Clutter or good business?
It’s a question being bandied around the (virtual) sports business water cooler these days, with recent and upcoming changes to the sports sponsorship landscape. We are about to find out the answer.
In recent days, the NHL approved allowing teams to sell a 3-inch by 3.5-inch sweater patch beginning with the 2022-23 season, a natural progression after allowing helmet ads last year to the tune of $100 million. This follows four successful seasons of the NBA’s jersey patch program.
Meanwhile, the NBA has joined the NFL in the sales of practice jersey sponsorships.
Even the typically more conservative MLB is allowing brands to appear on the field, such as the TV-visible part of the pitchers mound and on umpires. When we saw the Nike Swoosh added to all jerseys last season, and then partner with cryptocurrency company FTX on umpires uniforms this Summer, you knew that the time had come.
1) We're really excited to partner with @MLB!
FTX is now the official crypto sponsor of Major League Baseball.https://t.co/QngD1flayG
— SBF (@SBF_FTX) June 23, 2021
The question remains…Is it too much?
“I don’t see much complaining other than from some media types,” noted longtime sports marketing executive Chris Lencheski, a professor at Columbia University and CEO at Winning Streak Sports. “Just to get this point on size, shape, placement, there is lots of testing done to see both value and fan acceptance, and if you look at the dollars and the brands being involved, I would say the tests have been passed.”
The NBA patch program continues to be the model — for both fan tolerance and brand value — especially now as a host of teams have entered their second round of patch partnerships, some with renewals, and some with dollars rising and new partners coming into the fold.
The uniform patch started with the 2017-18 NBA season, coinciding with Nike becoming the league’s uniform and apparel maker. Along with the Swoosh appearing on the front right shoulder of player uniforms for the first time in league history, brands were allowed to buy the space on a player’s left shoulder.
“It was the right time for a pilot program,” explains Michael Myers, CEO of The Sports Marketer. “You’re introducing the Swoosh, an iconic and intrinsic brand, on the front right…let’s see if the front left will fly with fans, simultaneously. It did.”
New type of inventory brings a new type of partner
“I see jersey patches as the new naming rights deal,” Myers continues. “For one, they’re a great way to announce your presence: big splash appeal. And two, naming rights deals were so often done with ‘media inclusion’ in mind. ‘Last night at Barclay’s Center’ or ‘You’re looking live at Chase Field.’ Well, if it’s media you’re looking for, what hits pupils more efficiently than putting your name on the thing the cameras follow all game long?”
While traditional sports partners, such as GEICO (Wizards), Goodyear (Cavaliers) and FedEx (Grizzlies) were quick to adopt patch deals, the new type of inventory has acted as a gateway for a new crop of brands.
These new partners, ranging from Bumble with the Clippers and Wish with the Lakers, to Infor with the Nets and Sharecare with the Hawks, are organizations with the necessary multimillion-dollar budgets, while also looking for a unique and buzz-worthy entrance point into the über high-priced world of NBA sponsorships.
Squarespace took the Knicks patch and immediately expanded it into a building-wide deal at Madison Square Garden to storytell around their technology; while Rakuten, who had already spent considerable dollars on kit sponsorships with FC Barcelona, used their deal with the Warriors as an inflection point to introduce their company to the U.S. marketplace.
Financial boon for teams; Solid value for sponsors
For NBA teams, the patch ramp-up brought in roughly $150 million across the league, a strong incremental revenue gain via literally new territory. Now the key is to keep that revenue growing, while not cannibalizing other partnership dollars, such as venue naming rights.
How does the patch fit into the sponsorship landscape? According to MVP Index, each day during the NBA season, the league and its teams create more than $42.5 million of exposure value for brand partners via broadcast ($34.2 million) and social ($8.3 million) content.
On average, $147,619 of value (4 percent of the broadcast total) is derived from jersey patch exposure per match-up, providing sponsors 6m 33s of time on screen every game. That’s time and visibility literally not seen before, and it grows with the expansion of streaming rights each year.
With the visibility comes rising sponsor dollars.
How have they been received by the brands?
Overall, it has been positive. Bumble (Clippers), Infor (Nets) and Harley (Bucks) all declined to renew their patch deals, with the larger asking prices proving too much. However, they were all relatively quickly replaced by tech company Honey in L.A., while the Pacers‘ patch holder, Motorola, loved what they were getting in Indianapolis so much, that the company snapped up both the Bucks and Nets jersey assets, becoming the only brand with multiple team patches.
