COVID-19 and sport sponsorships: What now and what next? - Kuits Solicitors Manchester
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COVID-19 and sport sponsorships: What now and what next?

COVID-19 and sport sponsorships: What now and what next?

22nd May 2020 - Published by Kuits commercial team

With the landscape for sport significantly impacted by the global COVID-19 pandemic, commercial and intellectual property lawyer, Caroline Brennan, takes a look at the brand engagement opportunities for the sector during the crisis, and lends her an expert insight into what the future may hold for rights holders and sponsors.

The impact of COVID-19 on the commercial opportunities within sport

With the sport and entertainment industry founded on the fundamentals of live competition, events and mass gatherings, the outbreak of COVID-19 and the ensuing lockdown measures have not only called the sporting schedule to a halt, but also profoundly affected the conventional exploitation of commercial opportunities within sport.

The key premise of sport sponsorship is simple: sponsors, or partners, pay for rights of association with a view to converting the fans of rights holders, usually a club, team, competition or federation, into fans and customers of its own. What underpins this, traditionally, is the content produced out of the rights holder doing whatever it is they primarily do – footage of a football match for example – and the sponsor’s paid-for right to be a featured or visible part of that in some way.

With primary events cancelled, the industry has had to find new ways to engage consumers, as social distancing measures render the orthodox real-time physical activation and fan engagement impossible. One way many of the big names within the industry have capitalised on this is through their social media outlets and online platforms, leveraging their global followings and deepening their pool of content in a bid to keep fans engaged. We have seen examples such as showing archived content, previously unseen behind the scenes footage, esports, live streaming with current and former sports personalities, and an array of ‘at-home sports challenges’.

While there are ample opportunities for brands and sponsors to collaborate creatively on content during this time, if this doesn’t appear to be an option for either party, many sponsors may begin to explore their options around termination of the contract.

Termination – what’s the legal position?

Whether there is a case to bring the contractual relationship to an end as a result of COVID-19 depends upon the precise contractual language of the force majeure provision and whether it would be impossible or commercially impracticable for the parties to perform their obligations, rather than merely inconvenient.

Let’s briefly touch on what the common obligations of commercial partners in sport are, and how impossible they would be to perform in the current climate.

For a rights holder, the ability to deliver events, appearances, opportunities and content which depends on these things has been greatly reduced. That being said, we have seen how some of the larger organisations have generated novel ways of involving their fans and, to a degree, fulfil their contractual obligations. On the other side of the relationship lies the commercial partner, whose obligation is to pay – which, unless insolvent, they can probably still meet.

Whilst the contractual provision may establish the pandemic as a force majeure event, contracting parties must be cautious in declaring a force majeure event and ceasing performance of their obligations for a number of reasons. Firstly, from a legal perspective, incorrectly declaring a force majeure event may result in one party repudiating the contract and providing the other party with a right to damages. Secondly, from a commercial perspective, and in the interest of fostering long-term, prosperous commercial relationships, it would not be advisable to prematurely trigger force majeure provisions if there are other viable alternatives which the parties can explore.

On the assumption that parties will seek to maintain their relationships, discussions between them should be ongoing to find mutual solutions to develop and deliver their contractual obligations.

If you would like a more detailed analysis of this area, take a look here for our recent insight exploring whether COVID-19 could be classed as a force majeure event, and the practical steps business should take going forwards.

Adapt, or….

Commercial relationships between sports teams and their partners have long been built on a certain level of flexibility in delivery. Often, fixed headline rights such as the use of a brand in product category, designation and fixed physical branding, will be ever present. However, the detail of activations such as which team members attend a launch or feature in content are often fluid, to the benefit of both parties, particularly in today’s current climate.

Brand strategies surrounding activation was not a sprint pre-coronavirus, and many of the most successful partnerships are long term relationships and viewed by both sides as such.  For this reason, many existing partnerships are developing and implementing engagement roadmaps, which continue to deploy the staggered release of content in a bid to sustain engagement throughout this marathon and beyond.

We are seeing that the industry is not, for the most part, seeking to terminate relationships but rather move to adapt them by focusing discussions around the ability and practicality of flexing granted rights to allow for new content, new platforms, and the generation of novel and unconventional customer experiences. Strong relationships allow for a degree of manoeuvrability within the scope of the content to drive sales in the current, home-based environment. It is therefore paramount that brands speak openly with their partners about the messages they are trying to land, and build digital rights off the back of that. For example, a beverage partner might pivot their content from bar or other social occasion sales to e-commerce, with a particular focus on home consumption.

In adapting content to the current environment, it is paramount to successful acceptance by the fan base that the message conveyed resonates with the general public by striking the right tone. The most successful social engagement campaigns have replaced pre-meditated, polished content with real and raw content as they push to create relatability between the fans and the athletes.

We’ve included some examples below of how some of the best sports brands have delivered very effective consumer experiences during lockdown.

