I’m young in this game. I’ve only been doing this for 5 years in the world of sports.
That is selling sponsorship.
I look back at the early days of sports sponsorship…seeing Ebbets Field in the ’20s filled with signs of Chesterfield Cigarettes. This makes total sense…since that is where the attention is.
Sponsorship in-stadium then all of the sudden made even more sense with the introduction of the television. You could see the signage while the game was going on.
But a bigger more powerful advertising tool came for brands to spend their money on…the television commercial.
But leagues and teams weren’t that upset because the networks paid leagues for the rights and the teams got paid. There still was
Here’s where things became unglued for teams…and, to be honest for a lot of industries it was the beginning of their demise.
You might be thinking it was the internet…while that is something that massively disrupted our space….
Social media and the advertising platforms that they created are the biggest things to affect sponsorship since the introduction of television.
In a free market, we are taught that the best product is usually the one that wins.
Well, social media ads are winning.
They do 3 things very well.
- They are where attention is. We spend more time on social media platforms each year than working out at the gym. This is why television won over the newspaper and radio…it grabbed our attention.
- They are trackable, you can actually track a sale from a Facebook ad all the way through to the purchase
- And the most powerful tool, something we’ve never had in advertising until the internet…re-targeting. With social ads, we get as many at-bats as we want to convince you to buy on a platform that grabs our attention.
When you compare this to the assets we have in sponsorship…they are just flat out better.
If you aren’t using social media advertising as the main source to advertise today you are bringing a rock to a gunfight…where the gun is a tomahawk cruise missile.
I’ve written about this all before and nibbled around what I believe will happen in sports. But I realized I hadn’t put pen to paper and get it out there. So here it is.
First, we’ll start losing some big deals.
This is already happening. I am seeing it every day as we chat deals with teams.
These aren’t small deals… I’ve seen $1.2M pulled.
The scary thing is I’m hearing excuses for why that doesn’t address the real problem.
“They got their sponsorship budget cut, said next year they should have it back.” (In today’s booming economy…this is a lie, budgets aren’t being cut.)
There are many more like the above that get used for why the brand didn’t come back.
These though, are not the reason. The reason is they are seeing returns on social media ads, and as most brands should do…they are doubling down on the better return.
I want to bring up an important item here on traceability here. I 100% do not think that non-digital sponsorship doesn’t work. I have purchased items from brands because of in-stadium signage.
The problem here is you will get asked the question “How many X did that sell for my business?”
Your answer will be convoluted…I know this because I’ve given this answer to brands multiple times in my sales days.
It always worked because there wasn’t an alternative that could answer that question. Today, with social ads…there is.
You will, and probably already have started to lose deals from major brands if you don’t have digital assets.
If you’re lucky, they’ll let you know it is because of spending on Facebook ads.
Second, we’ll keep increasing our prices for our traditional assets.
This is the problem that is fueling the fire.
Every year we have growth numbers to hit. Every year we need to cover the cost of our in-arena assets.
Every year, we’ll increase our prices for those in stadium signages. Why? Well in sponsorship we need to keep increasing our revenue growth. We have to do better each year.
The value of an asset is only as good as the value it brings to a sponsor.
The problem is we are increasing the price for a product that our sponsors see as less and less valuable by the day.
I know what you’re thinking…I get hit with it all the time. “If this is a problem then why do brands still buy these assets at a high price?”
Well, first I’d say if you’re in the business of sponsorship sales you know that this is becoming harder and harder by the day.
Second, I think this is being artificially bolstered by a booming economy.
Brands, although are cognizant of how they spend…they have more money to spend due to a booming economy.
The money is flowing, so they have the budget to buy your top-priced assets.
A physiologist once explained to me that the reason we and other animals feel pain is for self-preservation. It lets our body know there is something wrong.
If we felt no pain, we wouldn’t know that our body was in danger.
Right now, with the booming economy, our body in sports sponsorship is numb.
