Top tips for negotiating football kit sponsorship deals (incl. considerations when working with betting companies)

Published 20 January 2016 | Authored by: Andrew Crystal, Joshua Charalambous

This article offers some top negotiating tips to help explain the practical considerations for both clubs and sponsors when negotiating a football kit sponsorship deal. It then explains the added complexities if the sponsorship deal involves a betting company.

It will be particularly relevant to executives and lawyers at or advising sports clubs, sponsors and betting companies.

 

Kit sponsorship

When The Football Association (The FA) lifted its ban on kit sponsorship in the late 1970s few would have predicted how desirable the space on the front of sporting jerseys would become.

Now, from airlines to beer, from insurers to betting companies, there is a diverse range of industries looking to capitalise on the exposure of the 20 Premier League teams who are benefitting from a record TV rights deal worth £5.14bn.

At the Premier League level, the movement away from reliance on ticket sales for revenue to TV and sponsorship is highlighted in Deloitte's Annual Review of Football Finance:

"For the first time in the history of the league, matchday revenue made up less than a fifth of the total revenue, despite record average attendance of 36,691."1

 

Top negotiating tips on sponsorship deals

Investigate the club’s brand and partnership rules

Does the club have a brand guidelines policy or a club partnership policy? Without one the club has a weaker hand in ensuring that its partners act in a way that is acceptable and uniform with the way the club is run.

Such a policy doesn't have to be a watertight list of "dos and don'ts", but should set out the basic requirements of what is expected of club sponsors. It also has added importance with the emerging business models being used in today's football market, such as the 'global family of clubs' model implemented by the City Football Group (Manchester City, New York City, Melbourne City and Yokohama F Marinos), as these geographically disparate clubs endeavour to have the same applicable policy and approach to their brand and partners.

Any brand guidelines/ partnership policies should be effectively defined and incorporated into the agreement. Internal training should be given and the policies refreshed and communicated to all partners to avoid disputes down the line.

Ensure that there is a clear definition of sponsorship rights:

  1. List the kits and each element thereof (including training kit, tracksuits, etc).
  2. Ask: does it apply to retail wear as well?
  3. Home stadium advertising, perimeter boards – check if there are provisions for if the boards become electronic and/or rotating? Who is responsible for affixing and taking down the signage? If the sponsor has this responsibility the club should think about when access to the ground will be granted and approving such works (e.g. is a cherry-picker going to be allowed to roll over the pitch?).
  4. There can be guarantees written into agreements regarding the length of displays for various electronic advertising and it's also common for sponsors to only have advertising space during certain competitions (eg only for Premier League matches and domestic cup matches and not for Champions League fixtures). Tottenham Hotspur famously used AIA as cup sponsors with HP as league sponsors before the Pan-Asian Insurance group bagged the exclusive deal for the shirts.2

  5. Free tickets/ hospitality – what provisions do the parties want to agree on?
  6. Tunnel, electronic scoreboard, video board, magazines, season ticket books etc – these are all viable spaces for sponsorship that kit sponsors could want to exploit – negotiate them and make it clear what's covered by the agreement.

Consider anti-embarrassment clauses

These are extremely important and almost a necessity in sport's current environment. From a sponsor's perspective, it is important that it is able to protect its brand image from unknown future events.

The perfect case example is the controversies surrounding Tiger Woods. In that situation, sponsors with anti-embarrassment clauses would be able to flex some muscle to avoid their brands falling into disrepute.3 The sponsor should obviously try to keep the clause as broad a possible, what could be considered "embarrassing" or causing "disrepute" can change very quickly and is influenced by press coverage, public perception etc.

An anti-embarrassment clause is slightly distinct from a morality clause (see below) although often both can be dealt with together. Whereas a morality clause is more likely to cut against anybody who makes outspoken or prejudice remarks, an anti-embarrassment clause is often wider and flexible to public perception.

Consider morality clauses

As discussed above, it will provide added protection to sponsors if there are morality clauses in the contract. These would be designed to protect sponsors from actions or comments made by individuals at the club.

From a club's perspective, it should consider the exposure of liability that might arise from such clauses – remember you should be wary of promising something that you can't control (i.e. that individuals won't make derogatory statements about the sponsor).

