Out-Law Analysis | 03 Feb 2022 | 1:36 pm | 4 min. read
Shirt sponsors of major football clubs will have their brand and logo featured on TV screens worldwide, as well as on the chests of the fans buying the latest shirt to support their teams. However, businesses agreeing shirt sponsorship deals should think of the arrangement as a club sponsorship.
Partner, Head of Sports
The direction and culture of a club, and how the impacts on a sponsor, can be altered not only by a change of ownership. In European football in particular, a change in chairmanship or presidency can also have a significant impact
While having the rights to the most prominent aspect of a shirt is critical, it is one element of what could be included within an overall relationship – including rights relating to a club’s first team, under-23 or development squad, youth sides and its academy.
There needs to be a good understanding of the full rights inventory a club offers, so sponsors are clear what is and is not included. This will help clarify what rights other sponsors might pick up and how these impact on those rights you choose to include within the scope of a deal.
The club or agent should be able to provide an inventory of current partnership agreements held by rights holders both directly and through membership of a league or competition. They can explain how and in what manner rights can be sold without their direct agreement – for example, if the operation of digital advertising boards around the ground is sold to an agency that then sells on sponsorship.
The direction and culture of a club, and how the impacts on a sponsor, can be altered not only by a change of ownership. In European football in particular, a change in chairmanship or presidency can also have a significant impact.
Players are clearly the most important brand ambassadors for a football club, and they are the ones wearing a shirt. However, they often have individual sponsorship deals too, and will interact with fans on social media. It is worth confirming with the club what control it has over players’ commercial and social media activity away from the club. This will help work out the degree to which sponsors need to enter into any individual agreement with leading players, and how to best achieve players’ support for and involvement in the sponsorship.
Often the players’ social media accounts are one of the most valuable tools for a club even if they do not control those rights.
Partner, Head of Commercial
Given the sharpening focus on environmental, social and governance (ESG) issues, sponsors could also consider linking the contract to benchmark ESG provisions. Thought should also be given to doing similar in relation to other criteria, such as those concerning diversity and inclusion
Sponsors should consider how the brand is to be portrayed and set out the requirements, for example, for the size of the logo, with particular consideration of what is and is not camera-facing.
The lifecycle of the current shirt design is also important. This impacts on the number of shirts sold and worn by fans. There are likely to be a certain number of changes during the sponsorship life, and it is important to consider what happens to unused stock post a deal coming to an end.
Sponsors should also consider the extent to which they need a club to cooperate in activating their commercial partnership, including the role of any brand ambassadors for the sponsor company or the club. It is vital to ensure these services can be called upon when activating rights under the deal.
There should be clarity over the precise rights being granted, linked to a detailed understanding of a venue, how each competition operates and the benefits that are or could be allocated.
Negotiating a sponsorship deal involves various contractual considerations. The agreement may need to be renegotiated at some point, so the agreement should provide for as much certainty and clarity over the process as possible. There could be an option included to extend the contract at the sponsor’s choosing, as well as contractual right to match rival bids to secure the sponsorship rights that is clearly defined to withstand challenge.
Payments can be linked to the club’s success. Rights of termination can be linked to failure if it effectively reduces the value of the sponsorship to a nominal amount.
As far as possible, sponsor companies should ensure that the value being gained for the amount paid is understood and set out. By doing this, the contract will reflect how best sponsors can protect their interests in the event that certain rights are not delivered.
The contract should provide an obligation on the club to procure services from their players, management, or executives to enhance the sponsorship deal – and to disclose any issues in being able to do so.
During negotiations, there should be care taken to determine who meets what costs relating to activation.
Football clubs are subject to many external forces. A sponsorship deal should make provision for what happens in the event that a rights holder breaches domestic, UEFA or FIFA regulations, and to what degree.
Given the fluid state of finances and rights within the sector, sponsors should be alive to potential changes in the way in which a club or a league may sell rights and how this could impact on the value of the sponsorship. For example, the impact if a league moves to a model where individual clubs selling their own rights, or the introduction of private equity into the selling of rights, rather than the predominant current model in British football where rights are sold centrally by the leagues.
Given the sharpening focus on environmental, social and governance (ESG) issues, sponsors could also consider linking the contract to benchmark ESG provisions. Thought should also be given to doing similar in relation to other criteria, such as those concerning diversity and inclusion.
Sponsors should also consider the potential currency implications of a transaction and how, if at all, to mitigate any risk.
Finally, it is important for sponsors to get clarity on what data they are able to use from forming their relationship with the club. The contract should then reflect the rights the company has to access and use that information, either through the club, or through direct access to customers.
Sponsors and football clubs alike stand to benefit from stronger relationships where thought is given to these issues at the outset.
20 Oct 2020
23 Jun 2021