We don’t see the pain as much as we should because the great economy is numbing it. It is letting brands say “sure I’ll buy that asset.”
This is why, for the most part, we aren’t seeing a huge problem. We are still getting the high prices paid for by these brands.
Fourth is the trigger point… an economic downturn
History shows it will happen. We will see an economic downturn in the next 5 years.
Whether it is a student loan crisis. whether housing crashes again, whether we see a collapse of a large industry linked to the American economy, something will happen and the economy will crash or recession will hit.
When this happens, the first thing to dry up will be marketing budgets.
Some brands will increase marketing spend as well, understanding this will be a golden opportunity to reach consumers for cheap.
But what I can guarantee you is this….track-ability will become the most valuable asset in advertising.
This is because CMO’s will need to prove ROI with every campaign more than ever.
Money won’t necessarily dry up…but dumb money will. Any asset that isn’t trackable to sales will be considered an asset for dumb money.
When this happens money will fly out of your assets and packages and into digital ads that are trackable.
You will be lucky to sell your back-of-game day program assets for 1/8th of the price.
Currently, with the assets being deployed in sponsorship, with them being 85%-90% analog and non-trackable…you will see your revenue cut to 1/8th.
My biggest worry is not the main teams (NFL, NBA, etc.). They will be able to survive this I believe with sheer brand power. I would say they are too big to fail.
Where this will have a devastating effect is the minor league teams. They will see the first money out and lose massive amounts of revenue.
They won’t be able to maintain the lost revenue. You’ll see minor-league teams closing shop or consolidating into ownership groups.
As this happens it will spread to higher levels of sports.
A loss of confidence in sports sponsorship as an outlet that can help will spread across brands. Regional departments will report to national departments for brands and they will start to pull out of major league deals as a result.
This is the doomsday that will cripple an entire sponsorship industry…sports or not.
There is a really easy solution here, and you should be stockpiling digital assets today.
In the end, those who have digital assets will win.
Just like those in e-commerce who pulled their stores online, just like travel sites who left the travel agent in the rearview toward success, the companies that shift with this attention will win on the other side of this.
In full disclosure, we have a horse in the race here at SQWAD. While we were selling sponsorship at sports teams we saw this coming with our meetings with brands.
We saw the hole and are trying to equip teams with the assets to survive and even thrive in this doomsday scenario and with the shift of advertising to digital.
The best thing is when you win, we win. When sponsors buy the assets for our team is when we do a deal.
Overall at SQWAD our goal, and really our company mission, is to make sure that this scenario doesn’t happen. It’s so we can help our teams look like rock stars to brands and fans with assets that capture their attention digitally.
We aren’t the only solution. There are other ways to add digital assets.
Building your Snapchat following is one way. More digital video content that is sponsored is another.
Tik Tok is a HUGE reach option for the younger fan demographic. The reach there is amazing right now. It will mature into a great distribution option.
Overall, your goal over the next 2 years should be to stockpile as many digital assets as you can.
They will sell now, but when the shift happens you’ll be one of the only ones on the block who has the assets that brands will be desperate to buy.
My worry is not many people will do this.
Will this happen? Well I’m not a prophet
I can’t predict the future. I just see some micro and macro trends coming. I’ve seen it happen with Toys R’ Us and Blockbuster.
The problem is many of these similarities are showing themselves in our industry.
The bigger problem is I don’t think we are shifting fast enough.
If we wait to build these assets until after the downturn…we’ll be too late and lose.
So either way, stockpile digital assets.
It will pay dividends now and in the future. Again at SQWAD, we can help, but already brands are asking for these assets.
Already teams whom we work with and see this are winning BIG with revenue from sponsors.
I urge you to not sit there and say “This will never happen.” That is the death path for any company or industry ripe for disruption.
I urge you to take the steps to get ready for doomsday.
I hope it doesn’t come, I hope I am wrong here. But just in case I and SQWAD will be here to try and turn the tables on this shift to make sure sports & event sponsorship come out on top.