Chart of the Week #48: The Resilience of Sports Partnerships

Last week we covered the resilience of North American sponsorship revenue and broader themes within the U.S. advertising industry, including the decline of traditional ads, performance marketing vs. brand marketing, and a shift by CMOs towards sponsorship that can be explicitly tied to revenue sharing and data sharing. We asserted that North American sports sponsorship can provide a unique, effective mix of brand and performance marketing.

In our recent most white paper A Modern Approach to Partnerships, written alongside Adam Grossman and Arctos Operating Partner Brian Lafemina, we examine the evolution of sports sponsorships, why they have outperformed and what is required from franchises and Chief Revenue Officers going forward. We touch upon themes such as reshaping sales and fulfillment strategies to cater to digitally native businesses, rethinking team incentives to drive long-term enterprise value, and leveraging analytics to quantify ROI effectively. These insights provide a playbook for franchises and leagues to not only adapt but to also excel in this dynamic environment.

So why, in fact, has sports partnerships outperformed?

We believe North American sports partnerships is driven by three differentiating factors: locality, audience, and duration.

First, sports partnerships is a very local business. Based on data from our partners at Elevate (h/t Benjamin Gumpert , Alyssa Melanson , Cole Koeniguer ), we believe ~65% of marquee assets (defined as jersey and sleeve patches, helmet patches, and venue naming rights) across the Big 5 North American ( National Football League (NFL) , National Basketball Association (NBA) , Major League Baseball (MLB) , National Hockey League (NHL) , and Major League Soccer ) franchises are heavily tied to the team’s local market. As a result of this dynamic, many sponsorships are unique, bilateral, and often long-term; local partners integrate their brand with that of the local team to grow their brand equity with customers. These impressions on the local customer base are highly valuable and can often lead to higher revenue generation from the perspective of a CMO.

Second, sports partnerships allows brands to reach a scale and valuable audience – both in-person and digitally. This is increasingly scarce in today’s world of fragmented digital and live experiences. The audience of sports also has several characteristics that are coveted by partner brands – they are higher-income, educated, younger, and often more diverse. These demographics are typically difficult to reach, leading to partner brands’ willingness to pay a premium for inventory.

Third, sports partnerships provides unusually long duration. Viewers of sports are exposed to brands for an extended period during games, with many games taking place every single season. This rings especially true for marquee assets, which warrant a hefty premium due to their high visibility. The length of and repeated exposure to an asset makes sports inventory highly valuable in a world where keeping and maintaining one’s attention is increasingly difficult.

We believe these three attributes form the foundation of the continued resilience we have observed in sports sponsorship. However, we also believe these attributes have long insulated management teams from market pressures that have been felt outside of sports for years. The result: management teams may need to “catch-up” to be on-par with management team practices outside of sports.