What You’re Missing about Pricing and Selling Sponsorship
With the announcement that the NHL is introducing sponsor jersey patches for the 2022-23 season, along with word that Monumental Sports & Entertainment is bundling jersey logos for the NBA Wizards, WNBA Mystics and its G League and esports teams into a single package, the conversation has re-started on what is the proper valuation of these—and other—sponsorship assets.
Despite the fact that I previously worked for the company that introduced the concept of an independent valuation service and developed a proprietary methodology for calculating fair market value, I’m less convinced these days that it’s possible for anyone not working with the brand considering the purchase to pinpoint the price that should be paid for a package of rights and benefits.
(That is not to say third-party services don’t have an important role to play. They can be absolutely essential business partners for a marketer seeking to understand the value of sponsorship assets and how to maximize that value. They can also contribute to rightsholders that need assistance in determining a general range in which to price different levels of partnerships.)
But, using the Monumental story as an example, reporting that “industry sources” say it’s likely the organization can find a sponsor willing to spend $10 million does not equate to “the package is worth $10 million.”
The assets and benefits in the package have a unique value for each potential partner. While that is true for any product or service, the distinction with sponsorship is how wide the range of “what it’s worth to me” is. When Hershey determines what to charge for a candy bar, the range is going to be a matter of cents. Pricing a two-bedroom condo, the range is thousands, or tens of thousands, of dollars.
With high level partnerships packages such as jersey logos and venue naming rights, the range is staggeringly broad. For example, it is entirely believable that no other company would have paid anything close to the $800 million Scotiabank committed to name Toronto’s NBA and NHL arena. Does that mean the bank overpaid? Absolutely not. Does it mean the naming rights were worth $800 million? Yes, but likely only to Scotiabank and no other company.
That is why sponsorships can’t be valued or sold like homes. It’s not a matter of setting a price and seeing who bites. Instead, it’s creating a strategic sales plan, targeting the most likely prospects that can achieve real business objectives through the partnership and then negotiating a price based on what achieving those outcomes is worth to the brand or company.
I’m confident that is the approach that NHL teams, Monumental, and other leading rights holders are taking. But any of us who are outside of their organizations or their potential sponsors do them a disservice when we attempt to establish values for their partnership offerings.