25 Oct COVID-19: Impact on Sponsorship Industry

COVID-19 has brought the world to a standstill. The global economy, employment and industries have been brought to their knees. Sponsorship industry is no different and 2020 is the worst year for the industry in the past 2 decades. Not only are the music festivals are getting cancelled, sporting leagues and events are also getting postponed or cancelled. Besides this shooting for the entertainment industry has been completely halted.

Prevailing Situation in the Industry

The ensuing economic crisis continues to impede on upcoming sponsorship contracts, with March seeing a 40% drop in the number of sponsorship deals, according to Sportcal, a GlobalData company. World’s biggest sporting leagues like NFL, NBA, IPL, Summer Olympics have been completely cancelled for the current year. Such cancellations will result in losses beyond millions of dollars for the sponsors and looking at the bigger picture losses are estimated to go beyond billions of dollars. No live sport means no live coverage and therefore sponsors do not have the foundations from which to launch their marketing, fan engagement, and all other activities associated with the rights and assets they’ve acquired.  Let me make it easy for you to understand – Super Bowl is the final match of NFL and has per day revenue potential of $780 Million dollars. That’s right just some hours match can grant you such magnanimous revenues and now it isn’t happening!

A lot of leagues were yet to start and a lot had a lot of matches yet to be played. Due to contractual agreements, corporates are liable to pay to athletes and teams but at the same time there is no revenue stream for them as such and it is lost cost for them.

Halting of shooting has had a detrimental effect on the product placement industry. Unfinished content that was sponsored by corporates will not be released soon and as a result, it’s a lost cost for these corporates. Although it’s possible to edit the videos but integration of the product into the work of art is still not possible and believe me this is what the corporates are direly after. A lot of products can’t be edited (Imagine putting a BMW in the whole movie just be editing!) into the work of art.

Course of Action

There are no second thoughts as to the employment this industry generates (An NBA team employees around 110-130 people). The whole chain from sponsorship sales to event management and strategic advice will be affected and as a result smaller sporting events will be in a dire situation but the problem doesn’t stop here. There will be a shift in sponsoring rights with sponsors moving towards the earliest possible sporting event.

A new survey by the European Sponsorship Association (ESA) has found that 72 per cent of brands are looking to extend their sponsorship rights despite the ongoing uncertainty caused by the Covid-19 pandemic. That’s exactly what I think should be the strategy of corporates.

Long term contractual sponsors should especially continue their contracts as there is no point in leaving the event with which the brand has associated itself for years and give away everything that a sponsor has built with an event. Staying with the event even after such a situation shall bring in increased fan approval and image build-up. Besides this companies should move towards Esports or online competitive multiplayer games for product placements as this pandemic has increased the viewership count for such events exponentially. Steam broke previous records of player count. Games like Fortnite are witnessing never before crowd count and I believe corporates should immediately identify such events and works of art to sponsor.

Let’s take it one level up and organize an online esports tournament (Even La Liga organized one!) and get as many participants as possible – An enlightened marketing manager effectively utilizing the current situation.

Another avenue to sponsor can be Youtubers. These streamers are gaining extreme popularity among all age groups, all thanks to the diverse topics that these cover (Ever wondered how would a classic ‘unbreakable’ Nokia react to 9000 feet fall! – YouTube is at your rescue). Finding multiple YouTubers to sponsor your product and integrate them into your video script is extremely effective.

Companies that are incurring huge losses amid the crisis and are being forced to resort to employee pink slips should rather restrict themselves from spending on sponsorship and marketing in the short term.