In the middle of March, the world of sports changed. We witnessed games being canceled, seasons being postponed, and fans being told they cannot return to stadiums. Many people were worried about how sports would return and what the future holds. Sports teams make most of their profit through three ways: fan attendance (ticket sales and concessions), tv and radio broadcast deals, and sponsorship sales.
According to Statista, “the North American revenue from sports sponsorship in 2019 was $17.7 billion dollars.” (Statista) This included events in entertainment such as music festivals, art shows, and annual events, but the driving factor for this number is the 4 major sports leagues. For example, the NFL “pulled in over $3 billion dollars” (Investopedia) in sponsorship in 2018. Sponsorship opportunities are important because they allow brands to interact with their target market and create a lasting impression on an audience. When COVID-19 hit, leagues choose to continue play without fans, which forced teams to figure out a way to uphold their sponsorship agreement. In the rest of this blog, I will look at what different leagues and teams did to innovate sponsorship contracts as well as talk about where I see the future of sports sponsorship heading.
One of the first sports leagues to return to action was NASCAR, well sort of. Weeks after the world was shut down NASCAR teamed up with iRacing to “form the eNASCAR iRacing Pro Invitational Series” (NASCAR.com) which would be broadcast on television channels such as Fox Sports and NBC Sports. This idea was able to provide fans the ability to watch NASCAR without having to leave the comfort of their couch. NASCAR professionals like Danny Hamlin were able to race against some of the best eSports racers in the world. Not only did this idea provide fans the opportunity to watch racing again, but it also provided race teams the opportunity to uphold contracts and hopefully keep their employees on the roster. In an interview with NBC Sports, Dale Earnhardt Jr. said, “All of the race teams are trying everything they can to keep their sponsors and keep their employees.” (NBC Sports) NASCAR teams and drivers were able to take their current contracts with brands and move them over to iRacing, so if a brand, like Turtle Wax, for example, was sponsoring the car for a driver this contract would be upheld since Turtle Wax would be on the car in iRacing. This allowed the brand to be seen by the public and pay the NASCAR team for their contract. The ability to uphold these sponsorship contracts, through the technology of iRacing, allowed these teams to keep their employees and pay them their salary.
In October, I was able to have a conversation with a Partnership Sales Representative for the Washington Nationals. He told me that many teams in Major League Baseball took a similar approach to NASCAR by using enhancements in technology to help stay on top of sponsorship contracts, specifically using “virtual signage in the outfield.” This individual told me that “most partnership contracts included in-game promotions and activation” things that are now more difficult to do with no fans in the stands. The Partnerships team for the Nationals had to think of ways to provide value and opportunities to their clients, so they decided to use the no fans to their advantage. If you watched a Washington Nationals broadcast this season, I had to do this often since I am a Phillies fan, you would have noticed virtual signs in the outfield seats whenever a deep pop-fly or a home run was hit. In years past, no one would have seen virtual signage in the outfield since these areas were typically packed with fans. The Washington Nationals, as well as many other baseball teams, turned the initial problem of having no fans in the outfield into an opportunity to uphold current partnership agreements.
The National Football League took somewhat of a different approach when it came to new ways to integrate sponsorship contracts. The NFL had the “luxury” of starting their season later than everyone else, so they were able to see what worked and what was not working in terms of sponsorship. The NFL Draft was a steppingstone for how the league and their teams would find ways to integrate sponsorship. According to Marketing Dive, “more than 100 brands” (Marketing Dive) paid money to sponsor this event. The league had brand interaction with companies such as Lowe’s (the Presenting Sponsor), Bud Light Seltzer, and Pizza Hut. Teams had the ability to host their own draft parties which were used for sponsorship opportunities. The New York Jets and Tampa Bay Buccaneers, as well as other teams, hosted thousands of virtual fans on a zoom. These gatherings of virtual people were of coursed sponsored, Verizon with the Jets and Miller Lite with the Buccaneers. The NFL also had their sponsors interact with one another. For example, “the Houston Texans bought food from Whataburger (a current sponsor) and had it delivered to Kroger’s Warehouse, another sponsor.” (Sports Business Daily) These two examples from the NFL provided value to their sponsors and have now made these sponsors more likely to renew a contract.
The start of this year's NHL season ushered in some big changes for hockey sponsorship. The league, which makes most of its money from ticket sales, decided to put brand logos on helmets as well as sell the naming rights to their newly developed four divisions. In years past, “there used to be off-limit areas to apply sponsorship within North American sports” (KSLSports.com) but now, with the help of COVID, we have seen most leagues take every opportunity to make money. The NHL’s 4 divisions are now called “The Scotia NHL North Division, The Honda NHL West Division, The Discover NHL Central Division, and The MassMutual NHL East Division.” (LA Times) These new division sponsors, as well as the helmet sponsors, allow the league and teams to make up some of the revenue they will lose from not having fans in the stands for this year. The NHL Commissioner, Gary Bettman, has said that the branded divisions will be a one-year sponsorship, but we will see if that is the case.
The world of sports sponsorship is forever changed because of COVID-19. We are going to see more leagues copy the NHL in selling naming rights for their divisions because this is an easy way to make a lot of sponsorship dollars. This idea fits the NCAA and March Madness well. The tournament has an East, West, North, and South division which would be easy to sell naming rights for. We will see leagues continue to develop and find ways to use technology to drive sponsorships. Leagues will continue to use virtual signage in broadcasts as we saw with the MLB. In terms of other technology, keep an eye out for virtual and augmented reality. These two ideas will give teams and brands the chance to interact with fans even when they are not at the stadium. Teams like the Philadelphia Phillies have done scannable QR codes which cause a virtual bobblehead to pop up on people’s phones. This new enhancement in technology will allow leagues, teams, and brands to interact with fans on a whole new level.