‘2 Wrongs Don’t Make a Right’ 26th September, 2016

Rights holders have generally been perceived as the dominant party within sponsorship contracts, this is because the rights holder unarguably has complete control in the dictation of which brands are granted access in becoming a sponsor or not. This often creates the illusion that rights holders are the dominant party and have the power to terminate contracts if they wish.

However, with the sponsorship market growing more cluttered with a vast array of opportunities now available for brands, sponsorship sales are increasing in difficulty to acquire, therefore, sponsorship revenue is becoming ever more precious for rights holders. As such, the power struggle between rights holders and brands have become considerably more balanced.

Having sponsorship funds retracted can be critically damaging to a rights holder and the hole created as a consequence can often lead to a detrimental knock-on effect. For example, a sports team without this financial security may not be able to buy the desired players, just as a festival may not be able to hire talented musicians for a strong headline act.

There have been countless recent case studies where brands have been the ones to pull the plug on sponsorship deals. A famous example of this is Adidas’ recently terminated sponsorship deal with the IAAF in wake of its doping crisis. The 11-year sponsorship deal with Adidas was set to run until 2019 and was reportedly worth £23m. The projected loss of revenue for the IAAF and its agency Dentsu over the next four years alone is more than £21m, which will undeniably have a long term negative effect on the sport as a whole.

According to an official press release that accompanied the deal announcement in 2008, the partnership between the IAAF and Adidas incorporated “every aspect of athletics, from product creation, to grassroots development”, suggesting that Adidas were committed to this partnership for a multitude of reasons and although the brand was under huge pressure to react to these scandals (and in no way can the actions of certain people at the IAAF be condoned) it could be argued that by pulling its funding, Adidas failed to spot an opportunity to rise above the negative connotations and display its commitment to the next generation of athletics stars instead of tarring them under the same brush as their predecessors.

Recently, Eddie McGuire, Australian Football League’s Director of Collingwood, evoked uproar at the Big Freeze, a charity event to raise awareness for motor neuron disease. McGuire made comments in regards to holding a female reporter, Caroline Wilson, under the water for 50 seconds so that he may donate a large sum of money to the fundraising event.

The public fallout was immediate, the comment was deemed sexist, inappropriate as well as a joke in poor taste. However, rather than Holden (Collingwood’s official sponsor), aborting their position as title sponsor, they took an alternative course of action to maintain their relationship to one of Australia’s biggest football teams.

In the wake of the scandal Holden and Collingwood’s partnership has been “restructured” to drive closer cultural alignment between club and company and ensure championing diversity is just as important as the sport. The restructured contract now consists of more than 50% of Holden’s investment directly funding the Collingwood’s female AFL team and community programs. Holden is now integrated within Collingwood’s diversity programmes, building awareness & ensuring equality continues within the AFL.

The newly demanded restructure of Collingwood’s contract with Holden showcases the importance of responsibility as a public figure and the consequences that follow. A percentage of the Australian public regard Collingwood as fortunate, however Holden have reformed the negative press and attention into a positive programme reimbursing the good nature of its organisation as well as their future ambition.

This case study highlights the importance of partnerships and how mutual benefits should not be so easily terminated, regardless of the situation.