Seldom will you see sports stadia unbranded, an athlete competing in unbranded apparel, or a globally recognized brand without an affiliation to sport in s
Neil MorganSenior Counsel,Head of Sports and Events
Omar ShariefTrainee Lawyer,Digital & Data
Sport and sponsorship go hand in hand; a multi-million-dollar industry. Seldom will you see sports stadia unbranded, an athlete competing in unbranded apparel, or a globally recognized brand without an affiliation to sport in some form. Brands first began to sponsor major sporting events, athletes, and sports clubs during the early 1900s. These early sponsorship arrangements were often simplistic value-in-kind arrangements, providing a product in exchange for brand visibility. Perhaps the most notable early adapters to this concept were Adi Dassler, founder of Adidas and Olympic Champion, Jesse Owens. Dassler’s approach transpired to be a masterstroke as Owens went on to receive four gold medals at the 1936 Olympic Games wearing his designs and generating mass awareness for the brand.
Since the early 1900’s to the modern-day, sponsorship agreements have evolved, and with that, their value significantly increased. In 2011, Abu Dhabi-based airline Etihad signed a reported £400m (AED 2 billion) 10-year-deal with Manchester City Football Club that pushed beyond a prominent logo on the team’s playing jersey. The partnership included naming rights to the stadium’s campus (now dubbed ‘Etihad Campus’), naming rights on the stadium (now known as ‘Etihad Stadium’) along with a host of sponsorship assets. On the same day, Etihad also announced that it would operate two daily flights from Manchester to Abu Dhabi. This showcases the alignment in business and sponsorship objectives.
Nike, the world’s largest athletic apparel company, took a long-standing approach, signing lifetime sponsorship agreements with elite athletes. These include, basketball legends, LeBron James, Michael Jordan, and football superstar Cristiano Ronaldo. The latter has been a Nike athlete since 2003, having worn over 65 different variations of Nike’s trademark Mercurial boots. Another example is, the United Arab Emirates’ very own Omar Abdulrahman receiving his Nike sponsorship deal in 2012, highlighting the Middle East’s importance to Nike. The opportunity for Nike to have their brands seen by millions of fans during high profile sporting events such as the FIFA World Cup, NBA championships, or UEFA Champions League competitions (the latter being the most lucrative club sports competition in the world) provides a considerable bonus to the brand.
In recent years, there has been a shift in the terminology used, from sponsorships to partnerships. Athletes, sports clubs, and competitions rely on sponsorship fees to form part of the revenue stream, whilst brands depend on athletes, sports clubs, and competitions for brand exposure, and access to loyal fan bases. Therefore, both sides see a significant value in their side of the bargain.
However, what happens if things go wrong? If an athlete commits a criminal offence or a sports club undertakes an action causing fan outrage. Perhaps the brand or one of its employees is subject to a sanction or a regulatory investigation? The risks are prevalent and ensuring you are protected, whichever side of the relationship you are on, is paramount.
In December 2009, local media outlets released allegations of Tiger Woods’ extramarital affairs. Tiger Woods apologized numerous times publicly and announced that he would be taking a break from professional golf. As a result, several sponsors sought to re-evaluate their relationship with one of the greatest golfers of all time. Accenture, AT&T, Gatorade, and General Motors ultimately ended their sponsorship deals, while Gillette and TAG Heuer suspended advertising featuring the Golf star.
The impact is reported to have cost Tiger Woods approximately £8m (approximately AED 40m).
Kurt Zouma, the French professional footballer who plays with West Ham United, caused controversy due to a video that surfaced online. The defender was filmed kicking and hitting his cat, causing issues with his own sponsors and his team’s sponsors. While Zouma’s own sponsorships were affected, it was West Ham United’s sponsorship with UK life insurance company Vitality which hit the headlines. Vitality suspended its relationship with West Ham United due to their handling of the Zouma incident. The player continued to play for West Ham United in spite of the controversy and the sponsors saw it fit to suspend their agreement with his club until further notice.
Although there are numerous examples of brands suspending or ceasing their sponsorship agreements, there are also examples of sponsors who have continued their agreements when controversy has occurred. Conor McGregor, an Irish professional mixed martial artist and previous champion of the Ultimate Fighting Championship has been marred with controversies throughout his sporting career. Despite these reported high-profile incidents, he still boasts an array of sponsors. This may be due to his persona, which has always seen the MMA star pushing boundaries and the personality of the sport in which he participates. In fact, his attitude and persona have brought greater sponsorship deals for McGregor, with brands aware of his previous actions prior to sponsoring him.
As the above examples highlight, when entering into any form of sponsorship/partnership arrangement, understanding the parameters that both parties are working within is of the upmost importance. Aside from doing due diligence and having a robust PR plan in place to act fast if unfortunate situations occur, contractual protection is key.
Including express termination rights if specific scenarios arise is advisable. They should be drafted with clear, unambiguous language, which provide adequate grounds for termination.
Below is a non-exhaustive list of examples which could be considered.
Mortal outrage at an athlete’s on/off-field behaviour, including being in direct contradiction to the brand’s image.
Sponsor’s being subject to sanctions or regulatory investigations.
Sport’s club or competitions undertaking actions causing fan outrage.
Regulatory changes make it impractical or illegal for the brand to continue its sponsorship.
If a specific scenario is of real concern based on:
due diligence;
prior knowledge of the sport;
prior knowledge of the sponsor industry; or
cultural sensitives, then such scenarios should be expressly catered for when drafting agreements. This will ensure the position on suspension or termination of the sponsorship agreement is unambiguous.
Notwithstanding the above, sponsor’s and sponsored athletes must also be cognizant of the nature of their industry. An extremely wide termination or moral outrage clause may affect an athlete who enjoys casual pre-match talk, such as a boxer or fighter like Conor McGregor. Indeed, the option to suspend or terminate a sponsorship depends on the drafting of the clause. The distinction is critical, as a suspension can be temporary while termination is permanent.
Caution must be exercised when drafting termination clauses. For instance, consider whether to include, not just actions of the sponsor itself but employees, people connected to the company, and maybe even the brand sector or country within which the sponsor operates.
Caution must be exercised when drafting termination clauses. For instance, consider whether to include, not just actions of the sponsor itself but employees, people connected to the company, and maybe even the brand sector or country within which the sponsor operates. If you are a sponsor and contracting with a sports club, make sure it covers players or Director acts or omissions and not just the sports club itself. Clear drafting can mitigate the risks of a claim for wrongful termination.
Our team at Al Tamimi & Company can provide you with expert legal advice when negotiating sponsorship terms, either from the sponsored athlete / team / competition or from the sponsor’s perspective. We have extensive experience in providing the best possible advice, particularly given the background of our Sports & Events Management team.
For further information,please contact Neil Morgan.
Published in October 2022