  1. Nike’s Living Room Cup – Weekly online fitness challenges for individuals to take on the world’s best athletes from the comfort of their own homes. Week 5 saw the followers of the Nike Living Room Cup challenged to do as many plank get-ups as they could in 45 seconds. Participants are then encouraged to tag @nikelivingroomcup in their videos for them to be shared by Nike’s page.
  2. Liverpool Football Club’s #StayAtHomeChallenge – This involves people videoing themselves doing as may keepy-ups with a roll of toilet paper inside their house as possible, and challenging their friends to take part by uploading their attempts and tagging them. This cleverly creates a plethora of creative submissions circulating on social media, ensuring Liverpool FC remains at the forefront of the sporting world’s mind.
  3. The USA National Basketball Association (NBA) – The NBA has launched the ‘NBA Together’ social engagement campaign that aims to support, engage, educate and inspire youth, families and fans in response to the pandemic. According to NBA’s official press release, the campaign centres around four pillars: ‘Know the Facts’, ‘Acts of Caring’, ‘Expand Your Community’ and ‘NBA Together Live’. Each pillar will contribute to “amplify the latest global health and safety information, share guidelines and resources, and keep people and communities socially connected through digital tools and virtual events”.
  4. Team GB – With #Tokyo2020 becoming #Tokyo2021, Team GB (and other teams from around the world) are using the time to engage with fans by sharing videos of their athlete’s home workouts, showing how the world’s best athletes are keeping fit at home in their living rooms with little to no gym equipment.
  5. Formula E – As part of the partnership between Formula E and UNICEF, Formula E are entering the online world with an eight-week e-sports competition. This will feature all of the teams and drivers from the ABB FIA Formula E Championship, as well as a selection of some of the world’s best gamers.

The above examples depict the potential scale of the engagement feasible through creative social media campaigns. Many go beyond a simple promotion of the brand to encourage followers to participate in physical activity, which is key for maintaining wellbeing in the current environment.

What’s next?

Whilst the long-term impact of COVID-19 on future commercial opportunities in sport is, of course, unknown, the industry consensus seems to be that the shift to digital and the drive to produce new and innovative content is here to stay.

People around the world are hungry to engage with digital content, with some brands reporting an increase of anywhere between 5-50% uptake online compared with this time last year. It is therefore up to brands to keep pace with their content production and feed the population’s seemingly insatiable appetite during these times and beyond.

One of the more buoyant industries we have seen during the pandemic is that of esports. Esports is a form of sport competition through organised video gaming. This world sees athletes and competitors from different leagues or teams go head-to-head in the same games that are popular with at-home gamers such as Fortnite, League of Legends, Counter-Strike, Call of Duty, Overwatch and Madden NFL to name but a few. The number of people gaming and streaming has seen an unprecedented acceleration in recent months, demonstrating that esports is uniquely placed to handle the challenges of the pandemic.

Twitch, the Amazon owned platform and the world’s leading live streaming platform for gamers and e-sporting competitions, has seen an increase in streaming by 20% compared to the final quarter of 2019. Similarly, other well-known live streaming platforms like Mixer, YouTube Gaming and Facebook Gaming have also experienced a surge in engagement.

As a result of this, traditional sports teams are trying to utilise esports in a bid to establish new and unique ways to maintain fan engagement. For example, F1 launched the F1 Esports Virtual Grand Prix series to replace its postponed races which has seen a number of current F1 drivers take to the virtual track to challenge an array of stars from different sports. Esports has undoubtedly provided a unique opportunity for engagement with a new audience digitally.

The challenge for esports organisations and streamers is how they will continue to engage new fans and gamers with their content post-pandemic when traditional sports events return. We could see traditional and esports industries continue to collaborate as part of a match day experience, for example, such as organising tournaments or hosting live streams with current players.

One thing is for sure, the possibilities afforded to the potential collaborations between the traditional sporting and esporting industries are exciting, and will likely lead to new partnerships in the future. With the uncertainty attached to what the future of sporting events may look like, and the constant review of lockdown measures globally, many sporting teams (such as Real Madrid FC) have been preparing for the return to play since the early days of the outbreak. Whilst ensuring that rights holders remain empathetic to their partner’s circumstances, this is a smart move to comfort partners about the commercial viability and longevity of their relationships by evidencing that brands are willing, ready and able to deliver what they have committed when the industry moves to its ‘new normal’, whatever that may be.

Beyond the statistics and commercial prosperity of relationships, sport has always demonstrated an undying ability to unite masses and create valued shared experiences. In light of the impact of COVID-19 and the lockdown measures will inevitably have on people’s mental health, the yearning for connection and shared experiences will be stronger than ever. Sport, at both a grassroots and commercial level, will have a huge part to play in our journey towards the new normal.

If you are a sponsor or rights holder and would like to speak to our advisor about a sports-related commercial agreement, or if you would like advice generally on your commercial contracts during these unusual times, please call Caroline Brennan on 07522 230811 or email carolinebrennan@kuits.com.

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