Restricting Sponsorship Categories Can Cause a Riot
Little did we know when FTX and the Miami Heat announced their naming rights deal in March that the cryptocurrency exchange would be in the news for an even bigger partnership just a few months later.
One of the largest sponsorships in esports’ brief history, the deal gives FTX naming rights to the vaunted TSM team for $210 million over 10 years. But some of what makes the deal noteworthy is what it doesn’t include.
Specifically, developer Riot Games will ban the use of the new team name in its broadcasts of League of Legends Championship Series and Valorant competitions. That includes not allowing TSM players to wear jerseys with the FTX logo.
The TSM founder and CEO observed in a Reddit post that “FTX will still be sponsoring our League and Valorant players in content, social, live-streaming and in person events. Which has more visibility than Riot’s broadcast.”
Although he is most likely correct, the ban poses bigger questions, not only for Riot and the organizations that field teams in the competitions it oversees, but all sports marketers.
The most obvious is: “Why?”
The only public statements from Riot simply confirm the restriction but don’t explain it. As Dot Esports quoted Chris Greeley, Riot’s head of esports, North America and Oceania, “The TSM and FTX sponsorship deal does not break any LCS sponsorship rules, but crypto exchanges fall under a category of sponsorship that carries activation restrictions. As a result, TSM’s new naming convention and FTX brand placement on TSM jerseys will not apply to the LCS or other Riot Games esports in North America.”
Dot Esports also reported that “Riot privately has very detailed bars on certain sponsors and categories, including but not limited to certain cryptocurrency exchanges, gambling, and pornography. It previously barred teams from sporting beer sponsorships prior to the LCS’ own deal with Bud Light in January 2020.”
Unless Riot shares its reasoning behind restrictions, many will speculate—especially based on what transpired in the beer category--that it merely wants to clear the way for leaguewide deals that will be unencumbered by the presence of competitors at the team level.
Given Riot’s prohibitive nature, it’s ironic that the developer found itself on the other side of the coin last summer, when it signed—and canceled within hours—a partnership that would have made Saudi Arabia’s megacity development Neom a main sponsor of the League of Legends European Championship.
In the wake of backlash from employees and fans, the company reportedly formed a global deals council to review potential partnerships, as well as an ethics committee that would also be involved in evaluating deals.
Nothing in the Riot Games situation means there are not legitimate grounds for sports and entertainment properties to limit or ban sponsorship categories. Rights holders must be able to protect their brands, culture, reputation, fan support, etc.
But drawing sharp lines that make sense—internally and externally—is difficult. And appeasing all stakeholders—not to mention avoiding all potential controversy-- is impossible if a property is to have any semblance of a successful commercial program.
In helping draft sponsorship policies for a wide range of properties, I often come back to the idea of taking direction from stakeholders, especially fans, as to what is appropriate. The trick, of course, is to do this in advance of deals being negotiated.
Social media listening can be a useful tool, as is taking a page from government and political operatives and floating trial balloons in the media to see the reaction to possible partnerships before they are signed or announced.
(This clearly was not done in the case of English Premier League club Norwich City, which scrapped a one-year, $7 million jersey sponsorship with gambling company BK8 after five days last week following uproar from supporters about the sexual nature of BK8’s marketing.)
It is not easy for properties to strike the right balance between being too restrictive and wisely avoiding categories and partners that could damage their organizations, but as the Riot Games example shows, more transparency into the decisions would go far in positioning a property as a partner that wants to do right by its sponsors and its member teams, players, etc.