Types of sponsorship

Sponsorship can take many forms, but the most common can be placed into one of the following categories:

• Venue sponsorship – associating a sponsor's name with a particular venue, such as a stadium or music venue.
• Event sponsorship – sponsoring a single event or series of events, or league or championship.
• Team or athlete sponsorship – sponsoring a club, team or individual sports star.
• Editorial and media sponsorship – from sponsoring a publication to carry editorial content related to a particular theme, to sponsorship of a broadcast, on demand or livestreamed programme or channel.

While not ‘sponsorship’ in the true sense, closely related commercial arrangements include:

• Branded content – editorial content created by or for a brand which wants to be associated with the content or to use it to promote brand awareness.
• Product placement – paying for products or services to be featured within an editorial or entertainment context.

What are the key benefits of sponsorship?

For the sponsored party, the key benefit is typically financial. Consideration for the sponsorship rights can also include receipt of ‘value in kind’ in the form of the sponsor’s product or services. The commitment of marketing spend by the sponsoring brand to help promote the sponsored event, team, venue, etc. can also be very valuable.

For the sponsor, the key benefits include:

• promoting their corporate image, including through association with a well-known event/person;
• creating brand awareness;
• providing a platform to launch, promote or showcase products or services;
• gaining media exposure; 
• entertaining existing and potential customers through hospitality or ‘money can’t buy’ activations; and/or
• employee engagement and motivation.

What are the key risks?

Sponsorship has risks as well as benefits for the sponsor and the sponsored party. These vary depending on the type of sponsorship.

Risk factors for sponsor include:

• financial – the sponsor may have substantial funding responsibilities;
• changes – changes to the sponsorship property (for example, a high-profile individual leaving a club, a ‘force majeure’ event causing cancellation or postponement; or rules changes impacting on the format of an event);
• PR – negative PR for the sponsor if a sponsored celebrity or team, etc. comes into disrepute;
• public acceptance – for venue sponsors there is the risk of the new venue name being rejected or failing  to be widely-adopted, and sponsors in controversial sectors can also be rejected by fans or accused of ‘sports washing’, etc.; and
• coverage – failure of the sponsorship property to get sufficient media coverage, including if the event, athlete, or team doesn’t perform at the level expected.

Risk factors for the sponsored party include:

• financial – the sponsor being unable to meet its funding and other sponsorship commitments;
• reliance – where the sponsor is providing essential goods or services, from team kit to crucial tech, a failure to deliver or issues with quality can be drastic;
• control – the sponsor wanting control over some management decisions in connection with the sponsorship property; and
• public perception – events may be seen as losing integrity through increased commercialisation via sponsorships, or as a result of the sponsor being involved in illegal or publicly criticised activities.

Regulatory issues:

Both parties to sponsorship deals can be impacted by regulatory changes, including:

• products regulations – sponsors in highly regulated or publicly sensitive sectors are vulnerable to changes in regulations, either at a governmental or sporting level, which impact their ability to deliver sponsorship rights;
• media regulation – the rules relating to editorial sponsorship, branded content, and product placement are complex and changing; and
• geo-politics – sanctions and similar political matters can impact the ability or desire to continue deals with sponsors from certain countries.

Conclusion

We hope that this whistlestop tour through the broad and complex world of sponsorship gives you a flavour of the benefits and risks of the various different types of sponsorship, as well as key considerations for those wishing to sponsor or be sponsored. The benefits can be maximised, and risks mitigated, with good advice. If you would like to discuss further, please do reach out to our expert lawyers in our Digital, Creative and Commercial team.