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Will Sponsors Start Sharing What They Pay with Each Other?

By Jim Andrews Apr 23, 2012

An article last week in The Sydney Morning Herald reported on a call by a major sponsor in Australia’s National Rugby League for the primary sponsors of the other NRL clubs to share among them what they are paying for their deals. The goal is to assure each company that it is getting a fair deal.

It’s an intriguing idea—one I first remember being put forth by a speaker from Coca-Cola at an IEG annual conference in the mid ’90s and have heard voiced every so often since then. It will be interesting to see whether it gains traction among the NRL sponsors.

Although it would seem to be a relatively straightforward exchange of information that could benefit the group, there are obviously reasons why other sponsors are not already doing this, beginning with the general—and understandable--reluctance of businesses to share financial information externally for any reason.

In many other sponsorship situations, another significant roadblock would be competitive considerations. The NRL may have club sponsors whose categories don’t overlap, but move the discussion to the NHL and do you expect Honda and Volkswagen to share with each other what they are paying for their respective team deals?

There is a larger question raised by the Australian sponsor here beyond whether sponsors should open up with each other. Why are his company—and presumably other sponsors—so uncertain that they are receiving fair market value from their rightsholder partners?

Now it probably comes as no surprise that working for IEG—the company that created and remains the leader in the third-party sponsorship valuation business—I believe a better solution than simply seeing another sponsor’s contract would be to have an independent assessment of a particular deal’s value to the specific sponsor.

Gary Johnston, the NRL sponsor, acknowledges in the article that “some clubs are worth more than others.” But this fails to take into account the myriad considerations that make the exact same package of benefits offered by a single property—let alone multiple properties—worth different amounts to different sponsors. Identifying those considerations and being equipped to put a dollar value on each is what a fair market valuation offers to both the prospective buyer and seller.

The downside of Johnston’s idea catching on is that sponsors would view it as the sole solution to their questions about value. Such sharing would be a good first step in providing some clarity to prospective sponsorship buyers, but it would not be a substitute for a complete valuation.

It also would likely compel rightsholders to have their properties independently valued in order to paint the real picture of their true worth.

More:

sponsorship evaluation sponsorship strategy sponsorship valuation international

 

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Jim Andrews

About the Author

A 30-year sponsorship industry veteran, Jim is responsible for developing and sharing thought-leadership content based on ESP Properties’ groundbreaking work in the areas of sponsorship strategy, valuation, measurement, digital content, data-driven marketing and fan engagement.

In addition to identifying key trends and delivering his unique insights into the critical issues facing rightsholders and their commercial partners, Jim is the chairman of the Annual Sponsorship Conference, responsible for the program and speakers, as well as hosting and delivering the event’s opening address. He also is responsible for the company’s annual report and forecast of overall sponsorship spending, as well as its compilation of biggest spending companies and annual industry surveys.

A frequent media commentator and guest, Jim has been a featured speaker at hundreds of sports, entertainment and marketing conferences around the world.

 

Comments

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donnella tilery 5/15/2012 8:34 PM
I'd be concerned if this happened in the fashion industry for market weeks. I don't think this would make it easier for my competition to figure out the value and activation info I include when I make my negotiations.
 

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