Sport Sponsorship Agreements: What Is The Goal?

Sport Sponsorship Agreements: What Is The Goal?

Key Contact: Rachelle Sellek

Author: Joe Smith

What is sponsorship and why is it important?

The influence of sport in the UK is undeniably strong. Whether it is football, rugby or hockey, millions tune in to their televisions or pour into the stadiums every week to watch the big match. The ability of businesses and brands to harness the mass publicity of sporting events should therefore not be underestimated. Sport sponsorship can offer a variety of different avenues for businesses to get their names out to the public, including kit sponsorships, matchday sponsorships or stadium naming rights.

Some of the main benefits of sponsorship agreements are: –

  • Increased media exposure – as social media and streaming services continue to expand and develop, the opportunity for brand exposure will continue to grow.
  • Brand awareness – increasing awareness of a corporate image or brand is the main purpose and goal of sponsorship. Greater attention will equate to greater familiarity and association.  
  • Increased profits – effective marketing can make the difference in scoring a successful sales drive. Businesses can use sponsorship to promote new or emerging products.
Terms of a sponsorship agreement

Sponsorship fees

One of the main terms of sponsorship agreements is the sponsorship fee and how much the brand exposure will cost. The sponsorship fee may be as simple as an agreed fixed price for the term of the agreement. However, the fee could also be in the form of variable payments or be linked to income targets. This will largely depend on negotiation between the parties to the agreement. Cost is an important consideration for businesses, and the payable fees will have to be weighed and valued against the likelihood of recouping monies through increased sales.  A sponsor should consider whether to opt for a sponsorship fee which is increased yearly as part of a multi-year deal or for a sponsorship fee which is to be linked to the performance of the team in question. For example, would there be a significant hike in the agreed fees if the sponsored team was promoted or won a trophy?

Sponsorship rights

A substantial part of the sponsorship agreement will focus on the rights of the sponsor, and the sponsor should ensure that these rights cover comprehensively and accurately all the main benefits the sponsor can receive. An important consideration should be the level of exclusivity that the sponsor is getting. For example, a sole and exclusive sponsorship deal with a sports club is likely to lead to a much greater awareness and presence than a multi-party sponsorship agreement would bring, although exclusivity may come at a higher price. A sponsor will want to include in the agreement its right to promote or advertise its business at events and the extent to which it can do this. In terms of venues, the rights to ‘signage’ (display of visual graphics that communicate information to the public) could be an important advertising tool, not only to fans at the stadium, but also to the wider public if the event is being broadcasted on television. Similarly, the agreement could include a right to display the brand on the kit itself. This could be a powerful method of publicity, as it is not only the players that wear the kit, but also the fans that buy the equipment. Product placement on the kit can lead to greater familiarity and brand presence, especially where the kit is also heavily promoted by the club itself.

Intellectual property rights

A well drafted sponsorship agreement should deal with the intellectual property rights of both parties, making clear which party owns these rights. Rights and remedies should be included in the agreement to ensure that each party is protected against any loss or damage arising from trademark or copyright infringement. The sponsor will want to protect any goodwill associated with its brand, by ensuring such brand is used or displayed in the manner specified in the agreement. Also, it will want to prevent any “passing off”, which is where a business uses the reputation of another for its own benefit, usually to increase its own profits. In this context, the sponsor’s relevant trademarks should be registered so that such trademarks are kept distinct and protected from those of the relevant clubs or teams. The sponsor will likely be required to afford protection to the sponsored party by giving  a number of  warranties, such as confirmation that the use of the sponsor’s branding or materials does not infringe the intellectual property rights of a third party, that all its trademarks are fully registered or that there are no other conflicting agreements (for example, if the club or team have already entered into an exclusive sponsorship agreement with another brand).

Duration of sponsorship

A sponsor should also consider the length of the sponsorship agreement. If, for example, the sports team or club in question is on an upwards trajectory, a multi-year deal could be an important asset to the sponsor. However, the sports team may not do as well as expected and the sponsorship fee may not justify the advertising, or circumstances may arise which cause the sponsorship arrangement to have a negative impact on the sponsor. Therefore, appropriate termination provisions should be specified in the agreement so that the sponsor can have an escape route.  

Post-match analysis  

As discussed, sponsorship rights can unlock the gates to a wave of publicity and media attention. Sponsorship may be used by all types of businesses, whether these choose to contract with a small, local sports team promoting brand awareness in a smaller geographical area, or with a larger sports club with broadcasting rights and exposure on a national level. Sponsorship can take a variety of forms; be it stadium naming rights, kit sponsorship or player or match day ball sponsorship. Sponsorship agreements should always be tailored to suit the needs of the individual business.

If you would like to discuss an opportunity of sponsorship, please feel free to contact the Acuity Law commercial and technology team.

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