A word of warning, both morality and anti-embarrassment clauses can be drafted to cut both ways (sometimes called “reverse morality” clauses) – i.e. a club could drop a sponsor if it committed an act that fell within the parameters of a clause. A good example might be the recent emission scandal involving Volkswagen. Although the media attention on this actually concerns the sponsor dropping the club due to a need to cut spending, it is a classic situation which would trigger a morality clause in a sponsorship agreement. For more on morality and reverse morality clauses see Angus Bujalski’s article here.4

Consider wider brand sector partnership:

The club should review other sponsorship agreements – especially with betting/ gambling providers - and ensure that the agreement is consistent with any others and it correctly controls the parameters intended.

Ensure that the role of the sponsor is accurately defined:

Any sponsorship agreement should properly identify the role of the sponsor and the scope of any official designations. Is the sponsor intended to be the official shirt sponsor, the official home shirt sponsor, official away shirt sponsor or official adult shirt sponsor?

Accurate designation of the role that reflects the heads of terms agreed by the parties makes it clear to the club; 'where can we exploit other areas of sponsorship'. From the sponsor's perspective it allows clarity on the scope of the agreement – can another sponsor come in and claim to be the official shirt sponsor or to have rights to the jerseys?

Ensure the sponsor's mark(s) are accurately defined:

In the agreement there should be a clear schedule of the marks intended to be used in sponsorship.

In addition, be sure that there are logo, brand and/or marks usage guidelines for the sponsor's use of the club IPRs and ensure that there are approval rights over all marks used by a sponsor. Do the parties intend group companies of the sponsor to be able to claim that they have rights under the agreement? Be sure to define the appropriate parties with rights under the agreement.

Carve out/ restriction of rights in relation to player/ manager image rights:

From a basic perspective, it is important that the club does not give away rights which it does not own itself such as the image rights of players/managers (which will, under normal circumstances, remain the property of the player/manager, and only be licensed to the club for use on specified terms).

These rights should be "back-to-backed" (i.e. matched up with the terms of) the players/managers respective employment contracts and/or image rights licence in order to ensure that all parties agree on advertising expectations. A starting point is often the number of players appearing in such sponsor's billboard or TV adverts (e.g three players or more are required in the sponsor's billboard or TV advert in order for it not to be considered a personal image right of the player). For more background on image rights see here.5

Consider sponsors rights as regards audio, visual, electronic recordings:

Consider the use and reproduction of the sponsor’s mark in audio, visual, audio-visual, electronic recordings as this ensures brand continuity across all media (especially video games). Specifically, do sponsors want clubs to allow use of marks across all media platforms or have the clubs entered into exclusive arrangements with certain games (eg exclusive arrangement with Pro Evolution Soccer rather than FIFA). Other examples that come to mind include the popular Football Manager game, which has a mixture of clubs, which allows their IP rights to be used.

Consider rights of renegotiation

Consider a right of renegotiation, refund or reduction based on the value of the sponsorship rights being devalued or a change in regulations that affect the value of the arrangement.

In an environment where the money associated with football means that clubs are becoming more competitive, it would be risky to contract with clubs without a right of negotiation, refund/ reduction based on the change in value of the sponsorship rights.

In other words, if a club is relegated or doesn't qualify for Europe or goes into administration, it would have a significant effect on the value of the sponsorship agreement to the sponsor and that should be reflected in the deal.

 

Added considerations when the sponsor is a betting company

Members of the gambling industry lead the Premier League table by number of primary kit sponsors with 6 companies occupying space on the kits of 7 teams. They are: 138.com (Watford), Bet365 (Stoke City), Betway (West Ham), Dafabet (Sunderland), Mansion (Bournemouth and Crystal Palace) and TLC Bet (West Brom). With these betting companies comes additional considerations.

What makes the gambling industry different?

When it comes to advertising there are a number of restrictions on the gambling industry, both legal restrictions and social considerations, each worthy of a legal analysis in their own right.

Understanding these restrictions and factors is important when clubs and betting companies approach the negotiating table. The key additional points to consider are set out below.

Legal restrictions

The Gambling Industry Code for Socially Responsible Advertising contains rules and regulations relating to the sponsorship of British sporting clubs by gambling operators focusing specifically on the advertising of adult-only gambling products.6 Such products must never be targeted at children and clearly this restricts betting companies from becoming named sponsors on children’s replica kits.

