One of the abiding themes of the Covid crisis has been the creative measures rights-holders have taken to generate value for sponsors while traditional avenues remain closed to them. In some cases, this has involved testing the limits of digital replacement technology (DRT) and eking out new virtual assets for clients in empty stadiums.
When Serie A resumed behind closed doors in June, the league, working with its virtual display technology provider Interregional Sports Group (ISG), took the opportunity to project sponsor logos and team colours onto empty seating areas in arenas. Major League Soccer pioneered an altogether more aggressive and controversial approach, emblazoning the brand of its largest sponsor, adidas, onto the pitch centre circle during matches in its MLS is Back tournament in mid-July.
James B Gambrell, chief executive of specialist virtual advertising company and ISG competitor Supponor, acknowledges that the exceptional circumstances created by the pandemic have led to ‘a significant breakthrough in commercial deployments’ of the technology. But at the same time, a new report commissioned by the firm, together with UK legal practice Lewis Silkin (Virtual advertising, cutting through the regulation), cautions sports rights-holders to use this new toy carefully.
Virtual advertising has been heralded as the next big thing in sport for more than twenty years because it allows right-holders to differentiate sponsorship messaging for different markets, sell the same inventory multiple times, and potentially promote brands in new and innovative ways. Initially, perceived shortcomings with the technology, such as what happened when people passed in front of virtual boards, delayed its entry into the mainstream, but the report suggests regulatory issues now represent the biggest barrier to widespread adoption.
One of its authors, Alex Kelham, head of Lewis Silkin’s Sports Business Group, says a lot of the relevant advertising laws are out of date and don’t anticipate the capabilities of DRT. Moreover, when global sports and broadcasters target different regions with different advertising messages, it’s increasingly difficult to establish which country’s marketing rules apply. For instance, do the virtual messages have to comply with advertising regulations in the country where the sport is taking place, the country where the virtual feed is created, the country where the rights-owner is based, or the country where a virtual advert is being displayed?
This point is particularly pertinent to Supponor’s competitor ISG and its attempts to sign regional betting deals for Formula One. The motorsport currently produces three different feeds for broadcasters in Asia, Europe and the Americas, allowing it to virtually overlay different marketing messages for each region (for cost and strategic reasons, the sport doesn’t currently tailor messages on a country-by-country basis). Earlier this year, the technology enabled ISG to agree a pan-regional betting deal with Asia-facing sportsbook 188Bet that will see the betting brand inserted virtually into broadcasts of all of the motorsport’s races across Asia – including China, where betting is banned. The agency is also known to be pursuing a pan-regional betting deal in North America.
While not explicitly mentioning Formula One, the report references the Chinese gambling ban and the way betting is regulated on a state-by-state basis in the United States and concludes that it would be a ‘high risk’ strategy to target virtual betting promotions at these regions.
ISG and Formula One’s lawyers clearly take a different view. At the time the deal was announced, the agency argued that regulators in markets where gambling is prohibited, tend to be sanguine about the fixed pitch-side betting advertising that proliferates in global coverage of properties like the Premier League and LaLiga – provided it is not deliberately targeted at local audiences.
The report goes on to warn of other potential regulatory hitches, such as differing interpretations about what is an appropriate level of prominence for virtual branding. Kelham gives the example of a UK channel receiving a feed for a cricket match produced in Pakistan which is peppered with overt marketing messages. Although the broadcast might comply with Pakistani advertising and media regulations, the UK broadcast regulator Ofcom is more likely to take a dim view of the advertising clutter.
Formula One, it transpires, has also tested the regulatory limits in this domain. Ofcom ruled that the motorsport took its use of virtual advertising too far when it projected the image of giant watch face from worldwide partner Rolex onto the Singapore Flyer – the giant Ferris wheel that towers of the race’s Marina Bay circuit during coverage of the Grand Prix in 2016. In that case, Channel 4, the holder of UK highlights rights to Formula One, was found in breach of Ofcom’s code, which prohibits products or services from being given ‘undue prominence’ during programming, even though the broadcaster was taking a feed produced by the motorsport. The regulator argued that because the broadcaster was producing a highlights show of the event, it should have removed the clip.
To appease regulators, the report recommends that rights-holders and broadcasters should err on the side of caution and demonstrate that virtual adverts are being used as a practical alternative to physical advertising. In addition, it counsels against dwelling on any branding for longer than is normal.
“Most markets do accept that sport is heavily commercialised, and that there will be sponsorship credits, logos all around the field of play,” says Kelham. “My instinct is that if the branding is integrated into the field of play or the sporting environment, it is unlikely to be unduly prominent, provided there isn’t any particular undue focus on it. But if somebody kicked a ball [during a televised match] and, rather than following the ball and the players, the camera just stayed showing the logo that was on the pitch, that would be considered undue prominence.”
Ultimately, the report predicts it will soon be possible to tailor virtual advertising within online sports programming to each individual viewer in the same way that programmatic advertising serves up highly targeted adverts when people browse the web. But, even with this, it says rights-owners will need to be confident that they have secured the necessary consents and opt out mechanisms.
The overriding message is that all of the excitement created by the technology needs to be tempered with a sense of restraint. Clearly there will be almost as many opportunities for media and marketing lawyers as the industry finds its bearings.