Sponsorship marketing in football continues to be an incredibly profitable industry. As football clubs continue to see the value of their brands grow, they are demanding more from their current and prospective sponsors to secure a place in their sponsorship portfolio. While the potential exposure for sponsors is thereby growing ever-greater, so too are the damaging consequences for when it all goes wrong. In this article we tackle the main issues for both sponsors and clubs alike to be aware of to avoid similar issues and to ensure that their relationship doesn’t get Messi…
Football clubs enter into a variety of sporting and technical partnerships with sponsors of varying degrees of value. These range from headline sponsors who will take pride of place on the front of a club's shirt to more minor relationships with matchday sponsors. Regardless of the financial value of the sponsorship agreement, clubs and sponsors should ensure that their agreements are water-tight in the following five key areas.
1. Clarity on the scope of advertisement
Sponsors should ensure they know what they are guaranteed to receive in return for the sponsorship fee, including the specific countries that the sponsor will be advertised in. A shrewd sponsor will ensure their brand is guaranteed to appear not just at a certain number of matches (or potentially every match over a defined number of seasons for a more lucrative deal) but will ensure the contract specifies exactly where their brand will appear on advertising boards, so as to interact with broadcast visibility. Factors such as the positioning and size of the logo, to precisely how long a sponsor's logo will appear on an advertising board during a match should all feature within the agreement.
2. Duration and the ability to terminate
Sponsorship agreements should include sufficient clarity as to the length of the agreement. Although an agreement should have a defined term, both sides should carefully consider their rights to terminate should unforeseen circumstances arise. Along with classic ‘boilerplate’ termination provisions and avoiding the pitfalls of a one-sided termination right for convenience, prominent issues to consider should include:
- A right to terminate where legislative or regulatory changes are introduced during the term of the agreement which significantly restrict (or completely inhibit) a company's ability to sponsor a particular club. This is of particular importance presently in light of the recent Scottish Government consultation on restricting alcohol advertising and promotion.
- Whether an incident that may damage the reputation of either the club or the sponsor ought to lead to termination. At the core of a sponsorship agreement is the sponsor’s purchase of an association with a football club to obtain the benefit of their goodwill and reputation. Therefore, the sponsor will also want to ensure that it is protected from any negative publicity that might surround the football club.
- When either a match is rescheduled or an incident occurs which has a detrimental impact on the visibility of sponsors such as, for example, a game being played behind closed doors (we’re sure that you can all think of a real-life example of this…), it would be prudent for sponsors to consider whether this should lead to termination when negotiating sponsorship agreements.
3. Clarity on fees payable and fee adjustment
Whilst it may seem obvious, the agreement should contain sufficient detail on the fees payable by the sponsor to the club. This should include clarity on how the payments will be structured and whether any bonus sums are payable in the event of club success such as reaching or winning a cup final. A wise sponsor would look to make a certain percentage of the fees contingent on the club achieving certain aims specified in the contract.
For longer term deals, sponsors should seek to include clauses stipulating a reduction in the fees payable in certain events such as:
- Poor club performance – For example, in the event that a club is relegated, a sponsor should ensure that this triggers a significant reduction in the fees payable for the season(s) left of the sponsorship agreement in which that club spends in a lower division given the reduced exposure this will apply to the sponsor's brand.
- Stadiums at reduced or no capacity – Little over a year ago, football stadiums up and down the country were near devoid of spectators during matchdays (or at the very best operating at a significantly reduced capacity). Whilst such situations arising as a result of the pandemic are hopefully in the past, scenarios whereby matches may be played in front of few-to-no fans will inevitably continue to occur - primarily due to fan trouble. It is not uncommon for UEFA to impose stadium bans on football clubs due to fan violence and disruption. No fans in the stadium means less exposure for matchday sponsors who have paid a high ransom to appear on advertising boards around the pitch and within the stadium. To ensure they are getting a sufficient return on their investment, sponsors would be wise to include a clause within sponsorship agreements reducing their fees in such events or including a right to terminate on this basis as stated above.
The agreement should also deal with any fees payable on termination of the agreement for whatever reason. For example, it is not uncommon for one party’s termination for convenience right to be met with punitive termination fees, which seek to counter the risk associated with such one-sided termination rights.
It is important to consider whether the sponsorship will be on an exclusive basis, and if so, the level of such exclusivity. Careful consideration will have to be given to whether the sponsor is (however unlikely) to be the sole sponsor or whether the exclusivity is sector or brand specific, which will require careful drafting especially where there are potentially overlapping products or services. Sponsors are likely to insist on exclusivity to ensure that clubs do not offer similar rights to their biggest competitors, thereby protecting any dilution of the effectiveness of their sponsorship. If agreeable, clubs will want to ensure they are receiving sufficient value.
5. Future Relationship
Parties should consider whether to cater for a renewal mechanism within the agreement. Sponsors who have agreed a lucrative position as a shirt sponsor for example, will want to ensure they agree rights to have the first chance to renew the agreement before the club seeks alternative sponsorship.
Any renewal mechanism should provide for any relevant amendments to be made to the fees payable.
Football club sponsorship deals can be lucrative opportunities for companies to spread awareness of their brand on the biggest sporting stages with sponsors having their brands and logos on screens worldwide, as well as on the front of shirts worn globally by fans. With the growing increase in exposure, clubs and sponsors alike need to think ahead to maximise the benefits of any deal. There is no one size fits all approach when it comes to sponsorship agreements, but certainly football clubs and sponsors alike stand to benefit from stronger relationships where thought is given to issues akin to those we have discussed in this article. Our advice: think carefully so you don’t score an own goal!
Please do not hesitate to get in touch if we can assist with any of your sponsorship agreements. For more insights into the Media, Sport and Entertainment Sector, please see DLA Piper's blog MSE Today.