||Why Exclusivity Isn't What It Used To Be
Diminishing Role of Exclusivity Does Not Mean That Sponsors Don't Want to Stand Apart from Competitors and Clutter; Just the Opposite is True.
Combine tight corporate budgets with the need for properties to carve out new inventory to attract additional revenue and the result is major changes to the way sponsors and rightsholders approach category exclusivity.
To be sure, exclusivity remains a primary driver for many sponsors. According to the 2011 IEG/Performance Research Decision-makers Survey, exclusivity and on-site signage rank as the most valuable sponsorship benefits, each with 63 percent of respondents ranking them a nine or a ten on a 10-point scale.
But although sponsors express interest in the benefit, many cannot afford -- or justify -- the price tag associated with the traditional definition of exclusivity: locking up an entire category.
"If we spent time and resources trying to block out competitors we would probably run out of resources very quickly and never accomplish what we set out to do," said Todd Fischer, manager of national sponsorships with State Farm Insurance Cos.
"It's like playing tic-tac-toe. If you try to block out the other guy, you end up with a lot more draws than wins. To pay four to five times more than what we want to spend doesn't make appropriate business sense."
Among the categories most likely to be split, say rightsholders: automotive, financial services, beer/malt beverage, quick-service restaurant and technology.
"Sponsor budgets have been reduced over the past several years and they are not willing to pay for exclusivity," said Eric Mastalir, vice president of corporate partnerships with the NHL San Jose Sharks. "That has pushed us to broaden the number of companies we work with to keep yields where they were."
In at least one case the change has done much better than simply maintain the same level of income. The Sharks have tripled revenue in the malt beverage category now that the team is working with two companies instead of one, said Mastalir, who works with Anheuser-Busch InBev SA/NV and MillerCoors, LLC.
The potential of increased revenue isn't the only upside for properties in moving away from exclusive packages. For many, having more companies involved translates into more exposure through sponsors' marketing activities, which in turn can help drive ticket sales and accomplish other objectives.
"In most cases we try to stay away from exclusivity because it tends to limit us in reaching different ethnic groups," said Michael Young, chief revenue officer for the MLB Los Angeles Dodgers. "We have a very diverse fan base, and as a result we evaluate exclusivity on not just revenue but also on reach."
For other properties, a different scenario has emerged in some categories: companies that require exclusivity but that are not willing to pay a premium for the privilege.
Such was the situation facing the NFL Chicago Bears in negotiations with Toyota Motor Sales U.S.A., Inc. last year. Although the team typically offers exclusivity only to companies in its top-tier Hall of Fame Partner program, the Bears did grant exclusivity in the non-luxury car category to Toyota even though the automaker's commitment is at a lower level.
"Everyone has to be flexible and make adjustments as the economy levels, but we work hard to maintain the value of exclusivity," said Chris Hibbs, the Bears' senior director of sales & marketing.
Reframing The Discussion: "Ownership" Not Exclusivity
Much of the discussion surrounding exclusivity can be better defined as being about "ownership," a term the industry has embraced as meaning the ability to create a meaningful association apart from other sponsors and competitors.
Consider that when State Farm's Fischer -- whose company has category exclusive deals with MLB and the NBA -- uses his tic-tac-toe analogy, he is addressing something greater than a single sponsorship contract that grants category rights.
"I would argue that exclusivity no longer exists," he said. "The day and age when you're controlling one point of entry is long gone."
What this means is that exclusivity has become largely irrelevant to many sponsors. What they want are "ownable" associations, which can sometimes be aided by exclusivity and sometimes not.
State Farm's former sponsorship of the NCAA is an example of the latter. Even though the company had category exclusivity, it chose not to renew the deal earlier this year in large part because it could not stand apart in the cluttered college sports marketplace.
In noting all of the different connection points through which sponsors can access college sports -- starting with official partnerships with the NCAA, conferences, tournaments and individual schools, as well as media and promotional ties with ESPN, CBS and Turner Broadcasting -- Fischer said, "to be an exclusive partner with all of those organizations would be a nine-figure proposition."
However, the same is true in baseball, where State Farm's exclusive MLB deal leaves plenty of open territory for competitors to sign with teams, minor league organizations, broadcasters, etc. But there the insurer is comfortable that programs such as the State Farm Home Run Derby at the MLB All-Star Game and its cause overlay with Boys & Girls Clubs of America allow it to stand out and make an impact.
"For us, exclusivity isn’t as important as differentiation," Fischer said. "With differentiation we can break through the clutter as opposed to buying out an entire category."
Exclusive platforms come in many forms, including physical spaces, events-within-events, participation in retail partnerships, charitable programs, etc., and can be initiated and controlled by either the property or sponsor.
One rightsholder putting more focus on offering exclusive programs is IMG College. The company plans to offer ownable inventory and platforms for the college and university athletic programs it represents.
"Ownable platforms are the new thought process in sales; category exclusivity is still important, but the cost can sometimes be too large to digest," said Lawton Logan, IMG College's senior vice president of business development.
(Source: IEG Sponsorship Report, 06/03/11)
What's In It For You:
The trend towards non-exclusivity is not limited to sports sponsorships. Many properties -- including those of Radio stations -- are finding that sponsors are willing to forego exclusivity in exchange for a lower cost of participation. And they are exploring creative ways to develop a more impactful presence. Automotive, financial services, beer/malt beverage, quick-service restaurants and technology are not only the categories looking most closely and changing their sponsorship options, they are the key categories for Radio advertising and sponsorships. Put the sponsorship "packages" in your back pocket and be ready for an open conversation about "ownership" of a particular element and the presence of competitors at your event.
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