The sponsorship agreement should clearly define what is to be sponsored. Many sports clubs have multiple sponsors for a variety of aspects of the club such as the kit and premises they use. For example, Manchester United have a long list of sponsors across a variety of aspects of the club including media & telecommunications, financial, main kit sponsors, secondary kit sponsors and training kit sponsors. By clearly defining and narrowing what the sponsorship is in regard to within the sponsorship agreement a club can maximise the potential sponsorship revenues they can receive by having multiple sponsors.
The sponsorship fee will be one of the key concerns for the club. The club will need to be careful in the formulation of the sponsorship fee as the terms of the agreement may be conditional. A sponsor may seek to insert a success based sponsorship fee whereby the club will receive a set amount based on how ‘successful’ they have been during the term of the sponsorship agreement. This should be strongly resisted by the club.
When entering into a sponsorship agreement a club will need to ensure that the agreement does not give the sponsor a right to influence decision making at the club – particularly in relation to the playing side of the club.
A sponsor may seek to gain a level of exclusivity. This should be carefully managed by a club so as not to reduce the potential revenue they can receive through sponsors. Exclusivity should be restricted as much as possible where given so as to allow a club to still seek sponsors for as many different aspects of the club as possible.
THIRD PARTY ADVERTISING
A sponsor may wish to include a clause giving them the right to use the clubs logo and branding as part of their own promotions with third parties. A club should resist this entirely in order to protect its own brand. Alternatively, a club could seek to bring conditionality to the sponsor being able to use the club’s branding by having to get the club’s prior consent to do so.
A sponsor may ask that a club be involved in their promotional events in order to maximise their exposure under the sponsorship agreement. A club should carefully consider the terms so that the club and its staff do not become overly burdened by the obligations under the sponsorship agreement. For example some Premier League clubs that have been sponsored by Chinese businesses have been burdened by agreeing to play several games in China during the summer. This has resulted in some high profile international players complaining of fatigue due to this contractual commitment.
A club will want to have a right to end the sponsorship agreement where the sponsor becomes embroiled in controversy which is damaging to the club’s own brand.
A sponsor should think carefully about definitions relating to the branding under the sponsorship agreement. A club will seek to keep this as narrow as possible in order to maximise their potential revenue. However, a sponsor should always keep in mind how much exposure their brand is going to receive.
A sponsor will also need to carefully consider the breadth of the branding opportunities given under the agreement. The sponsor will want to ensure that they are also represented as the kit sponsor under any marketing materials produced by the club – such as match day programmes. Additionally the sponsor will want to ensure that they are given exposure as the official sponsor of the club on the clubs online presence, such as their website, online TV subscription services and mobile apps.
The sponsorship fee will always be an integral part of any sponsorship agreement. A sponsor will want to ensure that they are going to get the best exposure for the money they are going to pay under an agreement. Therefore a sponsor should consider setting out the sponsorship fees based upon the ‘success’ of the club. This could be based upon the number of competitions they win, or their positioning in their league etc. However, a club will normally strongly resist this. Therefore it can often be easier to negotiate a base sponsorship fee with added bonuses based upon success.
Gaining the exclusive rights to sponsor a club’s kit will be a key consideration for a sponsor. A club will often resist or ask for a significant premium if this is to be the case. Gaining exclusivity will mean that the sponsor will have the only branding on any kit – this giving a great deal of exposure to the sponsor’s brand. If exclusivity is not possible the sponsor would want to ensure that its logo appears on the kit in an agreed design and location.
Sponsors will also want to maximise their brand exposure by using the club as part of their own adverting promotions and events. Therefore ensuring that the sponsorship agreement allows the sponsor flexibility to do this is important. Additionally a sponsor may also want to get a commitment under the agreement that a certain number of high profile players are to attend such events or be used in such promotions.
It is important for a sponsor to be able to protect its brand in the event of the club becoming embroiled in controversy. Therefore including termination clauses within the agreement that allows the sponsor to immediately remove itself from any relationship and attachment with the club will be an important consideration.
Sponsorship agreements are highly complex documents. They must be considered carefully with both parties seeking legal advice before they are entered into. Our Sports Law team has the expertise to advise on any sponsorship agreement.