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Leaders week: Sponsorship, data, digital media and esports

Leaders week: Sponsorship, data, digital media and esports

By: Matthew Glendinning

Posted:
9 Oct 2017
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Sports Sponsorship Insider editor Matthew Glendinning reports on some of the highlights from the Leaders Week conference in London.

Asics to focus more 'activity', less on 'sports'

The business challenges facing sports shoes and apparel manufacturers in the US market where the population is becoming less active was put in historical context by Gene McCarthy, president and chief executive of sporting goods brand Asics America. 

From the running boom of the 1970s, to the surge in sales of athlete-branded sneakers for the ESPN and MTV generation in the 1980s and the blurring of sport and celebrity endorsements in the 2000s, the industry now faces a decline in both sports participation and mass media consumption of sport.

“If the ice is melting on the periphery, where will we be in 10 years?” McCarthy asked. The answer for Asics is to change “from a footwear manufacturer to a health and fitness brand” focusing less on individual sports and elite sports stars, but embracing ‘activity’ at all levels.

The impact on sponsorship has already been seen with Asics dropping its title deals for the Los Angeles and New York Marathons in the US in favour of events like the Virgin Sports Festivals which promote road running as part of a wider health and fitness concept.  

McCarthy told Sports Sponsorship Insider that in the short term, Asics will have “a great presence in elite sports at Tokyo 2020”, but going forward, investment will switch to athletes that represent the spirit of the brand rather than a specific sport.

Existing kit deals with Australian rugby union and cricket governing bodies are not under threat, however. “The climate and market is very different in Australia,” he said. 

The future of sports sponsorship: Data, content and technology

Discussions around data, content and technology will be key to the future of sports sponsorship, according to a panel featuring leading sponsorship executives from DHL, PepsiCo and Rakuten.

On data, Fiona Taag, DHL’s head of global sponsorship, said that rights holders need to research their fan bases more regularly to be credible partners at the negotiating table. “What insights can you bring to the table? Is it three-to-four-year-old data or has it been updated every year or six months?” she asked. 

Mark Kirkham, PepsiCo’s head of marketing and innovation pointed to the customer data gathered by esports organisations as a model. Not only do esports properties accumulate customer data directly from their digital consumption path, but the data can be changed every 10 minutes.

Changes in media consumption habits are also driving demand for second screen viewing in venues. Taag said: “It’s surprising how many venues are not connected… I want to see highlights and content packages during the 90 minutes of the game.” Brands should also learn how to harness data better. The data insights from DHL’s sponsorship of rugby sevens, Taag said, could be applied to DHL’s Rugby World Cup partnership.

In terms of contract negotiation, Rakuten global marketing head, Rahul Kadavakolu, advised sponsors to focus on a handful of contract pages and leave the rest, like number of replica shirts or tickets, to the lawyers.

He told Sports Sponsorship Insider that player time, exclusive content and integration with new digital channels, such as a messaging or social media platforms, were key to the e-commerce company’s objectives.

Confidence and confusion in the esports ecosystem

There is a confidence, but confusion at the heart of the eports sponsorship proposition – confidence because of its growth rate and its position in the sweet spot of changes in media consumption, but confusion because brands and agencies are uncertain where to play in the sport’s ecosystem. 

Noah Whinston, chief executive of the Immortals team, summed up the dilemma: “There’s a paralysis of choice on esports: Overwatch, Twitch, Cloud 9 or Immortals, so many choices and brands don’t understand the difference. We have to present more in why teams add unique value where leagues don’t, and vice versa.”

Daniel Fiden, president of the Cloud 9 esports team franchise argued that attempts by brands and agencies to mitigate risks by covering a number for esports properties devalued the credibility of their association with the sport.

But he said that the biggest challenge for esports teams was how to value the number of impressions they notched up on digital platforms. “Teams are undervaluing our inventory across the board,” he said. “It’s a bargain when you think about how much value we’re generating.”

Cloud 9, he said, was over-delivering with non-endemic brands to assist in longer term relationships. For example, he gave T-Mobile branding on shirt fronts during coverage on ESPN even though it wasn’t stipulated in the initial contract.

Both Whinston and Fiden highlighted the unique relationship esports fans have with the players as another value driver for sponsors. “Cloud 9 players will do eight hours of practice and then go on to host their own radio show for another three or four hours,” said Fiden. “The relationship with the fans is remarkable.”

Digital spurs sponsorship renewals for Real Madrid

The decision by adidas chief executive Kasper Rorsted to switch the brand’s advertising spend from traditional advertising media to digital was “good news” for Real Madrid and a “smart move” by adidas, according to Rafael de los Santos Navarro, global digital director for Real Madrid.

The Spanish giant currently has 33 people working on an increasing number of digital channels as opposed to just three in 2013-14.  Real Madrid has 105m Facebook likes, of which less than 3% are located in Spain. Indonesia has the biggest Facebook presence with 10% to 11% of the total.

The club’s digital platforms generate direct revenue from advertising but also indirect revenue from renewals by existing sponsors. “Because of all these communication channels, adidas has seen a double-digit increase in e-commerce sales per year and this is something that is put back on the table in renewal talks,” de los Santos Navarro told Sports Sponsorship Insider.

“People still watch games on television but there’s a more engaged audience on digital. For example, adidas used to run advertising campaigns with the same player and the same jersey. Now, because of digital, they can the offer the shirt to people who like different players and know whether they are first-year or second-year buyers and so on.”

De los Santos Navarro was speaking at a product presentation for TOK TV, an app that allows fans to talk and text each other during games. The app is monetised by sponsor messages and advertising and generates direct income for adidas through timely product offerings. 

The final whistle of last season’s Uefa Champions League final, for example, coincided with peak engagement rates and an invitation to buy the Real Madrid shirt. “Get them while emotions are high,” said TOK TV chief executive Fabrizio Capobianco.

Where next for private equity?

A light was shone into the world of private equity by sports investment specialist Gerry Cardinale, who at Goldman Sachs backed landmark deals with the Yankees Entertainment & Sports Network and the ticketing and merchandising services company Legends Hospitality.

Cardinale said that private equity’s role in sports media rights and sports infrastructure development has gone as far as it can, with the baton being handed on to the ‘strategics’, that is to say, entities with strategic reasons for buying sports-related business. 

Cardinale did say that there was a final frontier of value generation in terms of the live event experience. “There has been an explosion in asset value of professional sports, what has lagged behind is the performance,” he said. “People have to take seriously that these are real businesses and need sophisticated people and sophisticated capital and use real [value] metrics… not just ‘build it and they will come’.”

Cardinale could also envisage future investments in youth sports – colleges and high schools – in the US. “The fan attachment in the US is such that there are very loyal fans to these teams; extend that as a parent to a child and it’s very sticky – but how can you professionalise that?” 

Esports, he thought, was not a good bet for private equity. “It makes a tonne of sense for [traditional sports team] owners to use esports to start transforming millennials into fans but, for private capital, people are trying just a little too hard,” he said.

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