Is Exclusivity Dead?

Many people within the industry are optimistic about the continued recovery of sponsorship spending since the recession hit.  For the most part things do look promising as leagues and teams announce new deals, overall sponsorship revenue growth and new TV contracts.  There are some staggering numbers as of late.  Farmers Insurance $700 million naming rights sponsorship for the proposed football stadium in LA and ESPN’s new $1.8 billion Monday Night Football renewal to name a couple.  The automotives are back in the game and new categories have emerged such as spirits as leagues amended their policies prohibiting liquor branding.  As we look at the evolving sponsorship landscape one particular trend stands out and gives rise to the question, “Is exclusivity dead?”

Marketing executives faced increased fees to maintain their sponsorship status quo while at the same time are asked to cut or keep budgets flat.  Properties did not want to take a step backwards and continue to perceive values at pre-recession levels.  This disconnect on what a particular category is worth forced both sides to adjust their strategy.  Sponsors decided they could live without exclusivity and were willing to relinquish certain assets in exchange for keeping their investment flat or at a reduced spend.  Properties realized in order to generate the expected revenue for each category, they would have to split it up and secure multiple sponsors from each. 

With the fragmented world of rights holders the exclusivity lines are often blurred.  A sponsor may be the exclusive partner of a team, but their competitors are all over the TV and radio broadcasts.  Pepsi may be the “Official” MLB league partner, but Coke sponsors over half the teams.  Others may hold deals with athletes like Sony’s endorsement of Peyton Manning whereas Vizio is the “Official” NFL partner.  Those of us in the industry understand the difference, but does the average fan distinguish between the “Official Sponsor of the Dodgers” and the “Official Sponsor of Dodger Baseball on FSN”?  

A player endorsement does not allow the use of team marks without a license deal, but do fans really care?  Of course the association may be stronger and an athlete wearing a team jersey featured in an ad looks better than a generic one, but the key asset in this case is the player’s likeness.  Sony’s humorous use of Peyton Manning wearing bubble wrap football pads in their ad campaign is arguably more effective.  With all of the different ways to associate with a team, league, rights holder or athlete, it is almost impossible to cover all the bases in regards to exclusivity.  Even companies with the deepest pockets need to draw the line somewhere.

Mixed use venues create another level of complexity.  For example, AEG owns and operates Staples Center along with the LA Kings.  The Lakers and Clippers are considered tenants.  Similar to other arena owners, AEG controls the permanent signs, concourses and concessions.  A sponsor such as Wachovia Bank signs an exclusive founding partnership with AEG providing them with these aforementioned assets.  However, it does not include the rights to the Lakers or Clippers unless a separate deal is consummated with each.  In turn, this allows the Lakers to bring in competing banks such as Comerica and One West Bank who are both Lakers sponsors.  Their in-arena exposure is limited to courtside signs, LED and video board messaging at Lakers games.  They also receive logo rights, tickets and hospitality all of which may be used to drive business.  Wachovia does own a limited presence at Lakers games as well, but with no opportunity to activate.  Meanwhile, their competitors are aligned with the main attraction (e.g. Lakers).

With the increase of mergers and acquisitions on the corporate side, a sponsor’s category definition is also much different than in years past.  AT&T used to mean landline and long distance phone service.  Now they are wireless, cable TV, directories, internet along with a long list of other products and services.  Bank of America translated to a bank.  Now they are credit cards, financial advisors, real estate, insurance, etc.  The sponsors themselves are too broad to include exclusivity for every business unit or product line. 

Sponsors may have also realized it is okay to not be exclusive as long as they do a better job with activation.  Rather than worry about what the competition is doing, the focus is on maximizing their assets.  It is not uncommon to see two sponsors of the same team with very similar deals where one is clearly getting more bang for their buck.  Sponsor A receives a sign in the stadium featuring their logo along with tickets and hospitality for the executives to use.  Whereas Sponsor B utilizes their URL on the sign to drive traffic to their web-site where they are running a consumer sweepstakes, tickets as part of a sales incentive for employees, a retail promotion with the team’s logo featured in point of sale and executing a community program tied to a local charity.  Both pay the same sponsorship fee and retain the same opportunities, but achieve much different outcomes. 

Of course there are still exclusive deals in the marketplace and we will continue to see them from time to time.  A lot depends on the category, the venue and the economics.  New forms of media outlets in the digital and mobile space will add to the fragmentation.  Joint use venues will continue to emerge.  Divided TV rights holders will also grow.  Exclusivity may not be completely dead, but it will be rare to find.