The Opportunity Costs of Questionable Partnerships
For many legitimate reasons, the focus of sponsorship proposals, discussions, negotiations, media coverage, gossip, etc. is on the cash value of the agreement.
But while that amount is typically the most important deal element for the sponsored property, it is far from the only value driver.
On the plus side, corporate partners can make significant brand- and business-building contributions to properties beyond the welcome influx of cash. Their promotional activity can draw attention, help sell tickets, etc. In-kind donations of goods, services and human resources can fill critical holes. Well known and popular brands bring a level of prestige and help to enhance the reputation of properties. And the list goes on.
Both parties should calculate the worth of all of those tangible and intangible benefits when considering the total value of a partnership.
And they should not forget to factor in any potential negative impact a sponsorship could have.
Consider the case of FC Barcelona’s new Spotify deal. Given the club’s recent economic troubles, the size of the cash infusion (reportedly $300 million over four years) and a growing, respected brand as partner, this sponsorship is clearly a net positive for Barca.
But it is not without its downside. For the first time, the club has sold naming rights to its legendary stadium, which will be known as Spotify Camp Nou beginning next season. Commercializing this temple to soccer was arguably necessary and has not led to any immediate fan or public backlash, but nevertheless, it diminishes the venue’s long-term stature to some degree and thus could impact the value of what future partners are willing to pay.
As MLB clubs market their inaugural jersey patches for debut in 2023—and speculation that crypto brands will be among the categories most interested—those selling for teams would be wise not to be blinded by valuations of $20 million per year and give thought to what type of company should stand next to iconic names such as Yankees, Dodgers, Cubs and Red Sox.
It will remain true that in sponsorship cash is often king. But properties should not neglect the long view while counting their short-term gains. Instead, they should remember these words from Proverbs 22:9: “A good name is to be chosen above great riches.”