Sport is on hold. That means empty stadiums, athletes training alone – and no ads for fans to gawk at.

The Olympic Games in Tokyo have (finally) been postponed by a year, as have the Euros. The start of the GAA football championship has been delayed and few would bet on it being concluded by September.

Missed games are one thing but, of course, sport is a business. There are bills to pay. Last week the FAI and GAA announced there would be pay cuts for 500 employees.

The sports sponsorship industry, too, is feeling the pain. Every cancelled match costs sponsors money.

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Growth in Ireland’s sponsorship industry had already been predicted to slow to 8 per cent this year.

Even with the decrease, the industry would still be worth some €242 million according to an annual survey by Onside, a consultancy.

Onside is involved in deciding how around €50 million in Irish spend is used in various sponsorship deals from music to sport. The average sport sponsorship asset is typically in the low six figures, but some deals can run to millions of euro.

“We are in new territory here so how sponsors’ and rights-holders’ agreements are reviewed will be very different to anything we have seen before, with short-term deals under particular risk.”

John Trainor

The slowdown was predicted before Covid-19 ended live sports. This pandemic is creating serious worry for those involved in sport sponsorship, but the market was already in a state of flux.

One difference is that people are changing the way they consume sport. They now have the option to watch events later and not in real-time. Another is that fans are demanding more diversity in sport and there are various campaigns, such as 20×20, to push for more women’s sporting events to be aired. Sponsors need to keep up with these consumer trends.

Although it is early days, coronavirus is expected to slow the sponsorship industry further, according to Onside chief executive John Trainor. He expects the full effects of this impact will not be seen until 2021.

“We are in new territory here so how sponsors’ and rights-holders’ agreements are reviewed will be very different to anything we have seen before, with short-term deals under particular risk,” says Trainor.

“A major threat in the rest of 2020 is that many campaigns and activations planned around major events like the Euros, Olympics and other rugby and GAA properties will now be pulled, stimulating a wider trend of brands pulling non-essential/committed marketing spend,” he adds.

He is optimistic, though, that the pain will be short lived.

“Brands will be looking to align themselves with what consumers will be longing for. Live entertainment. Sport will be a major catalyst for brands, especially for some of the stronger sectors of business less affected by the downturn, to reboot and help their customers back on their feet,” says Trainor.

Sport was attractive for sponsors at the beginning of 2020, with seven out of 10 sponsors considering a sports play. With teams and leagues finding it next to impossible to be active in the current circumstances, brands will now look for athletes and personalities to do more public speaking while striking the right tone.

The GAA offers the best value for money for sports sponsorships, according to Onside’s industry survey for 2020. Meanwhile, other modern forms of sport are starting to get sponsorship attention.

“E-sports rose most significantly through the ranks again in terms of being seen to offer strongest areas of opportunity this year, and today e-sports appear to have some particular advantages that may see this space surge in the medium term,” says Trainor.

He believes that once sport resumes, Ireland’s sponsorship market could swing from a sponsorship sellers-market to a buyers-market. 

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Rolling contracts and insurance

For some, sponsorship is not a concern. Croke Park Stadium Director Peter McKenna says families, public health and helping the national effort is the main priority currently. “Sponsorship is such a secondary concern right now. These things work themselves out,” he says.

Some industry experts think Coronavirus will bring long-lasting changes to sport sponsorship deals.

Michael O’Keeffe has years of experience in strategic sport sponsorship. Chief executive of communications firm Teneo, he echoes Trainor’s belief that agreements are being reviewed in an unprecedented way.

“The way people write and phrase their contracts will never be the same,” says O’Keeffe.

O’Keeffe was direct in his views about the future of sponsorship in Ireland.

“It is an industry that has seen significant growth in the last decade but is going to struggle,” he says, adding that there will be a “significant wobble in terms of decline in spend in the short to medium term. 

In particular, those organisations that don’t have an existing portfolio and are considering entering into a sponsorship will now take a ‘wait and see’ approach.”

Sport accounts for approximately 70 per cent of all sponsorship spend, so sponsorship deals depend on sport. If there is no sport, the value of the deal is completely undermined. A sponsorship contract determines whether the sponsor is able to get any value for money at all in the event cancellations or postponements.

Many contracts are being rolled out into the coming months or next year, according O’Keeffe. A big problem that sponsors and rights holders are facing is cancellations – not postponements or delays.

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Contracts may have clauses that include natural disasters, which would entitle sponsors to some to refunds. Closures and cancellations can create further difficulties, however. If forced cancellations happen due to coronavirus, insurance could cover them. As we’ve seen with publicans and restaurants though, this is not entirely straightforward.

Insurance companies such as Allianz and FBD are not providing business interruption cover to some of their clients who have been forced to close due to coronavirus – even to those who have an infectious diseases clause in their contract.

Sport is in the same boat. Stadiums such as the Aviva are not owned by the government but by the Irish Rugby Football Union (IRFU) and the Football Association Ireland (FAI). The same goes for Croke Park, which is owned by the GAA. If the owners of these stadiums close of their own accord, insurance companies aren’t covering them.

“One of the strengths of sport is we have an inbuilt resilience. We can’t win all of the time.”

Rob Hartnett

If stadiums close and sport doesn’t go ahead, who is going to see the sponsors that are visible on the sidelines or splashed across player’s jerseys?

If a stadium decides to remain open, this poses an ethical question for sponsors, according to O’Keeffe.

“Many will work in a spirit of partnership with the rights holder through the difficult times but it will be on a case-by-case basis and there isn’t a one-size-fits-all. Many companies are suffering due to loss of revenue during this crisis as are sports organisations,” says O’Keeffe.

Impact on brand reputation will play a role in the success of future sponsorship deals. O’Keeffe uses sporting events such as Cheltenham as an example. Cheltenham organisers received a huge amount of backlash for letting the event go ahead this year. Brands associated with the event may now, in turn, get backlash.

“Liverpool have behaved impeccably with so much to lose,” says O’Keeffe giving an example of a team who will be more attractive to sponsors once sport resumes as normal.

One thing is certain, according to O’Keeffe, and that is conversations will need to take place between rights holders and sponsors on contracts over events that have been postponed and/or cancelled.

Bonus payments are another issue. A lot of the value that comes from sponsorship deals comes from bonus payments, according to Editor of Sport for Business Rob Hartnett. They are going to suffer.

Bonus payments are based on aggregate audience reach and are paid if certain events happen. For example, a sponsor could offer a bonus payment if the team they sponsor wins a tournament. But once sport stops, bonus payments stop.

“I have no doubt Standard Chartered have a clause in their contract that they have a bonus payment if Liverpool win the tournament,” says Hartnett about the sponsor of Liverpool, the team who were favoured to win the Premier League.

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Hartnett and O’Keeffe believe the sport sponsorship market will prevail post-coronavirus.

“One of the strengths of sport is we have an inbuilt resilience. We can’t win all of time,” says Hartnett.

He also compares the business of sport, which employs up to 40,000, to that of pub owners and restaurateurs.

“We would be no more and no less immune to the economic change brought about by Covid-19,” says Harntett.

O’Keeffe agrees and says that the halt to sporting events amounts to “postponements, not cancellations.”

“More than ever, post this crisis, people will have a thirst for sport and entertainment. There will likely be a new normal for these events. Sponsorship has evolved and is a really powerful way for brands to communicate and engage customers or potential customers and it will recover,” says O’Keeffe.