Sponsorship’s Digital Revolution

Sports sponsorship is a unique marketing platform to reach a passionate and highly-engaged audience in brand-safe environments at scale. In 2019 it experienced its biggest year yet, generating a record $46.1bn in revenue and 36% of the total revenue generated by sports properties globally.

Due to Covid-19, we now project sponsorship revenue will fall to $28.9bn by year-end, a 37.3% decrease on 2019 and $19.5bn short of our pre-Covid-19 projection of $48.4bn.

Though via the media we voraciously follow the soap opera that surrounds the sports and athletes we love, it is the regular supply of live action that sport’s highly-engaged audience is built around. And since that was virtually brought to a halt worldwide in mid-March, properties haven’t been able to give sponsors the full value they signed up to pre-Covid-19.
The last two months have been spent exploring how sponsors can be compensated through ‘makegood’ collateral, and how new ‘sponsorable’ broadcast and digital assets can be created as we prepare ourselves for a sustained period of spectator-less sports.

Through Covid-19, sports sponsorship’s transition to being a digital business will be accelerated

In sports where events have been postponed or cancelled – or in instances where ‘makegood’ compromises cannot be reached – properties have also been preparing for cash rebates, and a worst-case scenario, the termination of deals. This, in combination with new agreements being put on hold as a result of brand-side cost-cutting, will see overall spend reduce significantly in 2020.

Longer-term, we see Covid-19 having two major changes on the sports sponsorship landscape.

With spend on marketing one area to be pulled back during downturns – unfairly in our view and unjustified based on data analysis – the pandemic will see the types of companies who invest in sport change.

But more fundamentally, as a result of Covid-19 sports sponsorship’s transition to being a digital business will be accelerated – digital assets finally becoming the most valuable part of a sponsorship package, rather than an add-on thrown in with little thought as to the value they deliver.

Sponsorship’s Paradigm Shift

We all know that, over the last decade, media consumption has become digital-first through our ability to quickly, cheaply and easily access media on our smartphones and other connected devices. This is reflected in the average person in the UK now spending over half (55% of total time) of their daily 10 hours 33 minutes consuming media doing so through digital channels¹. Comparatively, only two hours 46 minutes are spent consuming media on linear TV.

As a result, over those 10 years, the media channels used to market have changed. In 2019, 45% of global advertising spend went through digital channels, ahead of TV with 28%². Digital channels are where the majority of media engagement is happening, and therefore that’s where brands most want to engage with audiences.

For a variety of reasons we have discussed previously, sports sponsorship has been slow to adapt to this, with brand exposure from linear TV coverage still delivered as the primary metric of success for brand partners. This plays out in the data: only 9% of sports sponsorship value was delivered through digital channels in 2019. That means brands spent over half their money online, and consumers over half their time online, but sports sponsorship only delivered 10 pence in every pound of its value online.

Value Delivery for Sports Sponsors by Channel (%)

Many of our clients have been the first-movers in bucking this trend, building digitally-led packages and leveraging their unique IP to create engaging branded content, delivering it across their owned and operated digital channels. And every time they do, their digital packages become the highest-performing media their brand partner invests in.

This pandemic has accelerated already-visible trends in media consumption overnight, 95% of people saying they’re spending more time consuming media since the start of the outbreak³. And as with the direction of travel, this consumption is skewed digital –  web browsing globally increasing by 70% compared to normal usage rates, and social media engagement by 61%.⁴

As live events return over the summer without spectators, ‘physical’ marketing channels such as in-stadium activations and out-of-home advertising in and around the stadium have been parked until further notice. Due to Covid-19, that means properties are being forced into finding new assets to deliver value to brand partners or they face the risk of their sponsorship businesses becoming redundant.

The most innovative sponsorship teams are finding ways to do this through TV broadcasts by turning empty seats into additional ‘real estate’ for sponsor logos and creating new branded broadcast angles and experiences.

But those opportunities are still, as with the ‘analogue’ sponsorship world, finite – it is in the digital space where relatively infinite opportunities reside. That means properties will be forced, at a greater scale than ever before, to create innovative assets for their brand partners that don’t solely rely on broadcast coverage.

And their owned and operated digital channels, which for some of the biggest sports properties have a combined reach in the hundreds of millions, are a relatively untapped resource.

Satisfying Brand Expectations

Pressures on the traditional investors in sports sponsorship will also force innovation from properties.

When we move past spectator-less live sport and welcome fans back into stadiums – and we know that day will come – the marketing money will have shifted radically.

Currently, many of the biggest-spending sectors on digital advertising don’t look to sport as a natural route to market – in particular sectors with a high proportion of digital-first brands. In 2019, for example, retail contributed $28.3bn in digital advertising spend in the US alone⁵ – but only $2.9bn on sports sponsorship globally.

Primarily, this is because with the growth of digital advertising, brands have been able to see, with real-time data, the audience they are reaching and how successful their campaigns are performing. This type of measurement is the digital-publishing standard, not just that delivered by the pioneering forerunners like Facebook and Google, and allows brands to know how their marketing spend is directly resulting in an increase in product sales.

Sport, on the whole, hasn’t had the technology to do that, still relying on a measurability model built for the analogue age. But with revenue holes in their sponsorship businesses and some of the biggest-spending sectors on sport – such as Financial Services and Automotive – cutting marketing budgets, properties will be forced to open up conversations with sectors that have shunned sport in the past. Our challenge, and sport’s challenge, is to be able to give them the technology and measurement they would receive in the world of digital publishing.

For some, the pivot to digital will be daunting as it involves a shift in mindset and the unpicking of an accepted sports sponsorship modus operandi that has developed over decades. But Covid-19 is giving all areas of the industry an opportunity to rewrite the rulebook.

Sport’s challenge is to be able to give sports sponsors the technology and measurement they would receive in the world of digital publishing

References:

1. https://content-na1.emarketer.com/us-time-spent-with-media-2020
2. Zenith, Advertising Expenditure Forecasts December 2019
3. GlobalWebIndex Coronavirus Research March 2020
4. http://www.millwardbrown.com/global-navigation/news/press-releases/full-release/2020/03/25/global-study-of-25000-consumers-gives-brands-clearest-direction-on-how-to-stay-connected-in-a-pandemic-world
5. eMarketer, May 2019