Sport no longer a playground for sponsors
October 9, 2005
By Ingrid Salgado
The competition tribunal was not the only setting for clashes between South Africa's liquid fuel producers this week.
In the world of motorsport, petrochemicals group Sasol and oil multinational Total bickered over sponsorship rights to a rally in Limpopo.
The wrangle highlights the tensions that arise from cross-sponsoring in sport, and could be a sign of quarrels to come as South Africa's R3.5 billion sponsorship industry prepares for the 2010 soccer World Cup.
It also harks back to the soft-drink war of the 2003 cricket World Cup in South Africa, when a spectator was escorted from Centurion Park for opening a can of Coca-Cola, thereby ignoring the terms of a sponsorship contract between Pepsi and the International Cricket Council (ICC).
Attempts by rival firms to undercut major sponsors with promotional gimmicks, or to associate themselves with sponsored events or teams without paying, are known as ambush marketing.
The Sasol-Total saga is trickier to label as it involves two legitimate motorsport sponsors. If it is an ambush, exactly who is ambushing whom?
The spat became public last week when Total, citing alleged "bullying tactics" by Sasol and Motorsport South Africa, announced the withdrawal of its sponsorship of the upcoming Limpopo Rally, the last of eight events in the 2005 National Rally Championship.
Motor racing, along with football, rugby, cricket and golf, is one of South Africa's top five sports codes in terms of sponsorship spend, but sponsorship of motorsport is extremely diluted between events, series and riders.
Sasol Oil earlier this year signed a title sponsorship deal with Motorsport SA, earning the naming rights for the National Rally Championship. Unconfirmed reports put the group's annual payment to Motorsport SA at about R500 000.
In addition, the motor clubs that stage the rallies organise their own sponsors. This year's event sponsors include Hitachi, Toyota dealers in Cape Town, Sasol, Volkswagen South Africa, Osram and Subaru.
Andries van der Walt, Total's motorsport manager, says the French oil multinational was told it would have to share certain rights with Sasol during the Limpopo rally, including branding at the start-finish venue and logos on various publications.
"They could put up branding anywhere. In other words, they had about the same rights as the event sponsor," says Van der Walt.
This irked Total, not least because, for a relatively small upfront fee, Sasol had secured branding rights for eight events. By comparison, says Van der Walt, each event costs between a few hundred thousand rand and more than R1 million to stage.
The final straw came when Total was informed that the event could not be named the Total Limpopo Rally, due to an agreement with Sasol that no other fuel company could have naming rights for any championship event. The organising body instead wanted the rally to be known as the "Limpopo Rally presented by Total".
Van der Walt claims Motorsport SA revoked an earlier permit naming it the Total Limpopo Rally. "I wrote back and said 'under no circumstances'. From a marketing point of view, I'm wasting my money. The newspapers won't use Total," he says.
Motorsport SA says that, in order to safeguard the rights and interests of the overall series sponsor (Sasol), the organising club (Pretoria Motor Club), competitors and Total, it issued a substitute permit reflecting the altered name of the event.
It says Total would have been entitled to display branding and promotional material on the event, thus deriving benefit from their sponsorship.
Sasol says: "The matter regarding Total and Motorsport SA is between these two parties and has no bearing on Sasol as a title sponsor."
Van der Walt disagrees: "The role of Sasol is not to be underestimated in this obvious and transparent attempt to get rid of Total as a sponsor of national rallies."
Of the R125 million a year Sasol spends on sponsorship and corporate social investment, R60 million goes to sports sponsorships, mainly rugby (as official sponsor of the Springboks, among other teams), football and motorsport.
On the group's general approach to cross-sponsorship, Sasol spokesperson Elton Fortuin says it always seeks the naming rights to events or teams it sponsors, as well as the majority of marketing rights. If there is a co-sponsor, Sasol insists on category exclusivity, but this is waived in the case of motorsport because there are numerous sponsors of events, teams and individuals.
David Sidenberg, the head of strategy at BMI Sport Info, a sport and sponsorship research company, says neither Sasol nor Total is in the wrong.
Although not wishing to be drawn into the case, he says that in general the rights holder "has the holy grail" and has to deliver on those rights.
"Each sponsor or affiliate should be placed on notice in its contract of the specific rights granted to all other sponsors and affiliates. In this way, each field for which exclusivity is sought is defined so that the most frustrating of all types of ambush scenarios - where one bona fide sponsor ambushes another - can be effectively avoided," he says.
Sidenberg believes that sports rights holders have to respond by not only protecting their existing rights deals, but also by creating packages that offer real value to future sponsors, media partners and consumers. The onus thus shifts back to rights holders to provide convincing facts and figures of the potential worth of their offering to sponsors.
Alastair McArthur, the chief executive of Mr Price, a major sponsor of athletics and rugby, including the Sharks, says: "We don't like cross-sponsorship because it can cause degrees of hijacking."
It is for this reason that Mr Price will not get involved in sponsoring events like the 2010 soccer World Cup, opting instead to sponsor sports teams and individuals (about 10 000 athletes run in Mr Price colours).
"My personal opinion is that there are so many sponsors, eventually you're not sure who's behind it," he says of the major sports events. "We prefer the real live athletes or soccer players or rugby players."
