Under the Radar: Issues Arising from Sponsorship and Endorsement Agreements
Negotiating sponsorship and endorsement agreements in the sports and entertainment industries is somewhat formulaic, but without knowledge of such industries’ specifics, a brand marketer could face a number of risks. Things to think about beyond the basic deal terms:
1. Make sure you are obtaining the appropriate rights.
- Understand what rights are and are not being granted
- Does the property control marketing/media rights for the event? Does the property have a relationship with the teams/athletes? Will third parties have superseding rights?
2. Make sure you can terminate, or if things are going well, extend the relationship.
- Options / Right of First Negotiation / Right of First Refusal
- Minimize risk – shorter term with options
- Types of termination for the brand:
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- Due to breach
- Without breach – a simple opt-out
- Not delivering assets/hitting targets
- Resulting from morals clause or public denigration clause
3. Mitigate business risks to the extent possible.
- Fee reduction or termination for changed circumstances (e.g., athlete is injured/traded, team does not qualify for an event, specific metrics (like attendance) are not hit)
- Space payment out over time to ensure compliance
- Have more than one sponsored property or endorser
4. Make sure that the sponsored property allows flexibility.
- Ability to modify assets (especially digital and/or in long term deals)
- Ability to modify fees (if brand is not getting the value it expected: e.g., not hitting targets or category creep); performance-based adjustments
5. Consider hidden costs, such as:
- Having to pull down and replace marketing materials
- SAG-AFTRA pension and health costs
- Third party IP licenses (for music, logos, video clips, etc.)
- Compliance with state laws for promotions (contests/sweepstakes)
- Data security
6. True exclusivity is difficult to obtain. Consider owning a platform. Also, make sure the property minimizes clutter and also enforces against ambush marketing.