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Insights

01 May 2020

Drive (Virtually) to Survive and Thrive? – Innovative use of endorsement deals in challenging times

Introduction

With the cancellation or postponement of so many sporting events since the outbreak of Covid-19 and the governmental responses to it, many brands and sponsors are understandably concerned about the ways to maximise the benefit or limit the exposure of any existing agreements in place with endorsed athletes. What, then, are the options available to brands?

Termination or postponement of agreements

Understandably, the Covid-19 pandemic has seen brands’ marketing budgets frozen or slashed. Brands have been quick to seek ways to protect themselves financially. The effects of Covid-19 disruption on commercial agreements (force majeure provisions, frustration, compensation and termination clauses etc.) have been discussed at length in many articles recently - here and in the sporting context specifically here.

Other commercial options available to brands include seeking to “pause or defer” agreements. This can be useful in situations where endorsement periods are tied to specific events which have themselves been postponed. It is unlikely that the contract itself will provide for such postponement, however sensible commercial discussions could lead to the parties entering into amendments that are mutually agreeable.

Innovative Use of Ambassadors

“Repurposing” of Ambassadors – An interesting development in the world without live sport has been the increased popularity and exposure of esports and gaming equivalents – a prime example being in motor racing. Faced with a lack of “real” races, Formula One (as well as independent esports and virtual racing organisations) have held virtual grands prix on the dates of the postponed or cancelled races. A unique element that these new virtual races bring is the ability for pro gamers, real world racers and enthusiastic celebrities to compete against each other.

Certain brands already involved in the space have seemingly utilised image rights and personal appearance inventory from ambassadors in other areas for the purposes of cross-pollination of fan bases. Red Bull - the energy drink manufacturer and Formula One team - decided to include Ben Stokes, cricketer and Red Bull ambassador, as a one of its participants in the virtual Australian Grand Prix. Likewise, DP World - a sponsor of both the Renault F1 team and golfer Ian Poulter - organised for Poulter to take one of the Renault seats in the virtual Bahrain Grand Prix.

These brands may well be using pre-existing personal appearance day rights previously earmarked for filming or meet and greets for these gaming events. By using existing ambassadors, these brands have the comfort of the contractual protections in place for more traditional uses and also already have the image rights that can allow them to amplify the appearance post the event.

These crossover events can serve a number of purposes:

  • the use of stars helps promote the virtual races themselves (and indeed the brands who sponsor or operate motor racing teams) by giving the events a novel and interesting feel;
  • it can expose fans of other sports (cricket or gold in the above instances) to motor racing and reciprocally introduces motor racing fans to these personalities from other sports;
  • having an esports version of a traditional sport brings a new (younger) gaming audience to that traditional sport; and
  • it also introduces fans of the traditional version of a sport to the gaming version as they seek to fill the void left by postponed and cancelled fixtures, events and races.

Innovative Social Media Use – It is common for endorsement agreements to include social media rights for brands and obligations on ambassadors to post content. These rights have become increasingly important with ambassadors at home with plenty of time to create their own content. This lockdown has also provided brands with a great opportunity to experiment with new and innovative forms of digital activation. These rights do carry with them certain risks due to the lack of control the company will have over the content. Sponsors can protect themselves and amplify the effectiveness and reach of the social media content by:

  • having an effective yet flexible consent/approval process for social media posts. This, alongside doing proper due diligence (to ensure that their current social media content fits with the brand ethos) prior to engaging the ambassador, can allow for more effective endorsement;
  • ensuring ASA and CMA compliance by making sure that “paid-for” content is clearly identified as such;
  • insisting on receiving whitelisting, re-posting and removal/editing rights; and
  • having brand guidelines in place.

Conclusion

In the grand scheme of the Covid-19 pandemic, these small novelties are just that – novelties. But whether it is watching Ian Poulter “crash” his car whilst being interviewed during a virtual race or attempting Simone Biles’ handstand challenge, these moments offer the opportunity to engage an audience which goes beyond the traditional target demographic. What we can see is that both sport and brands do have the ability thrive in lockdown, provided they are able to recognise the need to adapt and respond accordingly.

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