As sponsorship has evolved over the last few decades, sports properties and their brand partners are creating more sophisticated agreements.  But, there’s one area in particular that can still be a source of frustration.  Sometimes, it can even end up being a deal breaker.  If you read the title, you’ll know that I’m talking about intellectual property (IP).

It’s one thing to throw a bunch of tickets, media, and signage into a deal.  It can be a different bag of potatoes if you want to include logos, trademarks, and other proprietary this-and-that.  Depending on the property, this can vault the fee substantially.

But, is that jump really quantifiable?  Can the “price” of IP be itemized like a skybox or dasherboard?  The short answer is….not really.

Don’t get me wrong.  All parties recognize that there’s certainly value in using, say, a team’s marks with consumer products or services.  It’s just that this value is essentially subjective.  There’s really no established means of determining how much an intangible asset like this is worth for numerous reasons.  For instance:

• Products and services are marketed differently. Hawking insurance looks nothing like retailing soda.  A one-size-fits-all mechanism invites skepticism.
• Brands activate in different ways, leading to different results. Other variables like team or athlete performance ebb and flow, which affects fan interest and mood.  Moving targets like these offer no consistency for baseline measurement.
• Business priorities vary. Justifying pricing based on one in particular (e.g., sales, awareness/consideration, category protection, etc.) may be unfair for brands who aren’t in it for those reasons.
• Sponsorship category spend ranges widely. Telecom and beverage companies, for instance, are going to receive larger price tags out of the gates in most cases.  Any sort of premium tacked on for IP will be sized accordingly.
• It’s difficult to isolate causality. Sponsorship rarely occurs in a vacuum, so there could be other marketing efforts at play while your metrics jumped during your playoff push.
• Sales metrics can be murky. Yes, studies have shown that fans are more likely to buy from sponsors of their favorite teams or athletes.  How this translates to exact sales figures is vague, though, unless highly-focused measurement programs are in place.
• There are all kinds of wild cards. Markets and fan bases range in size.  Buying habits are diverse.  Standardizing IP pricing against factors like these (and many others) is complicated, to say the least.

You get the idea.  That said, despite these challenges and since both sides typically agree there’s inherent value in marks, properties often choose to assign their own (arbitrary) value.

Most of the time this happens in one of two ways.  The first involves establishing a hard figure:  “Our IP is worth $100k.”  The second is based on a minimum-spend threshold:  “To use our IP, you must spend at least $100k on other things.”

Either way, factors that go into determining these levels include:

• Sport (NFL vs. NHL popularity affects price)
• Pedigree (the Knicks may be scraping the bottom, but they’re still the Knicks)
• Performance (the Cubs’ turn from lovable losers to world champs surged pricing)
• Profile-raising transactions (moving to a new venue or acquiring a star athlete)
• Attendance (the Cowboys are in a postseason slump but still sell out)

It’s not always a matter of justifying fees through hard numbers.  Certain properties, such as the Yankees or Manchester United, are true heavyweights.  They’re so globally established, historically successful, and in demand that they can inflate their fees with a take-it-or-leave-it attitude.

So, how do you find middle ground?  How can you differentiate yourself from the pack of brands ready to blindly pay those premiums and take your place?

Here are a few ways manage the price of IP without breaking your budget or giving properties heartburn:

• Shape your value proposition to show what you can offer them that no one else can.
• Offer to place their marks in locations they otherwise wouldn’t appear without you.
• Restrict use of IP only to places that are important for your activation.
• Obtain only the marks that are relevant to your objectives rather than the full slate.
• Share metrics that demonstrate how your activation will benefit their business.
• Offset pure rights fees by providing value-in-kind products or services.

These techniques can be just as effective for securing other intangible benefits.  Things like category exclusivity and pass-through rights are just as hard to quantify, but obviously have inherent value.

Just keep in mind that sponsorship negotiation is not about “winning.”  The most successful partnerships are the ones that begin with both sides excited about the outcome.  A happy CMO makes your life easier.  A happy partner is incentivized to go above and beyond with added value throughout the life of the deal.  And that, of course, makes you a happy camper.

Considering a new sponsorship deal?  Get in touch so we can discuss the best way to position your business, objectives, and needs for the right package at the right price.