The Madness of Sponsorship Make‐Goods

There are clauses in sponsorship agreements that normally gather dust after the contracts are signed, namely force majeure and substitution.

As we’re all well aware, there is nothing normal about 2020 and the dust has been shaken off of those typically skimmed-over clauses. Force majeure and substitution, the terms as we know them, have had their time in the sun over the past five months and it’s not surprising that daily make-good conversations abound in the sponsorship business.

While most properties were proactive in the second quarter of 2020 to address force majeure and get right into substitution or make-good discussions with brands, the bumps in the road are far from over.

Just when we think things are moving in the right direction with a substitute benefits plan, another bump appears and adjustments need to be made. Postponed or canceled events, league policy shifts, brand strategy adjustments — the list goes on. The best-laid plans continue to evolve and change.

In a previous article, I said that 2020 would be a year of contingency planning, optionality, resilience and innovation. Knowing what we know now, I would also add patience to that list. Believe me, it’s a muscle I’m developing more and more each day as I navigate the ever-changing landscape of sports and entertainment.

Let’s dig into the details a bit, shall we?

Due to the number of make-goods happening in sports, there is a general lack of inventory in team–controlled media, digital and social assets. Most properties have hit a saturation point. With that said, innovative team marketers and agencies are working together to find new platforms that will deliver value to clients.

To support the make-good process, professional leagues are working with teams to add incremental TV-visible signage placements as well as access to limited media inventory and licensed content. This has been invaluable for teams in supporting and maintaining their most significant signage and entitlement partners.

Here is a snapshot on how the leagues are supporting teams so far.

• In the NFL, teams will cover the first 8-to-10 rows of the lower bowl seating in their stadium to provide signage placements for partners. Many teams are reserving this inventory for their top partner make-goods. Others will use it to generate incremental revenue on a game‐by‐game basis. With the recent cancellation of the NFL preseason, teams are awaiting word from the NFL on replacement TV content to assist with media make-goods at the local level.
• In the NHL, while the Canadian bubble sites have fully tarped the arena seating, this is more for aesthetics and not incremental signage. We are seeing additional in‐broadcast treatments to support league partners, which are no doubt part of their league make-good plan. For teams, they have been granted access to limited playoff dasher board inventory, which is not the standard for the league, and provides great make-good value for top team partners.
• In MLB, the league has allowed teams to add on‐field virtual or permanent placements along both baselines in foul territory, TV‐visible tarp signage in the stands and a virtual placement on the back of the pitcher’s mound visible in local market telecasts.
• Down in the NBA’s Orlando Bubble, they have extended the courtside digital to include baseline digital, added new corner digital placements and made select national media units available to teams for make-goods.
• For MLS’ recently-completed Orlando Bubble, they too have worked to add on‐field virtual signage positions to support teams in the make‐good game. They also added the ability for teams to sell sponsors on each shirt sleeve and shorts.

As TV ratings begin to roll in, we will see if this inventory delivers enough value to cover partner losses. In many cases, I think this new league-approved inventory becomes part of the team’s permanent offering.

Agencies like ours are working hard to redefine social activation during the pandemic. Some of the executions may even survive and become a new platform for the post‐pandemic world — a silver lining perhaps.

A few things for properties to keep in mind:

• Some brands are hurting right now. If properties can provide relief in the form of contract-term extension, deferred payments and/or fee reductions in lieu of substitute benefits, this could go a long way to solidify the partnership relationship over the long term.
• Many brands need marketing value right now to drive their business. They are willing to work with properties to get that value and perhaps try something non‐traditional. There are no crazy ideas and many brands will reward creative thinking with a generous valuation.
• Arguably the most difficult asset to recoup is the lost value of trademark/IP activation rights over what should be the most exciting time of year for some leagues. Brand activation power is limited when it comes to social giveaways and promotions. Tickets and experiences are off the table in most cases. In‐retail messaging has shifted from playful sports creative to mask and social distancing guidelines.
• With the shift in the seasons and playoff windows, there will be very little offseason for some sports, namely the NBA and NHL. Properties should view this as an opportunity to get ahead of the next season of make-goods (oh yes–there will be more) and create effective activations with brands.

How did we get here, and where are we headed next?

Before the pandemic, brands invested with properties because they believed in the value of the IP affiliation and event-marketing assets. After the pandemic, that will continue. The key to success is in how the two parties agree to work together during these strange times. The result of our tireless planning (and re‐planning) will set the stage for the future.

As my mother always told me, be kind and treat others as you would like to be treated.

Molly Arbogast is a sports marketing expert with more than 25 years of experience on the team/property side of the business. Her firm, POV Sports Marketing, specializes in working with brands and properties to secure sports sponsorships. Over her sports career, she has worked in sponsorship development for the Philadelphia Eagles/Lincoln Financial Field, Learfield, NBA/WNBA, Palace Sports & Entertainment and International Management Group (IMG).