UP461 Are You Advising or Selling? Conflict of Interest in the Sponsorship Industry

New research from The Gemba Group suggests a credibility problem for the sports sponsorship industry arising when agencies both advise brands on sponsorship opportunities and sell rights for those same properties, leading to potentially biased recommendations. 

The discussion highlights the increasing involvement of procurement departments, the need for greater transparency and better analytical tools, and the importance of long-term, sustainable relationships between brands and rights holders. 

Our guests view these issues as crucial for sponsorship to continue growing as a vital revenue stream for sports organizations. 

Guests:

Rob Mills, Global CEO, Gemba

Claire Kelly, Managing Director of Europe and Middle East, Gemba.

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Transcript

0:00

Hi there. It's Richard Gillis here and welcome to Unofficial Partner, the Sports Business Podcast. Today we're asking a big question of the sponsorship marketplace for sport. I guess the question is, are you advising or are you selling? Can you do both? Are you being paid a commission to give the advice that you do to your clients? And does this impact the sorts of decisions that get made about who sponsors what in 2025? The question arises from research by gemba, which has recently integrated turnstile into its sponsorship practice. Ember's. Survey suggested. 42% of their respondents taken from the brand side, clients and sponsors of sport. Said that there was a conflict of interest amongst sports marketing sponsorship agencies, and. That was a significant issue in the transaction process around about the same number. Think that that issue impacts the credibility of sponsorship as a marketing platform amongst the brand community. So powerful stuff. And to help answer the question, we've got two visitors from Gemba, Rob Mills, the Global Chief Executive, and Claire Kelly, a regular. Contributor to Unofficial Partner who is managing director of Gemba Europe and Middle East. If you're listening to this, you'll also like the Unofficial Partner Substack newsletter, which goes out to subscribers every Thursday. If you want to join them, sign up either via unofficialpartner. com or go to Substack and search for Unofficial Partner.

Richard: 1:36

Is quite exciting getting you both together. It's quite hard to get you two in the same room.

Rob: 1:39

Yes. never come on because she's worried I'm gonna drag her ratings down.

Richard: 1:43

I know it's like, you know, we've is true. So net, the Netflix one and then there was the, Tesco one. It's always in the top 10. Claire, you

Claire: 1:52

dunno. was preach off to that.

Richard: 1:54

keep meals out. That's the headline.

Rob: 1:55

her, her rationale basically is if it stays in the top 10, that's because of her. And if it doesn't, it's because of me.

Richard: 2:02

You've got, you've got everything to lose here.

Rob: 2:04

It would appear that way.

Richard: 2:07

Right. We've got the headline of, a credibility problem for the sponsorship model. I love this. I love a credibility problem already. You have me a credibility problem. and so you've done, you've been talking as to the, to the industry, a survey. Just set it up for us. There's a bit of research, but within this, I think the juiciest bit is the phrase conflict of interest. And we will get to that in due time. But just set it up for us. What's happening.

Rob: 2:33

Yeah, I think probably a couple of things. We both, um, went to Monaco to sport L as you did last year, and I think there was that realization that there is no easy fix to broadcast. You know, the big will get bigger and if you're a second or third year sport, you may hold that revenue or it may decline. And I

Richard: 2:51

I.

Rob: 2:51

so we sort of came outta that. With a really sort of strong assertion that sponsorship's gonna probably need to pick up some of that slack. Um, started thinking about, well, what are the things that sponsorship needs to do to, to grow? Um, and, and which, which we'll touch on a little bit later on. And I think at the same time we are seeing increased procurement involvement as well with sponsorship. I mean, um, we are now getting directly engaged by procurement departments. There's a lot more governance around sponsorship now, so it was just probably an opportunity to sort of take a step back and go, okay, what, what is going on with sponsorship and what are some of those inhibitors does that would stop sponsorship reaching its full potential? And obviously, you know, there's always been this conflict of interest issue that's been kicking around the industry. So we thought let's just go and talk to, to the people that are making those decisions and get a sort of sense from them about what do they think? Is it an issue? Why is it an issue? What, what needs to happen to sort of change it? And that was sort of the catalyst to, to do that survey.