The sponsorship falls under the definition of advertising pursuant to s.327(2)(a) of the Gambling Act 2005 and must comply with the industry code for socially responsible advertising which, at paragraph 33, states:

"The advertising of adult-only gambling products or product suppliers should never be targeted at children. This applies equally to sponsorship and this code requires that gambling operators will not allow their logos or other promotional material to appear on any commercial merchandising which is designed for use by children. A clear example of this would be the use of logos on children’s sports shirts which in future would not be permitted under the terms of this code."

Football is a game for all ages, and with children’s replica shirts occupying a significant proportion of the market, this is an area that requires commercial consideration. Do betting companies simply accept that another sponsor may advertise on children’s kit? To what extent can they control who that other sponsor is? Or are there some more creative solutions - such as Dafabet and Aston Villa’s promotion of local charity Acorns (2013/14 and 2014/15 seasons)?7

There are also more recent developments relating to offshore gambling providers that has affected, and could affect, sponsorship partnerships between betting companies and sports clubs. In a letter to sports governing bodies from the Gambling Commission, it was explained that only gambling operators licensed by the Gambling Commission are permitted to advertise to consumers in Great Britain (or provide them with facilities).8

Although the majority of providers will be licensed (especially all those companies who are kit sponsors), it raises an additional hurdle and consideration for emerging betting companies in the Asian market9 who want a slice of the English sponsorship pie, but are yet to be licensed by the Gambling Commission.10 Asian facing giants Dafabet are experienced kit sponsors in the Premier League but there have been instances in recent years of remote gambling operators seeking to exploit perimeter advertising.

Be mindful as well of whether issues arise if a betting sponsorship is implicated in matches played in other EU member states as they may have restrictions on activation and exploitation of such rights within their territory.

Social consideration/audience

Gambling is a regulated activity with an age restriction. It is also considered by some to be a morally objectionable activity, not to mention it is forever associated with the sport’s challenge of controlling match fixing in the modern age.

Keep this in mind - one obvious high profile incident that concerned the social challenges of gambling sponsorship was when Papiss Cissé refused to wear a shirt affiliated with a pay-day loans company (and said that the same applied to gambling companies).11 Richard Scudamore, Chief Executive of the Premier League, famously said in 2014 that it would be impossible for the Premier League to allow a betting company to become the title sponsor (contrast this with The Football League’s deal with SkyBet).12

Such social considerations also can play a part in contractual negotiations and drafting. It might be that clubs and sponsors could negotiate particular CSR efforts focused at supporting these social considerations (e.g. responsible gambling/ anti-match fixing campaigns). One consideration might be for clubs who go on pre/post-season tours to countries where gambling is a particularly sensitive subject.

 

Comment

Certainly on the ground and looking to the future, many of the considerations highlighted above are starting to play a greater role in the contractual negotiations than just the raw numbers.

With the explosion of innovative gambling technology (think in-play sport betting, cash-out etc) available on the average consumer's mobile, the natural connection between sport and gambling is only growing stronger.

Companies in the betting industry are, generally, more liquid than other sectors meaning they are attracted to investing the cash in return for exposure. Where better to obtain such exposure than the world's most watched football league?

With no sign of the appetite of sponsorship deals waning, and an ever increasing number of brands wanting to be involved, it is important to consider these issues when addressing sponsorships in this space.

Hopefully this piece will be helpful in negotiating your agreements - whatever side of the negotiating table you are on.

 

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About the Author

Andrew Crystal

Andrew Crystal

Andy is a Senior Associate in RPC's Commercial Contracts team. His practice includes general commercial and technology contracts and he has particular experience in negotiating sponsorship and endorsement contracts for sports brands, sports retailers and high profile athletes and celebrities. 

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Joshua Charalambous

Joshua Charalambous

Josh is part of the IP/Tech team at RPC and sits within RPC's wider Sports group. Josh has worked on contentious and non-contentious matters involving a number of high profile sports clients including: internationally renowned football clubs, the UK's largest sport retailer, high profile athletes and leading sponsors. Josh has also spent 4 months at a leading insurer listed on NASDAQ and has advised on coverage, defence and policy wordings.

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