Trend 5: Rights capping
In 2014, the Canada Sponsorship Landscape Study noted a 6.7% decrease in sponsorship spending in the country after years of steady increase. This sector is once again seeing growth—IEG predicts a 4.5% increase in 2016—in large part due to the arrival of new players and the increase in activation budgets (which is often taken from the amount paid in rights). As a result, several properties are facing a cap on their sponsorship revenues, especially in high-level professional sports and important music festivals.
As we revealed last year (see the 2015 Guide), some brands opt for a modest sponsorship level, and then invest massively in activation to optimize their commercial gain. But that model doesn’t benefit the rights holders (the properties), who often feel that they’re giving the sponsors far more than what they’re getting in return.
Properties are also facing other challenges, like finding ways to profit from new digital platforms, adapting to a market that no longer justifies increases in rights and holding their own in a context where sponsors often have the bigger end of the stick during negotiations. That said, there are several ways in which rights holders can stimulate growth.
The best sponsorships are structured on agency models, complete with an account management team, creative services and production support. If the relationship is good, both partners will benefit from such a structure. The property can recoup some of the budget dedicated to activation, and the sponsor can save on agency fees and time, and deal directly with the organization, which is more apt to know its fan base. Of course, for this model to work, the property must have a strong and talented team internally.
Properties can also benefit from working with partners that do a lot of activations even if the rights that they pay are slim, provided that the partnership helps the property reach its communication goals (stimulating ticket sales, building its reputation in the market, recruiting other partners, etc.).
Rather than looking solely to increase revenue based on the sale of rights, sponsored parties must also fully invest in the partnership to ensure that it gets stronger over time and that it helps the sponsors reach their objectives. After all, it’s the effectiveness of the sponsorship that will ultimately lead to profit in the long run.