More brands who had not spent large sums in sports sponsorship previously, such as crypto and fintech companies, are entering the space through patches.
Just last month, we saw the Portland Trail Blazers ink StormX as the first cryptocurrency patch sponsor, while fintech company Credit Karma grabbed the Houston Rockets available jersey real estate to launch their new Credit Karma Money product.
Up next, you have expiring deals coming in cities like Philadelphia, where the Sixers announced that StubHub would not return on their jersey, making that young and exiting team another candidate for a high-priced brand addition that ups the portfolio.
Different approach in D.C.
A different, more cumulative approach is also going on in Washington, D.C., where Monumental Sports & Entertainment’s Jim Van Stone told CNBC that the organization is going into the market with not one, but four jersey sponsorships from all four MSE “pillars” — the NBA Wizards, WNBA Mystics, G League Go-Go’s and NBA 2K League Wizards District Gaming — after the organization chose to reconfigure their previous deal with GEICO.
This unique, “unified offer,” eliminates any off-season and can reach Millennials through NBA 2K (and the NBA), the growing audience of “The W,” the innovative audience of the G League and the traditional NBA consumer in a global capital like Washington. Several sources we spoke with look for the package to be valued in the $10-$12 million range annually, and will almost certainly attract new dollar flow in expanding categories, rather than the traditional, well-evaluated brands.
“We think it’s a global opportunity,” Van Stone told CNBC’s Jabari Young. “We feel good about the package and what we can bring together for the right partner…[W]e’re optimistic that we can move quickly on it, but if we go slightly into the season to find the right partner, I think we’re fine with that.”
Sweater sweeter sponsored?
The NHL’s dive into the patch pool will undoubtedly take its cues from the NBA’s success of these past few years, but will ideally find its own brand storytelling, much like we saw with helmet sponsors.
Given hockey’s unique fan base, don’t look for teams with crossover ownership — think Knicks-Rangers, Nuggets-Avalanche, Sixers-Devils or the aforementioned MSE adding the Capitals to their basketball offering — to go out with deals that could cover the entire marketplace.
“It could happen, but the brands are very distinctive and you never want to homogenize your product to their fan bases,” Lencheski added. “What Monumental has done with a year-round basketball-specific package makes sense, but do you roll the Capitals into that as well? You are probably leaving dollars, and yet another new partner who is enamored with the value of what the organization has built just with the Caps and their success on and off the ice, on the sidelines, and that doesn’t make sense.”
Will NHL teams see the same type of dollars as their NBA counterparts?
“The top-tier NHL clubs—’top-tier’ meaning a combination of current or historically strong on-ice performance, well-known heritage and/or playing in large markets—will likely bring in more than some of the low-end NBA team deals,” asserts Jason Miller, SVP & Head, Properties at Excel Sports Management, who has handled NBA patch deals for the Bulls (Zenni), Celtics (Vistaprint), Hornets (LendingTree) and Rockets (ROKit Phones) and is currently working with both the Sixers and Timberwolves to secure new partners in advance of the the upcoming NBA season.
And like any good partnership, Miller explains, a key for teams is to stay far, far away from thinking about simply slapping a logo on the sweater, but instead intertwining team and sponsor brands and messaging.
“The NHL is so distinctive, so steeped in tradition, it’s incumbent on teams to tell their story, to share their history and find the right match,” Miller notes.
The trick, as always in selling, is not only finding the right match, but the right pricing as well. Unlike with the NBA patch being the first “on player” asset, the NHL already has helmet logos which may dampen value a bit.
That said, Miller is aware of NHL clubs hitting the market with a $7 million annual asking price. That would put them at the higher end of the NBA’s scale.
Where are we headed?
Regardless of the league or patch size, the incremental value of patches is here to stay. The question becomes how much will fans accept and brands see as value for ROI.
“You won’t get to NASCAR-like coverage, or even what we see in global football,” Lencheski concluded. “But the teams know that there is money to be had, and very targeted measurement to prove value, so selective, exclusive and valuable will rule the day.”
Professional sports leagues are in the business of, among other things, providing a voice for brands, and increasing revenue.
And right now…business is good.