Richard: 3:42

What is the conflict of interest that we're talking? Let's, let's sort of just identify what that is to begin with and then we can sort of move on from there.

Rob: 3:49

Yeah, I think, and I think we, you know, there's real and perceived isn't there? And I think obviously there's, there's very strong perceptions out in the industry. I think our contention is that probably as, as there's more governance, um, and procurement focus in sponsorship, there's probably a bit more of a light being shined on situations where a An agency is actually providing advice to someone of a brand about where they sponsor and also selling rights. where we see that manifesting itself is if a brand has been told by an agency to that they wanna sponsor a particular, property, that agency then has to go to the rights holder and, and get a commission deal. Now, if that rights holder says, no, I don't wanna do that commission deal, or I want you to split the commission, what we're then seeing is examples of where that advice is changing. in the end, the brand's not necessarily getting the optimal property. Um, and the rights holder also is missing out there as well. And the, the, I suppose the concern we have with that is that there's been more focus on that from procurement. and it's not good for brands because they're not necessarily getting the best advice and it's actually not good for rights holders'cause they're not actually getting relationships that are sustainable as well. They're getting more sort of short term, um, tactical, fixes rather than long-term relationships. So we're seeing examples there. we're also seeing examples where it's sort of not in the interest sometimes for a relationship to be renewed because there's no commission in a renewal. So there's an encouragement sometimes to change your property and again. You know, what rights holders want is really long term, you know, relationships that they're building on. And we're seeing examples in the industry where we're churning more as well. And it's a fact and it doesn't happen every time. And it, and we're not necessarily saying that every deal is impacted by that, but I think what that survey tells us that, you know, roughly 40% of people who are pretty heavily involved in sponsorship decisions are getting concerned about that credibility and that that potential conflict of interest.

Richard: 5:42

What do you think? Just bring you in? This is really interesting'cause I, I think everyone who's listening who's had anything to do with the sponsorship industry knows this is a real question. So there's no issue in terms of, no, this isn't happening. We know it's happening, we know it's always happening. And I, I guess you get to the point of why it happens and how it shapes decisions. I think ultimately we'll talk about how it impacts on what gets sponsored and what doesn't. I guess there's, there's, there's something in there in terms of, of how this works, but has it always been the case, I guess? And we are now just where we are because that's just how things have always been done.

Claire: 6:16

Yeah, I mean, I've not worked in sponsorship as long as, as Rob has. Obviously ember's

Richard: 6:21

Who has.

Claire: 6:22

in sponsorship for, for 20 years. I've come out the industry in the last sort of 7, 2, 8. And I think one of the things that, um, sort of been true years ago, and it is now, is that it is possible to, to get to an independent, advice position, which is fact-based and is actually driving money back through sport and entertainment, rather than sort of taking that commission led model.

Richard: 6:47

You've got these two, two areas that I think you've got the sort of sponsorship agency or sports marketing agency who is taking on either taking fees from both sides or. You know, there is a portfolio that they're representing on one side, and then they're presenting to brand clients on the other. So there's a sort of, there's an inside sports marketing conflict within that. And then there's another one, which is when you get into a sort of networked agency, a bigger agency, where you've got a media agency attached to a sponsorship agency, quite often the example, what I always say is, you know, remember the, the client wanted to get into cricket. Do you do an ECB deal or do you go with Sky? And obviously the number that you get from the Sky deal through either media rights agency is much bigger than the one that you would do for sponsorship. So, lo and behold, you know, the, the Sports Sponsorship agency within the, networked business is skewed by that. Just internal incentives that are really difficult to align. Just make more money from the media deal than you would from the sponsorship deal. And it's harder work. The sponsorship deal is like another load of activation, whereas the media rights deal is just a deal and then you just re keep resigning it, if you're lucky Uh, do you recognize that the way that I've painted that in terms of micro and macro conflicts.

