When we seek to identify trends in the sports sponsorship market for 2015 and beyond, two stand out above all others: the continued, and seemingly inexorable, growth of revenues derived from the market; and the utilisation of technology and data by brands to target a new generation of tech-savvy consumers.
Not much needs to be said from a legal perspective about the first of these trends: the numbers speak for themselves. The World Cup in Brazil generated $1.4 billion from sponsorship deals with 20 major companies, a 10 per cent increase from the 2010 World Cup. Global estimates place revenues from sports sponsorship rising to beyond $45 billion by 2016. And taking a yardstick from the UK market, Chelsea’s new shirt deal with the Yokohama Rubber Company is estimated at a value of $60 million per season over five years (more than double the amount paid by Samsung).
It is the latter trend and the way in which brands are proving smarter and more innovative in how they use technology and information to target consumers in their sponsorship activation that poses more interesting questions. As Albie Hecht, former Nickelodeon President and CEO of TV station HLN, puts it: “to capture an audience you have to capture the way they behave”. The means of doing so, and delivering the ability to do so, are in evolution, creating challenges for sponsors and rights holders alike in terms of how this goal can be achieved and what can legitimately be done in its pursuit.
THE VALUE OF DATA
The package of rights offered by rights holders has traditionally been, and to some extent still is, a linear and tangible ‘menu’ of deliverables. Formula One led the way with its on-car branding as a means of catching eyeballs, supported by a money-can’t-buy hospitality programme allowing sponsors access to unrivalled client/contact entertainment and networking opportunities (as well as the ability for a motorsports mad CEO to indulge his passion).
It's trite to say that the development of broadcast channels and digital media have transformed the way in which eyeballs can be caught, but it is nonetheless critical to understanding where sponsorship is now and where it will head. Rather than passively engaging with audiences, brands want to use the package of rights on offer to engage actively with consumers through new technologies. As such, access to a rights holder’s databases is key so that sponsors can specifically target relevant content at each customer group and social media platform in a personal way.
Real Madrid has over 15m followers on Twitter and Cristiano Ronaldo alone over 34m (just beating JLo to 13th in the Twitter rankings). Despite countless examples of sporting personalities (Mo names mentioned) and organisations using social media to their own detriment through ‘Twitter spats’ and the like, the value of access to such a following is of huge commercial potential. Recent examples of sponsorship deals have shown that the potential for sponsors to have access to systems through which they can make highly targeted marketing campaigns is a key driver. Back in 2012, it was suggested that the potential value associated with Arsenal’s revamped Customer Relationship Management system gave impetus to the renewal of the club’s partnership with Emirates.
DATA PROTECTION ISSUES
What then are the legal pitfalls awaiting rights holders and sponsors? Certainly, each must tread carefully with regard to compliance with their responsibilities as Data Controllers or Data Processors under the Data Protection Act 1998 (DPA). Getting this wrong could mean a fine from the Information Commissioner, which could be particularly significant under the incoming EU General Data Protection Regulation which is likely to come into force in the next few years. Under the draft proposed by the EU Parliament, Data Controllers or Data Processors in breach of the Regulation could be faced with fines up to 5% of annual worldwide turnover or €100m, whichever is the greater.
The relevant Personal Data in question are likely to be names, addresses (digital and physical), and other identifying features such as individuals’ interests. Take the right for a sponsor to run a targeted promotion for one of its product lines whereby ticket holders for a football match (who have provided their details to the football club in the first instance at the point of purchase) are offered the chance to enter a sponsor-backed competition to meet certain players after the game in return for buying said product. This is common enough and requires the communication of that promotion to the ticket holders by using their email addresses and names. In this scenario, there are a number of obligations imposed on the Data Controller under the DPA (note the 8 principles in particular), including the following:
- Personal Data must be processed “fairly and lawfully”. The key point here is that individuals need to provide consent to the ways in which their Personal Data are used. Rights holders should aim to obtain consent from individuals, when they collect their data, to share their information with (limited and carefully selected) third parties, including sponsors, for marketing purposes in order to maximise the potential value of their data. In our experience, most rights holders do this well, but the clarity of the opt-ins / opt-outs could sometimes be improved and we have encountered issues relating to older customer databases which do not have the necessary consents; and
- the rights holder is required to have a contract with the third party governing the transfer of Personal Data. This contract should set out that the third party will only process the relevant Personal Data in accordance with instructions from the Data Controller. This will typically sit in the sponsorship agreement which will, therefore, need to include clear drafting on the rights and responsibilities of the sponsor in its use of data.
