The big four leagues have successfully managed to retain advertisers in the wake of the sports hiatus. A recent MediaRadar study indicated 83 of the top 100 corporate spenders across the NBA, NHL and MLB have returned (see: purchased spots) since play resumed. While COVID-19 did not cause significant turnover within the advertising category, former Anheuser Busch executive (VP of Global Media Sports and Entertainment) Tony Ponturo explained the novel coronavirus has dramatically shifted the power balance between rights owners, rights holders and their brand partners. “Brands now have the leverage and are using it to renegotiate contracts,” he said, “not only because of the necessity of economics, but because we’re reflecting differently as human beings” (think: hours spent watching television are declining among 21-35 year olds). The densely populated fall sports calendar is also working in their favor.
Our Take: With sales on the decline across several key categories (think: travel), corporate marketing budgets have shrunk. That has left “every league, every team and every broadcaster vying [for a piece of a smaller pie],” Ponturo explained. The increased competition means brands have more leverage in negotiations than they would have if the dollars were flowing more freely.
The crowded fall sports calendar (another byproduct of Coronavirus) is another factor contributing to the buyer’s market. As Ponturo explained, “The consumer can only absorb so much [content]. So when you have a month like September, with so much inventory, something has to give.” That something is likely to be television ratings. Remember, in addition to the increased competition for eyeballs, COVID-19 has accelerated the cord-cutting trend. The lack of fans in venue also hurts the home-viewing experience (it simply lacks a big-time feel).
The increase in inventory, combined with the expectation of depressed ratings, has advertisers looking to renegotiate existing media buys. Of course, the league’s broadcast partners are not going to assume a ratings decline—even if their own estimates suggest there will be one. Ponturo said, “[Broadcasters] are guaranteeing advertisers ratings and if they fail to meet [those benchmarks], they’ll award the buyer additional units [on the back-end]” (which might explain why Q3 advertising spend has not fallen off nearly as much as some anticipated).
While the anticipation of depressed ratings may drive some brands to pare back spending within some sports, Larry Taman (Managing Partner, Brand Positioning Doctors and Co-Host of the Brands, Beats & Bytes podcast) indicated a viewership decline is less of a concern for advertisers than one might think. “[Companies] who are really connected [to a specific sport] are buying in to reach the core demo. Most don’t care if overall ratings aren’t good; they care about the core rating. As long as they’re nailing that demo, they’re going to be happy,” he said. Any make-good received would simply be gravy on top.
The lack of brand activation in stadiums this fall (since most will be without fans) further hurts rights owners. But as Darryl Cobbin (Managing Partner, Brand Positioning Doctors and Co-Host of the Brands, Beats & Bytes podcast) explained, it’s not as if “the dollars brands allocated for experiential [marketing] are going to go away. They’re just moving. [Those companies] still a need to capture the attention of the consumer” (another reason why advertising spend has not fallen off a cliff). Social, digital, broadcast and cable properties will be the beneficiaries of experiential budgets dissipating.
The shift in power should enable brands to command incremental value from their team, league and media partners. “Chief Revenue Officers and sponsorship/marketing heads will have to go from being sellers to true marketing partners who seek to understand how they can make [sponsor] dollars more productive in the marketplace [or risk losing the business],” Ponturo explained. Social media activations and a larger presence on digital channels are among the value-adds rights owners/holders could offer a sponsor to strengthen the brand’s connectivity with the consumer and give them more bang for their buck.
Cobbin did not dispute that there has been a transfer of power in the sponsorship space, but he says it has been “grossly over-exaggerated. While there has been a decline [in sponsorship spend], it has not been precipitous.” He said there has been a “low double-digit” drop-off in the amount of money brands have brought to Q3 2020 sports upfronts—a far cry from the 40% decline some bears had anticipated. That’s likely because sports remain an attractive place to advertise. “These major sports properties are still the most efficient way to reach the largest number of people at the same time,” he said.
While there may not be a dramatic decline in overall spend, it does reason to believe with so many sports leagues playing this fall, brands will shift money around to ensure they meet their sales expectations given the resources available. Cobbin indicated that’s bound to leave “some properties holding the short end of the stick [in terms of both ratings and dollars].”
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