You might not know that Bill Glenn, SVP and marketing & sponsorship strategist, has an alter ego. At any hour of the day you might find him giving his two cents on sports marketing and sponsorships on Twitter as Sponczar. While first reluctant to join twitter, Bill has taken to the medium and has built quite a following. And lucky for us, the Sponczar doesn’t always speak in 140 character quips – sometime he writes for a number of publications, including Sports Business Journal. Enjoy the longer form of Bill’s latest piece on jersey sponsorship below, and looking forward to seeing more of Bill’s thoughts on ShareBlog in the form of The Sponczar Speaks.
The Sponczar Speaks: Jersey Sponsorship
Jersey sponsorships. If you’ve not considered it, now’s the time. Why?
Small- and midsize-market teams are under tremendous economic pressures. Sponsors continue to seek new channels of fan engagement and better ways to immerse their brand s in the game experience. Jersey sponsorships offer a potentially fresh alternative to both challenges. But what will be the industry’s basis for jersey sponsorship value?
The MLS started selling the front jersey sponsorship in 2007. A dozen MLS teams will have front jersey sponsorships this season, most of which earn $2 million-$4 million per year. Clearly, brand s have established a consistent market value for what they’re willing to pay MLS clubs for this asset.
Who will be the first to break this ground in the NFL, NBA, MLB or NHL? Can you imagine the scrutiny they will receive? It’s fair to point to the MLS and say jersey sponsorships will be worth what brand s are willing to pay. But, with hope, brand s will validate the price because these four leagues are different. They have long histories and rich traditions.
Guidelines drawn from three areas can help minimize the risk associated with assessing the value of jersey sponsorships: research, naming rights, and international markets.
Research: Horizon Media recently released a study suggesting the projected value for jersey sponsorships across the NFL, NBA, MLB and NHL was $370 million. The study used the cost of a 30-second spot as one factor in calculating value. As a client, I used this same factor to value brand ed college football coaches headsets but with a heavily discounted formula. Similarly, to effectively use this research study as a basis of valuation, it will be critical to understand how the study uses ad value and balance that with the brand objectives for the jersey sponsorship.
Naming rights: By comparison, and based on today’s stand ards, naming rights are arguably a team’s most integrated and valuable asset. In 2009, stadium naming rights across the 122 teams in the big four leagues generated $187 million annually. By comparing jersey sponsorship and naming rights deals in the same market (possibly even with the same team) using common base metrics such as CPM, attendance, fan base, etc. a rationalized range in benchmarking jersey sponsorship value can be established.
In addition, comparing stadium with jersey sponsorships with respect to reach implies an external/internal exposure trade-off. Brand s associated with stadiums are routinely referenced in external media reports, whereas the jersey sponsor typically is not. Of course, media reports may also contain pictures of game play, including a jersey sponsor. Conversely, although the stadium sponsor may appear on the field of play, brand s on jerseys are the focus of fans throughout the event, whether viewed live or televised. Given the active focus of fans on the players — and the jersey — one might expect more effective brand recall and association from the jersey sponsorship.
International markets: International jersey sponsorship deals offer a relevant basis for valuation. The EPL may be the industry stand ard for jersey sponsorships. Liverpool and Manchester United have reported $32 million (all figures in USD) annual deals with Stand ard Chartered and Aon Corporation, respectively. The EPL earns $160 million annually in jersey sponsorships across 20 clubs. Excluding these two deals, the league still averages about $5.3 million annually per jersey sponsorship.
However, it’s important to remember that stadium naming rights in Europe are less common because municipalities own many stadiums. Absent a corresponding stadium naming-rights deal (except for current EPL clubs Arsenal, Bolton, Stoke City and Wigan Athletic), the jersey sponsorship has been an EPL team’s valuable asset, much in the same vein as naming rights are here in the States. Undoubtedly, this has enabled EPL clubs to maximize jersey sponsorship value, a critical point in any comparison.
In the end, MLS jersey deals offer a starting point for value and common EPL properties go a step beyond. But the value of jersey sponsorships will indeed be determined by what brand s are willing to pay. That is inevitable. If brand s pay without validating value, that will be unthinkable.