Every contract is different. But any pro sports sponsorship deal likely includes a Force Majeure clause – provisions that protect against unforeseeable and uncontrollable events, what in the insurance industry would be called an “act of god.”
The COVID-19 pandemic certainly qualifies – though typical Force Majeure cases in sports are natural disasters, storms or things like electrical blackouts that disrupt broadcasts.
If seasons are called off, brands will be refunded or given other contractual provisions that are set in their Force Majeure clause, Schauder said, like credits to roll forward the sponsorship dollars for next year or rights to certain replacement inventory.
Pro sports have more flexibility. The NCAA’s March Madness basketball tournaments are immovable. Not just because of the name, but because the NCAA takes out TV air time and space in arenas and hotels years ahead of time, and that just can’t be pushed back later in the year. NBA teams control their own stadiums and TV networks.
Pro teams and leagues have alternatives for making good on sponsor investments, even if games are cancelled, said Riccardo Tafà, Managing Director of the agency RTR Sports Marketing. They can put players in media and social media content as a way to generate impressions and visibility until games resume.
Brands prefer to be sponsoring sports games, but they are at least protected from meaningful losses due to cancellations.
Leagues and broadcasters with TV rights collect insurance. Though the leagues will suffer. NBA executives told team owners to brace for hundreds of millions of dollars in losses during a conference call on Wednesday, ESPN reported. And that was when games were going to be played in empty arenas, before the season was halted entirely.
The ill luck may fall hardest on athletes.
Brands get paid back when they miss games. Players don’t get paid.
Players unions do huge financial planning campaigns with athletes when they know a significant amount of the season may be cancelled, because it’s usually a lockout over a contract dispute with the league, Schauder said.
Team contracts and even endorsements often pay per game, sometimes with an upfront guaranteed check. Which means now many players aren’t being paid at all.
That’s an opportunity for a digital media startup like OpenSponsorship – a platform where brands and athletes connect on social influencer campaigns – but brands are in a holding pattern, Anand said.
Done deals between brands and tennis players for Wimbledon or the NBA playoffs now may fall through, she said.
Some brands will hopefully see their sponsorship partnerships as more of a two-way street, and find ways to stick with athletes and leagues instead of hitting pause, Tafà said.
Doping or cheating scandals are a reason to drop sponsorship commitments, he said. “But this Coronavirus thing is nobody’s fault.”