Rob: 8:10

And I think, I mean, the first one is probably the one that we think that we can help with, um, around you. And I think a, a lot of our thinking is actually built around media ag thinking, ironically, and, and in the sense that when you get a brief, when as a client, you go to a media agency to give a brief and they do some planning and they say, this is the optimal use of your money to reach your target audience with this reach and this frequency and this message. The challenge in our industry is that you could go to a agency who's giving you that advice, and they only represent a slither of the industry. So

Richard: 8:44

Yeah.

Rob: 8:45

going, well, this is all the things because they naturally have commission relationships, uh, in place with some properties. So that in itself is, is a sort of systemic problem with the model. Um, and you can't. Provide agnostic advice if you cannot provide an option to go and buy everything in the market. And the trouble is, is because fees are discounted, because there's a, um, an understanding that they'll make money on the back end of the deal. ended up in this sort of commission model. So, so we think that that's fixable. And I think, and just to be really clear on that, this industry needs great sales agencies. You know, it's a really important part of the value chain. You know, we need people out there

Richard: 9:24

Yeah.

Rob: 9:24

understand properties, tell that story and sell rights. So that's a really important part of the value chain. Similarly, we need agencies who can provide really good insight LED analytics, as, as Claire said, that helps a, a brand, make the right selection, negotiate the rights, and then activate those deals. They're two really important parts. Our contention is that the way the world's moving and the opportunity for sponsorship and, and the need for sponsorship to get bigger, our contention is that those things have to be separated. Because I, I think the market and our own little ecosystem, we might be thinking that we can get away with that, but I think people are telling us in that survey that that's a problem. I think the other bit that we don't know, quite frankly, Richard, is outside the people that we are surveying who are sponsoring, there's probably a whole lot of people that have left the sponsorship category as well because of it. So, you know, there's another probably huge bucket of money out there that we're not even seeing. So I think to take your sort of two points out, we primarily focused on that first one. That second one is a, a broader media agency challenge, obviously, which we recognize, but we're not necessarily, um, sort of coming up with a solution about how we might address that.

Richard: 10:33

So you've got that, that number. So the, the, the one that jumps out is the survey found that 42% of respondents, so the respondents are brand side. Are they brand, are they the client side? Yeah.

Rob: 10:44

It's a mixture of c people are involved in sponsorship, brand marketers, and procurement.

Richard: 10:50

Okay. And they, so that 42% believe that conflicts of interest stemming from agencies both selling rights and advising potential buyers are a significant problem for the sponsorship industry. The figure rises to more than 52% of people with more than 10 years experience in the sector. So, and you probably preempted the question, which is I. What the outcome or what the problem for the, for the sponsorship industry and therefore the sports business economy, is that, is it, so there's a reputation issue in terms of brands coming in and saying, yeah, okay, I don't wanna get into this bun fight between agencies and it's a bit, opaque, let's put it that way. Or they're saying that, we are not gonna spend here. Are they gonna use them? I mean, I guess there's a question about why don't they use their money to flush this out? Because they've got the power, presumably the budget holders, the brands, and they're gonna do this implicitly in terms of, okay, we, we just, as you say, we're not gonna spend on sponsorship. We'll just go and put it in a TV ad or, uh, you know, an out of home, um, campaign or whatever the alternatives are that's happening without actually being recorded by anyone anyway.