While the obligations above most obviously bite on the rights holder as Data Controller, brands should remain alert to the limitations under data protection and marketing laws on their activation plans. Brands may collect data themselves through their marketing activities – for example, a hyperlink from an event website to the sponsor’s site for a promotion may lead to users submitting their details for the first time to the sponsor. In this scenario, the brand will be the Data Controller and therefore subject to the requirements of the DPA imposed on Data Controllers.
There may also be marketing activity where it is less easy to discern which party controls the data. Joint initiatives, such as the release of a title sponsor branded mobile app for a Tournament (an Aegon Championships app for the annual tennis tournament at Queen’s, by way of hypothetical example), demand clarity in user terms and conditions as to who is the chief operator of the app and, therefore, Data Controller and who is entitled to use the information collected. A member of the public may well only see the name Aegon and not consider that the LTA may also wish to contact them, whereas contrarily between Aegon and the LTA it might be clearly understood that the LTA owns the app and data collected through it.
Clear and transparent mobile app terms are particularly important from a privacy perspective in light of recent attention given to the area by regulators in a number of countries. Practical advice can be drawn from the Information Commissioner’s Office and the Article 29 Data Protection Working Party (the European advisory body on data protection and privacy), such as ensuring that end-users are provided with clear information in plain language about their privacy rights, and empowering consumers to manage their privacy preferences in real time.
Monitoring marketing practices is on the Information Commissioner’s agenda, and from 6 April 2015, the threshold for tackling unsolicited marketing was lowered. Individuals will no longer need to prove that they have suffered “substantial damage and distress” from unsolicited direct marketing in order for the Information Commissioner to take action. If a rights holder is to give rights to a sponsor to target individuals within its databases directly, they will need to be able to rely on the fact that the sponsor will only do so in accordance with their instructions. And likewise the sponsor will need to ensure that it acts appropriately.
These data protection challenges are inexorably linked to technological development. Having an increased number of means by which data can be collected and marketing messages distributed is a double-edged sword in that it offers enhanced opportunity for consumer engagement, but demands increased alertness to data protection requirements. We are witnessing the advent of connected stadia, such as the Barclays Center in Brooklyn (transformed by Cisco’s “Connected Sports and Entertainment Solution”) and the Levi’s Stadium (home to the San Francisco 49ers) where use of wireless beacons offers Bluetooth connectivity to the fans. The possibility of pushing sponsor messages to a 49ers fan’s smartwatch at half time directing him or her to the nearest beer vendor in the Levi’s Stadium is now an achievable reality.
If all of the above makes the modern day sports marketer’s job seem like a minefield, it need not be. It is evident that the opportunities afforded by technological development and the use of data can be overwhelmingly positive for rights holders and brands alike. Embracing the value of data is an attractive option for all concerned and we will see it continuing to be put to effect to maximise the commercial revenues of rights holders and sponsors’ returns on investment.
From a rights holder perspective, it can broaden its portfolio of rights and use data to ensure that it has a detailed understanding of the market position and its appeal to brands. Harlequins have been outspoken about the fact that having a deep understanding of its customer base means that partners can be accurately and appropriately targeted. Such an understanding ultimately puts rights holders in a strong position to frame and negotiate more lucrative sponsorship deals, given that they can offer highly tailored rights packages backed up by information on the various customer groups to which they have access.
From the perspective of the legal draftsman, we would suggest that flexibility is required to allow the contract to flex and adapt to deliver the benefits of new technologies to each party. It is impossible to see the future, but consider including language such that analogous technological means of delivering a right (for example, LED perimeter advertising boards (cfstatic boards), mobile apps (cf mobile optimised websites)) can be accommodated and, if you are acting for the brand, seek to negotiate at least a first option to discuss use of new rights that may become available due to new technology.
Finally, don’t fear the data protection regime. Compliance is important, particularly in light of increased fine issuing powers available to the Information Commissioner, but the principles of the DPA are common sense. Clarity and transparency as to how, and by whom, data will be used are key and can be easily achieved with the use of the correct contractual and consumer facing language.