What happens with our favorite teams and their sponsorship contracts when they hit play offs???
As the world of sponsorship in sports has evolved, so have the terms of negotiation when signing deals involving teams, properties and corporations. Traditional formulas once used have now been broken down and personalized creating an exciting window of creativity when drawing up contracts. This gives the freedom to develop standards for negotiation on a case by case basis when getting down to Playoffs.
Methods of Negotiating Playoff Deals with Sponsors vary. It is up to the negotiation team to use their own hypothesis to determine the extended value regarding the property/team when/if playoff games are held on the property or involved teams are headed for an extended season (playoff run).
Drilling for Oil….
Rolling the Dice in 2006, Lucas Oil purchased the naming rights to Colts Stadium in Indianapolis, Illinois. The Naming rights cost Lucas $122 million over a 20 year span. Six years into this contract Lucas Oil “struck oil” as the Colts had made it to Super Bowl, to top it off Illinois won the bid the same year to host the event that then in turn catapulted Lucas Oil onto an invaluable yet unexpected Global Marketing platform. Lucas estimates this single event alone has increased revenue by $10 million and Lucas Oil hasn’t looked back since.
Considering there are no guarantees a team’s annual performance. Putting a monetary value on extended seasons have known to be structured in different ways. In some cases an “exceptional performance revenue” will be included in the contract. Stating a specific royalty to be exchanged from the corporation to the team/property, usually multi-level bonus structure. Value based upon number of playoff games, final fours, championships and wins. Due to extensive exposure during these time periods teams/properties can negotiate based on enhanced marketing exposure frequencies.
In some cases, additional packages are set to sell if playoffs become a reality. This is a high risk and high reward method that is used to maximize sponsorship revenue. This method consists of a fast paced negotiation process, utilizing sales teams attempting to maximize complicated short term contracts. Evaluation on the team/property/event and exposure, may prove the dependant variables included in this process are well worth the fuss!
Long Term Commitment….
In this case most commonly linked to Naming Rights or Exclusivity Deals the commitment of a sponsor will remain through playoffs with a pre negotiated plan of action. A per-game calculation is determined due to the undetermined amount of games. In these relationships it is most common for benefits of regular season contracting stay static, additional promotions may be optional.
Tactics and Strategies….
We all know the amount of impressions significantly increases if a team makes it to playoffs. For a hosting property and all brands involved during this time, promotional communication has potential increase revenue far above the original projection value.
The characteristics of negotiation allow both Team/Property and Corporation to determine the most symbiotic and profitable approach for their specific contract when approaching the topic of Playoffs.