Even in the case of the Sharks, McArthur says, the KwaZulu-Natal rugby union has different sponsors for drinks, cars, airlines, and so on.
"It's something we live with," he shrugs. "But you really need a professionally run organisation to protect you from co-sponsors. Otherwise you get confused branding."
Standard Bank has encountered cross-sponsorship issues in football. It is the official banking partner to top clubs Kaizer Chiefs and Orlando Pirates, among a host of sponsors, suppliers and partners.
Kate Johns, the bank's public relations manager for sponsorships, says: "Standard Bank has specifically chosen to link itself to these two teams on the basis of our core business - banking - and we believe that the exclusivity that this affords us limits any problems that could arise through potential cross-sponsorship."
For example, she says, Chiefs and Pirates both compete in an annual football tournament sponsored by another banking group. Their association with the bank has no bearing on their involvement, participation or performance in the tournament.
"The distinction is clear that Standard Bank has certain rights to the teams, as their official banking partner, while the other sponsor has the exclusive rights to market, leverage and engage consumers around the event itself," says Johns.
In cricket, the bank's strategy to deal with cross-sponsorship is simple: it is the sole sponsor of all international and domestic limited-overs cricket-related activities.
"This means that we own all eventing activity, branding and associated marketing outputs around the cricket properties that we sponsor," says Johns.
But exclusivity doesn't come cheap. Standard Bank forked out R106 million for its limited-overs cricket sponsorship over three years.
"It's becoming so expensive to ensure exclusivity for yourself including, for example, mobile content rights," says Brand de Villiers, the managing director of Sail, the sponsorship, sport and entertainment company. "It's a whole new ball game. It's getting crazy."
UK-based Orange TV is bringing the ICC Super Series clash between Australia and a World XI to cellphone users with live coverage of the cricket games. It is the latest commercial application in the convergence of sport and technology. BMI, however, expects television to continue to provide most sports rights holders with their largest media income, at least in the short to medium term.
De Villiers attributes shortcomings in sponsorship arrangements to an "expectancy gap" between parties.
"Sponsors want as much mileage as possible. Rights holders want their money as soon as possible."
The way to resolve issues around cross-sponsorship is to ringfence sponsors' rights, thus ensuring they are not sold to others, he believes.
It is this aspect that has some event sponsors of motorsport on guard. One sponsor, which declines to be named, says it appears that Motorsport SA did not inform motor clubs or long-standing sponsors of aspects of the Sasol deal.
"Other sponsors are worried because it could be them next year," he says.
According to Sasol, certain sports administration bodies need "significant improvement" to ensure the sporting disciplines they represent have sufficient corporate governance practices and administration procedures in place.
In the case of cash-strapped smaller sports codes and events, the margin for error when negotiating contracts is larger, partly because many of the organising bodies are staffed by volunteers, and partly because, in desperation, they all too often take the first offer they get.
Although more than 80 sporting codes receive some form of sponsorship, about 60 percent of sponsorship spend accrues to the top five codes.
"The rights holder tends to look short term because they need the money, without looking through their entire needs analysis," says Sidenberg.
In the case of football, the opposite applies. Sponsors are coughing up fees that Sidenberg reckons are difficult to justify in the belief that the benefits will flow through to them in 2010.
MTN, which recently paid $12 million (R78 million) to become the title sponsor of the CAF Champions League and the Africa Cup of Nations, says that football continues to serve as the best platform to deliver access to the mass market. But this has led to "sponsorship clutter" in football.
"While this is good for football, it poses challenges to corporate sponsors," says Victor Rakhale, MTN's senior manager for sponsorship. "There is perhaps a need for football administrators to relook at how football sponsorships are packaged."
Rakhale expects the 2010 soccer World Cup to enable football to grab a bigger slice of corporate sponsorship spend.
According to BMI, future growth trends in local sponsorship look "particularly bright" as South Africa heads towards 2010, when it hosts the biggest sport event. Looking back, growth in the domestic sponsorship market far outstripped global growth trends between 1994 and 2004, averaging 19.4 percent a year.
"Companies are finally realising that sponsorship is no longer just chairman's folly," says Sidenberg.
A word of caution for sponsors comes from SABMiller, whose Castle Lager brand sponsors the national cricket, rugby and soccer teams, as well as test cricket and premier league and third division soccer in deals worth more than R80 million.
The brewery says the only benefit sponsorship brings is exposure. The rest depends on how rights can be further leveraged for business benefit. "Deriving maximum value from sponsorships is really up to the sponsoring company and how professional it is at extracting full value," says spokesperson Michael Farr.
At a glance
More than 1 000 South African companies are involved in sport sponsorships.
The top 10 companies account for as much as 50 percent of direct sponsorship spend.
Direct sponsorship deals in South Africa rose from R63 million in 1985 to R1.9 billion in 2004.
The Merchandise Marks Amendment Act of 2002 sets down lengthy jail terms for directors of companies that engage in ambush marketing for designated events in South Africa.
Since Sasol announced a three-year R120 million deal to sponsor South African Rugby last September, it has received R62 million worth of exposure.
Sport attracts 80 percent of all deals in the global sponsorship industry, up from 68 percent in 2001. A projected shift to corporate social investment activities has not materialised, although "lifestyle" sponsorships of events such as music festivals are growing strongly.
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