Sponsors play a huge role in sports, both for clubs and individual athletes. The sponsor is able to get their business out to the public through brand awareness and increased media exposure, and in return the team and/or the individual receives revenue. For example, Everton Football Club has recently signed its biggest sponsorship deal with Stake.com to allow the betting company to become its main sponsor and place its logo on the club’s kits for an undisclosed figure.
However, whilst sponsorships are very attractive in sports, the terms of the sponsorship agreement must be clear on key areas to ensure that teams and individuals are protected. We have created a short guide on some of the things to keep in mind before entering into a sponsorship agreement, but please note there are of course other areas which will require careful consideration.
Identify the type of sponsporship
Not all sponsorship agreements relate to the promotion of the sponsor via the club’s kits (and that is of course before we even begin to determine just what do we mean by “kit”?). There are multiple forms of sponsorships which can arise for both clubs and individuals and it is therefore important that this is clearly articulated in any agreements. For example, some sponsors may wish to be included on billboards and promotional material and individual athletes may have their equipment provided by separate sponsors such as footwear and clothing.
It is important to understand exactly what it is the sponsor will be provided as this will have a direct impact on the other provisions contained in the agreement. This will also directly affect the exclusivity point below, and it may benefit clubs breaking down the types of sponsorship and exclusivity to exploit their rights wider.
It is not uncommon for sponsors to want exclusive rights to sponsor a club. For example, football kits for high profile teams are never sponsored by two major clothing brands such as Nike and Adidas. Rather, what is more common is for the club to gain other sponsors who do not compete with the main sponsor. The main sponsor may wish to have a say in the club’s other sponsors and, therefore, clubs need to be careful about the wording of the agreement to ensure they do not restrict themselves.
Much like clubs, sponsors will not want the athlete to be sponsored with another competing brand. Therefore, exclusivity provisions are often included to prevent the individual from promoting items of a brand which is in competition with the sponsor. However, this does not always apply and the individual’s sponsors can differ to the clubs – for example, some athletes may have their footwear such as running shoes, football boots or sports trainers supplied by a different sponsor to the club’s sponsored kits. So, there is much to consider before entering into any agreement.
Teams and individuals also need to assess how long the agreement should remain in force for. This may vary depending on the type of sponsorship – for example, if a company is sponsoring an event such as the Olympics which occurs every four years, it may wish for the contract to continue for 4 years with the option to extend. Nonetheless, there is a general interest by sponsors to tie in clubs for large periods of time by signing long-term contracts but careful thought is required here, as a lot can happen in one season of sport, never mind four years, and thorough termination provisions will be required to ensure the sponsor protects their interests.
The method of calculating payments due under the agreement is an important part of the sponsorship agreement. The two most common payment mechanisms are a fixed payment or conditional payments; the latter meaning the value is calculated depending on specific events, for example a fixed fee multiplied by the position in which the team (for example in football, basketball or other team sports) or the individual (for example in tennis, F1 and other individual sports) comes in the standings.
In addition, there are other considerations which clubs and sponsors need to consider. For example, are there to be additional payments or reduced payments? This often occurs where a club is promoted or regulated or where team a team wins a tournaments or other events. This is particularly relevant for long-term contracts where the position of a team can vary.
Termination provisions appear in most commercial contracts and sponsorship agreements are no different. In particular, where the agreement is long-term, sponsors will want to ensure there are thorough termination provisions to allow it to terminate upon certain events. In sport, for both clubs and individuals, a large part of this often relates to negative publicity. Sponsors will seek to have in place provisions which allow for termination in the event that the actions of the club or individuals negatively impact the reputation of the sponsor. Examples of famous athletes who have lost sponsorships due to their conduct include Tiger Woods, Lance Armstrong, and Maria Sharapova. More recently, West Ham’s sponsor, Experience Kissimee, announced the end of its sponsorship with the club following the actions of footballer Kurt Zouma who was seen to physically harm an animal.
Intellectual Property (IP)
Finally, it is vital that clubs and individuals consider their intellectual property rights as well as the sponsors’ intellectual property rights. Using sponsor’s names on websites, promotional material, and equipment all has implications upon IP rights and this needs to be clearly drafted in the sponsorship agreement. In particular, the agreement should be clear on how the club/individual can use the IP to avoid infringing on the IP rights of the sponsor such as: (a) what IP is being used, (b) where can the IP be used (c) what restrictions are there on the use of IP and (d) is express permission required for each new use of the IP?
Clubs and individuals also need to consider their own intellectual property and image rights. Sponsors may wish for this to be assigned to the sponsor, but clubs and individuals should seek to retain ownership of their IP. This needs careful drafting in any agreement including granting sponsors a licence to use the IP but ultimately ensuring that the club or individual retains ownership.
How can we help?
At MacRoberts, we have extensive experience in drafting and advising on all kinds of commercial contracts. We are confident that we can provide advice and drafting to cover all possibilities that you need to have in mind when entering into a sponsorship deal. We can advise both teams and individual athletes to ensure they are fully protected.