Sponsorship is one of the most important streams of revenue for any event. Similarly, sports sponsorship plays a vital role in generating revenues in the sports fraternity. Sponsorship is a lucrative option for brands and businesses to invest in sports. At the same time, they can leverage their brand value and presence in the market. It has been proved that brands that connect with sports leave a greater impact on the minds of the consumers and fans as compared to traditional marketing.
With pandemic nearly shutting down all the sports, the sports industry is reportedly expecting the revenue to be down by $61 billion. This accounts for nearly half of the yearly planned revenue. According to one of the surveys conducted, 31% of sponsors expect pro-rated agreements and refunds, whereas only 11% of rights holders saw the same. Additionally, 64% of rights holders believe sponsors will make up all lost exposure, but only 45% of sponsors agree.
Sports teams and associations are facing huge financial losses as the investors and sponsors are pulling out of the deals. This leaves them with no major source of revenue as the market is also stagnant and there are no business operations across the globe. Although sports are resuming slowly and steadily, the market will take some time to recover. Brands are reluctant about investing in sports as of now.
Different leagues across the globe are facing similar financial issues due to pandemic. Recently English Premier League suspended Chinese TV Broadcaster for non-payment of dues. The football clubs have to pay the rebate of broadcasting rights, and there is no matchday revenue due to the absence of fans on matchday. Most of the companies have also pulled out of the agreement due to political reasons and Anti-China sentiments.
English Cricket Board and Cricket Australia are battling monetary problems due to suspended tours and matches. Most of the affiliate associations have approached the Global governing bodies to come to their rescue during the financial uncertainty caused by the pandemic.
Indian Premier League (IPL), the biggest T-20 tournament in the world, has also seen a dip in sponsorship revenue. With VIVO pulling out of Title sponsorship at the last moment, the new title rights were sold at 50% of the original value. IPL 2019 accounted for ₹620 crores from central sponsorships, whereas IPL 2020 stands at just ₹420 crores. The teams have also seen a drop of 25-30% in sponsorships.
The Board of Control for Cricket in India (BCCI) is also struggling to find a new kit sponsor and merchandise partner for the Indian Cricket Team. After Nike refused to continue the association, BCCI invited a tender for the bid, but it is yet to reach an agreement for a new sponsor. Even bigger brands are reluctant to make a huge investment due to uncertain financial situation. Nike, one of the biggest sports brands, reportedly suffered huge financial losses during the lockdown.
The only tournament that has been not affected or has incurred loss is the US open due to the preventive measures it had taken in the past. The US Open reportedly had an insurance amount every year that could be utilized during unprecedented situations. The long term thinking helped the organizing committee to cope during the pandemic when crowds were not allowed to watch games.
Considering the successful implementation of long term plans, many sporting bodies might adopt the method used by the US open to tackle the pandemic.
Despite the resumption of various sports, the financial situation will take some time to recover. The aftermath of the pandemic can see brands becoming cautious in spending on sports properties. It could be the best time to invest at lower rates and get the maximum returns in terms of brand value in the future.
By Archil Katiyar