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11 October 2017

Should Sponsorship Rights Holders Sell Their Crown Jewels?

News came last week that the RFU were considering selling the naming rights to Twickenham Stadium. Whilst the sale of such rights is becoming relatively common there has been an outcry in some quarters that the national rugby stadium should be beyond the reach of brand sponsorship. This blog assesses whether the RFU should pursue this, potentially controversial, revenue stream.

Sponsorship is a relatively new marketing channel and is still evolving and maturing. There was a time when placing a brand on the front of sportsman’s shirt would have been unthinkable, this position has moved over time with the latest progression allowing sleeve branding on Premiership football shirts. The All Blacks and Barcelona FC were last within their respective sports to succumb to shirt branding citing that it was too sacred to share with a sponsor, but this position softened over time.

So, is it inevitable that the RFU will sell Twickenham’s naming rights in time and does it matter if they do? We would argue that it would be a counterintuitive strategy and rather than increasing their revenues it could hinder their long-term sponsorship income by undermining the integrity of their commercial properties. Take, for example, Wimbledon’s commercial programme; compared to the other grand slams they have the fewest number of ‘official suppliers’ (12) and deliver the smallest amount of sponsor exposure, however their sponsorship income is the second highest in global professional tennis tournaments, only marginally overshadowed by Roland Garros (€47m v €44m pa) who have nearly double the number of sponsors. As a result, Wimbledon remains one of the cleanest commercial environments in sport whilst remaining the most profitable tennis tournament in the world.

Whilst the All England Club take a rare approach to their commercial programme, most rights holders dilute their proposition by overly commercialising their sponsorships. The FA for example have 24 commercial partners including 3 lagers and 3 soft drinks. The result of this overcrowding is a devaluation of their rights. To demonstrate this point it is worth highlighting that amongst the FA’s sponsor family there are 7 [FMCG] brands you could buy in your local supermarket (Mars, Walkers, Budweiser, Carling, Carlsberg, Coca Cola, Lucozade Sport), all of whom have the right to activate this sponsorship. Good sponsorship activation demonstrates to a consumer that a brand is differentiated because it shares their interests and passions thereby making it relevant and appealing. The more brands who have these rights, the more this message is diluted making it less effective. Once the effectiveness of the sponsorship is diminished the value falls meaning that the rights holder needs to sell more in order to maintain their financial position. This becomes a vicious circle.

However, when rights holders act more like Wimbledon than the FA and maintain their integrity by only providing branding within relevant and credible positions and limiting their total number of partners the rights become infinitely more valuable. This allows the rights holder to stay true to their traditions and heritage. Equally as important, it also ensures that sponsors fully activate their rights because they know they have a truly unique and differentiated proposition. This not only inflates the financial benefit of the sponsorship but also adds incremental value for the rights holder in other ways. Brands who fully activate the sponsorship will increase the property’s exposure and engagement amongst their consumers leading to a rise in other metrics valuable to rights holders such TV audiences, social media interactions, merchandise sales etc.

So why don’t more rights holders follow this model? The succinct answer is short termism. Properties don’t achieve exclusivity and prestige overnight, this is gained over time with a very strict brand management strategy. Rights holders would need to take a short term financial hit in order to tighten their sponsorship proposition, few Financial Directors would accept this approach.

So where does this leave Twickenham’s naming rights? The new Chief Executive, Steve Brown, has been quoted as saying, “We have an obligation to maximise the potential of our assets and ensure we have money to reinvest”. The RFU’s profits are invested to grow the game of rugby, its mission statement highlights that it “aims to make a profit to reinvest in rugby union in England.” So, this potential sales strategy is well intentioned, however we believe that by keeping the stadium name sacrosanct and sharpening the RFU’s commercial focus elsewhere would achieve the same revenues whilst maintaining their integrity and building their long-term brand.

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