Claire: 11:58

That's the, the thing that we're, we're wanting to lead the charge on here is to say like, we generally believe in sponsorship as a, as a brilliant channel for sport and entertainment. You know, Rob's talk to the broadcast landscape. It's only gonna become more and more important as a, as a vertical. And so we want to try and create that perception that, you know, credibility isn't a problem. That it is. Once you go through that rigorous procurement process, you are able to come out the other side with a clear understanding of the value that you are getting and that you are transacting at a fair price. and that you don't have to be worrying about. Yeah. conflicts on, on either side. And I think that was probably the thing that was most. Fascinating in the, in the survey, um, you know, we've had a lot of anecdotal conversations, but to bring that group of, of senior folk together and to say that not only 42% reveal it's a significant problem, but 40% saying that it's a genuine credibility issue for the channel, that's a huge number. If you're thinking about how sustainable this is as a, a core, commercial vertical in the sport. Like you don't, we, we can't afford as a, an industry for that proportion of, people that are making decisions around sponsorship to, to be questioning why they're making that investment. And so, I think that we definitely see line of sight for it to continue to be a strong channel. It's just what do we need to do, as agencies, what decisions do brands need to be able to make based on data and, transparent, objective opinion, uh, advice in order to be able to make sure that, um, it is being sustainable and is sustained in the.

Richard: 13:33

It is interesting. Rob, you mentioned at the beginning that, this was, it came from sport el that you know, that you were, you were looking around sport el and just unpick that for me. So what you were say seeing was the me the media money. Ain't gonna be the same in, you know, and that trope is the, obviously, you know what's gonna replace the media money. Sponsorship is gonna be a significant part of it, but actually there's a leaky bucket on the sponsorship marketplace that is gonna be a problem in terms of trying to solve that.

Rob: 14:00

I think, I think, and it's not just sponsorship clearly, and I think, you know, it's, I've got a very strong contention. It's obviously a huge part of the, of the business that Claire's, um, driving for us around, you know, better direct to consumer relationships as well. But as we sit here at the moment, outside broadcast, sponsorship's probably the biggest second line item in, in most revenue, revenue summaries for, for a sports organization or a club. And yeah, it was just probably an interesting opportunity to just take a step back and go, okay, well what, what does stop sponsorship reaching? Its full potential? And we sort of landed on two things. One was this sort of independence, credibility. Hypothesis, which is what we went and tested. And I think the second one was just the quality of analytics tools that sit around it. And again, I think if you, if you sometimes as an industry just need to remove ourselves from our little bubble, if we think about, you know, and media agencies aren't perfect, but this, the planning tools, the data they have to make decisions. We don't have that in sponsorship to the same degree. And it's one of the reasons why we obviously invested pretty heavily in turnstile about seven years ago.'cause we've had this really strong contention that markets don't work properly if there's not transparency and rigor on pricing. It just, it just doesn't make sense. So really went hard on trying to address that pricing issue and, you know, seven years later, you know, with is, is it perfect? No, but we're getting brands and rights holders sitting in the room with the same numbers transacting quicker because we've managed to do a lot of work around transparency and rigor on pricing. And there's probably a similar need for other analytics tools as well. So there was just a bit of an aha moment for us about, okay, do we. Promote that independence model and, and let people know that there is another way that you can actually do deals without necessarily having, um, a, a conflict of interest, sort of point A and point B, you know, as part of this sort of enhanced sponsorship division that we're launching commitment from us, I suppose, to really double down on investments, on new analytics tools and. You know, that's both traditional research. But I think the real exciting thing is, you know, the team that, you know, Claire's building and their backgrounds is just really thinking through analytics in a whole different way. You know, clean rooms, first party data. How do we actually bring a level of rigor to sponsorship that makes it credible and better? Because I say I think there's so much upside. And the great thing about sponsorship and the challenge about measuring it is so broad.'cause it can impact a consumer, it can impact, uh, a, a trade buyer, it can impact your staff. And it's a very holistic sort of regime of metrics that we need. And there's no silver bullet to that. Um, and I think we're quite excited by opportunity because, um, yeah, one, there's a need and two, um, a world where everything's getting more fragmented, if we can get brands closer to their target audience that are passionate about something. I mean, that's a super exciting proposition. So it was a, I suppose coming outta that in October it was sort of reinforced. A few things have been kicking around our head for, for couple of years.

