FIFA second-tier sponsorship value questioned

When FIFA announced that it was to restructure its World Cup sponsorship programme, many were stunned at the GBP 75 million asking price for top-tier packages, which was a substantial hike on the previous price.
 
But FIFA quickly filled the six top-tier spots, valued at GBP 75 million, without a hithc. The bigger question could be about the value attached to the eight second-tier sponsorship packages, priced at about GBP 10 million each.
 
At the time, sceptical observers suggested the changes were designed purely to boost the sponsorship revenues of the governing body. FIFA defended its decision to shift from 15 overall sponsors to six primary and eight secondary partners by claiming the system would create less clutter for its main sponsors and provide an opportunity for brands with less financial clout to align themselves with the World Cup at a more accessible price.
 
The tiered structure is nothing new. Most major rights holders currently adopt this approach.
 
The appeal of FIFA’s lower-level package is not in its opportunities for exposure, but as an economic way to align with the property as a platform for the brand’s own promotional activity.
 
Such a system appears to be viewed as the best by rights holders. Other than FIFA, the English Football Association, England and Wales Cricket Board (ECB) and London 2012 organising committee (LOCOG) are currently in the market selling second-tier deals.
 
Many now believe that second-tier sponsorship opportunities are substantially over-priced and offer little value for money.
 
“I’m not a fan of the tiering system,” said Karen Earl, managing director of Karen Earl Sponsorship. “The big deals, such as the one struck by Emirates (with FIFA) last week, have a tendency to overshadow any second-tier packages, and with the price of these associations creeping up, there is a big question to be asked about value for money.
 
“It depends on the proposition from both sides, but there has to be added value for the brand or there is no point in signing up. Also, there is a feeling that the properties are dicta-ting the terms rather than the brands, which is not a good position for sponsors to be in.”
 
Earl added that there are benefits in riding the coattails of the bigger-spending brands and the potential to free up money that would otherwise be spent on rights fees, to increase promotional budgets.
 
“This only works when the cost of the second-tier deal actually constitutes a saving,” Earl said. “The prices being asked for these deals in the current market are becoming unrealistic.”
 
Andy Philpott, director at sponsorship agency Prism, agreed that the packages are generally overpriced, but suggested the pull of the property has a major influence.
 
“Second-tier deals are undoubtedly overpriced and, ironically, there is a feeling that brands are buying the cheap seats, but properties are getting away with it for a reason”' he said. “You have to consider whether the sponsors have a choice. Properties such as the World Cup are in such demand that brands are practically knocking down the door to get involved. In this environment, rights holders can charge what they like and they will still get the deals done. In a year or so we will see whether FIFA's restructure worked, but I wouldn't bet against it.”
 
The scenario facing some existing FIFA sponsors supports Philpott’s theory.
The biggest surprise among FIFA’s top-tier partners was the absence of McDonald’s, a long-time World Cup supporter. Locked out of the top level, it is faced with either signing up to a second-tier deal or ending the association.
 
“It is difficult to assess McDonald's position,” Earl said. “You could say there is already a major association between the brand and football regardless of what FIFA deal it signs, so why pay top dollar? That said, I would be surprised if it didn't take up a second-tier deal, as it seems unlikely that it would want to lose the official partner status.”
 
There is a feeling that internal bureaucracy over getting sign-off on renewal deals, due to the speed of FIFA’s movements, has left a number of existing sponsors frustrated that they have only the second-tier deals to go after - but not so frustrated that they will not do so.
 
In the long-term, sponsorship properties might push their power position too far in terms of the asking price, especially when it comes to second-tier deals. But much of this depends on the bravery of the sponsors. It is difficult to walk away from an opportunity as big as the World Cup, even in protest at an over-inflated price.

Source: euFootball.BIZ © Copyright 2006 - All rights reserved.