normal’.”
2. Collaborate more closely with partners
For Nolan, point two applies to both existing long-term commercial deals and new ones.
“It makes it more complicated, but more integrated,” he explains. “We're seeing the more successful collaborations between sponsor and property being based around really working together for a win-win. That creates more assets, more flexibility, and also the rights holder being a platform for that brand to engage with the audience base in a more meaningful way.
“It’s about innovating or developing new assets. That could be for online fan parties, Q&A events, working more with athletes and influencers, or cause related market – of course, we've seen more of that in the last few months. Other content types will become more prevalent.”
At the start of lockdown, a number of grounds were made available to support the National Health Service (NHS), followed by fresh activations from clubs and their partners.
“Manchester City did a nice bit with Puma where kids were able to design their own football kit,” continues Nolan. “That interactive element of getting closer to the fan had some really nice examples outside of just quizzes and competitions.
“Online fan parties were another area. There was more of an interactive element because that's all that they had to go on, so more resources and effort were put towards that because games were being played behind closed doors. I expect to see more of that.”
Teams have benefited from more interactive activations during lockdown
Closer collaboration may well extend to the boardroom when it comes to formulating deals. The flat fee with performance bonuses is nothing new for partnerships. However, Nolan believes flexible incentive-based payments could be more widespread and intricate as brands seek to strike a balance between risk and reward.
“We've seen it in the US more than in the UK, but that’s something which could play out a little bit more.
“As it's not as standard as previous contracts, then you could argue that it might take a bit longer. But I think there's been more collaboration over the last few years. You're seeing more flexibility in and around the asset base between partner and property.
“By nature, that's already happening. Clubs are having to be more flexible and potentially adding in more assets for the same value. You'll see more flexibility from clubs but that's not to say it will take longer to renew.
“To look at the other side, brands will certainly be discerning about the value that they're getting from a partnership, so will need to be more convinced than ever about parting with their money.”
3. Accelerate digital
The lack of action during sport’s shutdown saw more clubs turn to social media to appease fans eager for their content fix. That reliance on digital could only be the start for teams in a bid to monetise more effectively.
“Continue with digital engagement, customer relationship management (CRM) and have a more personalised experience for those not able to attend games,” says Nolan. “Develop new growth areas such as esports. They will be the focus for all Premier League clubs and indeed all rights holders.”
Speaking during a SportsPro Insider Series session last month, Jim Lucas, the Football Association’s (FA) managing editor, affirmed that lockdown had proved that creating effective content was still possible, highlighting the ability to move away from mirroring television without skipping on quality. Remote, streamlined production now looks set to be the norm, enabling clubs to provide partners with more bang for their buck.
“There's been an acceleration of digital to some extent,” agrees Nolan. “Clubs are being smart about how to push that content and engagement in a more constrained calendar.
“CRM and digital customer experience will be important. Developing new assets, whether that’s through gaming, which we know had a boom during lockdown, or more music, fashion, and food tie-ins that aren't just related to the live content and the shoulder programming around it.
“We’re going to see more collaboration working with brand partners where, in some cases, they've had the media exposure that they've always had, and they've maybe got a good return on exposure. But, actually, it's more about how they are engaging effectively, how they are really driving brand impact and business impact, so proving that is as important as ever.”
Clubs should look to develop new assets through digital
In keeping with that theme, another study released by Nielsen this month revealed that nearly half of the UK population have an increased interest in brands who have been socially responsible during Covid-19, suggesting there are increasing opportunities for those companies to reach engaged and appreciative audiences.
Of those asked in July if they had a greater interest in brands who have been socially responsible and ‘do good’ more than before, 45 per cent of respondents agreed they did, an increase on the 41 per cent who said so in June.
Young people in particular appear to be the drivers of this new way of appraising companies, with slightly under half (48 per cent) of those aged 16 to 29 claiming to have an increased interest in socially responsible brands. That compared to 46 per cent of 30 to 49-year-olds and 34 per cent of those aged between 50 and 69.
With the new season kicking off on 12th September, the pressure on brands and clubs to be more astute with their partnerships will be greater than ever. Nolan feels companies have been “sympathetic” to teams’ current plight but warns that can’t last forever in the search for value.
Deal structures could be about to shift. Clauses covering unforeseen events such as global pandemics, resulting in contracts being devalued, will surely become universal. The length of agreements, too, may alter.
Teams have to focus and double down on their efforts around sponsorship. Retention of partners is going to be key in the ‘new normal’.
“In the UK, the average duration of deals has gone down significantly,” notes Nolan. “Back in 2010, it was just over three years in length whereas in 2019 that was less than one-and-a-half years.
“More brands are testing or swapping platforms to some extent. Betting has had an influence with their short-term deals, but if we see the average of one-and-a-half years it can't go too much lower.
“There might be ‘one plus one’ options in there, which is common place, but that goes against empirical evidence that says longer-term partnerships generate higher value for a brand. But with the competition and different assets available, then there's a belief for brands to test a little bit more.”
The number of commercial deals in UK Sport has jumped from 600 in 2010 to nearly 2,000 this year
A compressed middle for mid-range tie-ups could also be forecast, thanks to a bifurcation of mammoth and more modest contracts. The five-year plus kit deals, for example, should be here to stay, but lesser, short-term agreements have caused the split.
“The long tail of less than UK£1 million is growing, so there are more at that lower level,” continues Nolan. “The UK£1 million to UK£8 million sponsorships are becoming more difficult to sign because it's a bit more squeezed at both those other ends.”
Nolan adds that the number of new deals per year in UK Sport has shot up from 600 in 2010 to nearly 2,000 this year, forcing clubs to find unique ways to stand out given the choice companies now have. Digital, again, seems to be the centre piece for teams’ new commercial tactics.
“They need to show that they have an innovative platform, have an engaged audience, and how they impact the brand's business,” concludes Nolan. “Assessing that value between parties is more important than ever and being able to break that down in the contract is therefore going to be vital.
“We’ll see a digital content element of these contracts, rather than it just being put in without a value. It's going to be more and more prevalent as it becomes a bigger part of the overall packaged value, as well as some of those more innovative assets.”