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Onur Yegenoglu | Covid-19 challenges pave the way for a true partnership approach

Onur Yegenoglu, head of sport at KIN Partners, says that while Covid-19 has had a hugely negative impact on the sports industry, there are numerous opportunities that have arisen out of the pandemic

The Premier League returned last weekend, and while we still have the unfamiliar sight of fan-free stands many of the traditional opening day initiations remained, with half of all clubs wearing shirts from new kit suppliers or adorned with new (or renewed) sponsors, and more than £750m of fresh talent on display.

There is no doubt the coronavirus pandemic has created short-term challenges that few in the sports industry had predicted or prepared for. The consequences have been wide-ranging, from the obvious and immediate hit to bottom line via reduced matchday revenues and broadcast rebates, to a predicted mid-to-long-term impact on sponsorship values.

Much has been written about the just how much the pandemic will cost Premier League football clubs, and sport more generally. Deloitte has predicted that teams are set for a combined revenue loss of £500m in their 2019-20 accounts. On top of this, clubs are forecast to earn around half of their predicted matchday revenues in 2020-21, equating to a £350m loss if supporters fail to return during the season.

Further research from sports marketing agency Two Circles has predicted that overall global sponsorship spend could reduce by as much as $17.2bn, representing a 37 per cent year-on-year decrease, from $46.1bn in 2019 to $28.9bn in 2020.

While it is tempting to focus on these immediate and extensive commercial impacts, beneath the surface there are reasons for optimism. These are two-fold, in the form of new opportunities that behind-closed-doors sport presents and, more holistically, the way it has forced rights owners and holders to review the entire sponsorship model that underpins brands investments in sport and how they are realised.

Reassuringly, a survey by the European Sponsorship Association in June found that 72 per cent of brands are looking to extend their sponsorship rights, despite the ongoing uncertainty, and 23 per cent of European sponsorship industry executives estimated an increase in revenue in 2020.

Football, pandemic or not, will continue to be the world’s most popular sport and the Premier League its most-watched domestic competition. In the short-term, the dynamics have changed but the audience remains, although it is now engaging with the ‘product’ in a different way. For that reason, premium properties will continue to grow in value.

This is supported by the knowledge that brands led by the best marketing brains know that now is the time to invest in the right properties, at precisely the moment when competitors may be looking to reduce their portfolios. This can create a significant competitive advantage in terms of share of voice and sport remains a hugely attractive investment opportunity.

Sport is unmatched at reaching emotionally engaged and demographically diverse audiences, at both global and local levels, in real-time. It also offers relative safety for brands who are striving for growth. The cumulative financial, brand and fan value of leading sports franchises continues to increase year-on-year.

The biggest reason for optimism is the fact that Covid-19 has forced all sponsorship stakeholders to reset, review and innovate their whole approach to the traditional model. We are entering an era of partnership, in the truest sense of the word, based on collaboration and finding creative solutions that meet the objectives of both rights-holders and owners, the success of which can be measured empirically and not just emotionally.

In future, ideas will be co-created by brands, rights owners, athletes and ambassadors, underpinned by purpose and centred on developing intellectual property and tangible first-party data. This will lead to more inventory, assets and revenue streams being created. The days of sponsorship as a pure branding exercise are well and truly over.

The key to finding win-win collaborations will lie in putting the fan at the centre of all experiences, campaigns and services. Sports organisations will need to follow the model of all successful direct-to-consumer retail corporations – this starts with having a better understanding of the fans’ (and non-fans’) wants and needs. And that no longer applies solely to match-going supporters but requires understanding of the journey and experience of the millions around the world following on multiple platforms.

Since the pandemic hit, web browsing globally has increasing by 70 per cent, compared to normal usage rates and social media engagement is also up by 61 per cent. Digital sponsorship activation has mirrored this trend, led by the need to offset inventory as they are no longer applicable while physical events are on hold. But investing greater resources in digital inventory must be seen as a long-term play.

Data will begin to define all future partnerships and will be the currency by which deals are agreed and measured. Digital inventory is not only the quickest way to gain valuable first-party data, but also the primary method for rights-holders to create better impact and value for brands. Data will begin to underpin the entire partnership value proposition and ensure that digital rights are no longer seen as an add-on in negotiations, but a key differentiator.

Alongside the expediated evolution of the partnership approach, Covid-19 has had wide ranging consequences in the sponsorship sales and management space with several big agency players severely affected by the pandemic.

At a global level, we have seen an increase in M&A activity for some, and others forced into drastic cost saving measures. For smaller independent players, now is the time to invest in talent, relationships and data tools that can help them rival the established powerhouses.

The changing complexion of sponsorship models, and subsequent rights valuations and activations, means that a one-size-fits all approach is becoming increasingly outdated. The opportunity is there for dynamic, data-led agencies that can quickly mobilise specialist multi-market teams, with the localised expertise that is crucial to realising the full value of individual or commercial properties. 

In time, when we reflect on the full impact of Covid-19 on the sports industry, it will come to define the tipping point that necessitated change to the traditional commercial partnership model that was long overdue. Those who embrace this pivotal shift now are laying the foundations sustainable success.

Onur Yegenoglu is head of sport at KIN Partners, a leading independent sport and entertainment talent and commercial management agency. KIN has worked with some of sports biggest icons of recent times, including David Beckham, Usain Bolt and Neymar Jr., and were the founding commercial arm of Beckham’s MLS franchise, Inter Miami.

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