Shirt sponsorship: an agreement of two halves- Iain Taker

There has been a significant level of publicity concerning reports that Standard Chartered influenced the decision by Liverpool FC to issue a series of apologies in the aftermath of the Luis Suarez and Patrice Evra saga. The Liverpool sponsorship contract is worth a reported £20m per season for four years, and has, again, raised the issue of what protections a sponsor should seek to include in order to protect their brand.

This article identifies a few areas that should be in the sponsor’s thoughts when negotiating such a contract, which has the potential to build or damage a brand domestically and globally. While every contract will be negotiated in different circumstances, there appears to be a growing level of awareness and negotiating power on behalf of the sponsor.

Morality provision

While every sponsor wants to focus on the potential benefits of a sponsorship agreement, it is vital that the possible pitfalls are limited as far as possible. Therefore, a provision that should be included in the sponsorship contract is one covering the consequences for immoral behaviour by the club, players and/or fans. Such a provision should allow the sponsor to claim damages and, in serious cases, elect to terminate where there are instances of immoral behaviour.

With the close connection that sponsors build with the club, an action such as racism, homophobia or financial irregularities can tarnish the sponsor’s brand image. It is therefore prudent to have the option to disassociate from the club and to seek remedies in such an event, which may, in turn, need to be spent on addressing any negative impacts caused to the sponsor’s public image. In addition, a sponsor may wish to be involved in the process of agreeing press releases from the club in the aftermath of such an incident, although this request is likely to be resisted by the club.

Termination provisions

In addition to the option to terminate for breach of the morality provision, a sponsor may want to seek to have the option to terminate on convenience in circumstances such as. failure to qualify for Europe/relegation/on notice i.e. if sponsor ceases to operate in that market.

While a club will usually be hesitant to agree to such a provision, as it removes the certainty and guaranteed revenues that they will receive from the agreement. The club may be willing to agree if there are additional performance related pay incentives as the upside of such a term.

Performance-related pay

One of the most important aspects for many sponsors is the possibility to develop and build brand recognition across as wide an audience as possible- nationally and globally. The more successful the club being sponsored, the greater the exposure that the sponsor is likely to receive and therefore the value of the agreement to the sponsor is increased. Therefore, more sponsors are seeking to include an alternative payment structure which includes a base sponsorship fee with add on for various successes.  It is important to remember that success may mean different things for the club than the sponsor e.g. both will regard winning trophies, European qualification, avoiding relegation etc as a success but the sponsor may be more keen to link a ‘success fee’ to areas such as number of television appearances.

No-competitors agreements

It is common that the main shirt sponsor is given the option to purchase additional rights associated with the club and stadia, it is important the effect of the sponsorship is not diminished by having a competitor’s brand displayed at the same time.  This may be in relation to being able to supply the official outlets in the ground if the sponsor was a soft drink company for example.  The sponsor should also seek to ensure that they have a first refusal over advertising space in the ground, as the value of the agreement will be diminished if the perimeter advertising boards are displaying competitors’ products. For example, in the betting industry, a number of firms currently display the latest in-play odds on the advertising boards around the pitch during the match; this would detract from the value of another company’s shirt sponsorship.

Change of logo provision

While most sponsors have a single recognisable brand logo that they are seeking to promote, it is prudent to retain the right to change this as and when beneficial.  The sponsor may wish to utilise the potential for having different logos displayed on the different kits, be it home/away, league/cup/Europe or season by season. This could enable the sponsor to develop a number of areas (or brands) within the business e.g. a betting company may use the home shirt to promote their sports betting and the change shirt to promote their casino offerings.

 In addition to the right to select which logo to use when the shirts are designed, the sponsor should also retain the right to amend the logo (text, design and colours) as, during the course of the agreement, they may rebrand their logo. It is often important to ensure that the logo is as prominent as possible and that the colours of the brand show up correctly on television, so the sponsor should seek to be consulted during the shirt design process. This is not to say the sponsor would dictate the colour of the home kit, for example, but may be able to ensure that the logo selected is the most appropriate for the chosen designs.

 Assignment

It may not be possible for a club to display their sponsors name on the match day shirt for all games, in all competitions, due to the different advertising laws that are in place across Europe. This is exemplified in France, where it is not possible to advertise alcohol or betting/gaming products on a match day shirt. In this situation, the sponsor would want to ensure that a provision is included in the contract that they are either repaid the relevant proportion of the sponsorship fee or that they are able to assign the rights to an alternative sponsor and keep the associated proceeds.

Additional sponsorship rights/database rights

Due to the significant sums that may be paid in conjunction with a sponsorship agreement in the Premier League, it is important that the sponsor maximises the benefits that they receive. One option is for the sponsor to have their logo included on areas outside of the match day shirt. These additional options will include: training kit, perimeter boards, tickets, club website and social media outlets, programmes and post-match interview boards.

Sponsors may also want access to the club’s database of supporters who (subject to data protection regulations) can be marketed to as part of official emails from the club or third party direct marketing by the sponsors. With the increasing role that social media is playing, it would be wise for a sponsor to seek to gain exposure through digital media platforms such as Twitter and Facebook, which can enable the brand to be seen by a vast number of people internationally for little or no additional cost.

Conclusion

A sponsorship agreement should help to build a partnership between the club and the sponsor. While it is the intention of both parties that the sponsorship of the club will bring with it many benefits, the reality is that the agreement must also cater for any on-going dialogue and potential problems between the parties. The article has raised some of the important areas that may not always be considered by sponsors and prior to entering into negotiations the sponsor must analyse and evaluate what are the key drivers for and success criteria for the agreement.

Iain Taker is an associate at Kemp Little LLP, specialising in commercial contracts, social media and sports law, and a registered lawyer under the FA Football Agency Regulations.  
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