Claire: 16:47

Yeah, like it's much more exciting and interesting to be trying to crack the genuine pass through of value in a sponsorship, than, trying to work out what the biggest media equivalency number is that, um, no one in the industry probably believes, is correct, but everyone sort of continues to use as their core metric for, uh, for value. Like it's. Much better to be thinking about what tools and, um, systems are being used in other industries to genuinely try and have a crack at, calculating the general return on investment. Like, you know, no, no one should ever try and achieve or try and, um, you know, display what the, what an ROI is. Um, kinda a product size level because I just don't think it exists. It's not possible because every transaction is valued in a different way or should be valued and reflected and valued in a different way. But there are some great ways to think about, um, valuing and evaluating that I think we can learn from other industries. And you know, Rob mentioned obviously like clean rooms being a really obvious one, even the way we think, more about how we're using eye tracking on exposure and how we're thinking about how you follow through a transaction, from your digital ecosystem. there's. A, rigor that can be, done there. And I think historically, perhaps sport hasn't, applied that same level of rigor that other industry sectors may have.

Richard: 18:08

It's interesting sort of, you know, and. Obviously Rob, Rob, this is a question for Rob, but this is the historical context of this is really

Rob: 18:16

Why you, why you say

Richard: 18:17

interesting.

Rob: 18:18

Historical. What was the connection there? Didn't have to do that.

Richard: 18:25

I just, you know, I, you know, I dunno, I dunno why I did that, Rob. I can't think why I did that. But there is a, I remember having conversation, this is again, we are, I'm going back 20 odd years and the market divided the agency market. There's a question here for, on the agency side, because my assumption is if this was a, problem that the client's worried about enormously, they, the market would solve this problem and that they would punish people who were selling both sides and reward, purist. Agencies, client first agencies. And I remember talking to, I mean like back in the days of Karen Earl, that then became Synergy. Their, their sort of marketing position in the place, and it was a successful one, was we don't sell rights. You know, and they came out and that was their sort of on the front of the door. And there was a, there was some clients that really wanted that. Then IMG would say, well, no, we are, clients come to us. And their argument against the Karen position, or the synergy position or the purist position was market intelligence. There was, okay, we, we are in bed with the rights holder and we know their rights, you know, you know, on a level that, that Karen Earl and Synergy don't discuss. And that was, you know, I've no idea where the truth lies in this, but this was, this, this was the sort of back and forth, and the client isn't stupid. The cl the, the client knows. What they're entering most of the time. And that actually they, they benefit from, we are doing, we are packaging the open golf, you know, and the joke was always, you know, the answer's, Colin Montgomery, now what's the question? that sort of positioning is a sort of, it's a nice gag, but actually surely the clients see through that and they are, now there's a question here in terms of, is that a sort of, is there an analog to digital thing? Has data or, a a broader, spectrum of, of information that is available now that wasn't back then? Is that, has that changed anything? I'm just wondering what's shifted.

Rob: 20:26

Yeah. I, I think, yeah, let's unpack, unpack that. I think, um, and yeah, we, we looked a lot as a, as an agency, Karen, our early days because we had a similar model. And I think, so the interesting thing for me, you know, coming from the bottom of the earth in Australia is that we've been running this model now for 15 years there, and in a typical year, about 12 to 15% of sponsorship expenditure runs through gambit clients in Australia. So we have quite strong visibility there, never taken commissions this sort of argument that gets thrown up, oh, well, we are closer to the deals and we know what's going on, so you couldn't possibly do better than us. Put it this way, Richard, every time that one of our teams walked into a rights holder with a brief from a brand. We've never been knocked back. So I think what's happened is there's been part of the industry that's put up this smoke around you. You can't possibly transact unless you're with us.'cause we're on the inner. First of all, it's not true. secondly, the whole media agency doesn't work. You know, media world outside sponsorship does not work that way. So I just call BS on that, quite frankly, and, and a lot of agencies have got away for a long time with that smoke and mirrors and that myth and well done. But think one never bought into that. And we've got a really strong proof point that says that's not true. And I think Karen all and Synergy, you know, prove that out in this market for a long time. The second part of your question, what's changed? I think two things. One, sponsorship now is increasingly competing with channels that are very transparent, very measurable, very accountable. So these decisions of thresholds around investment are getting more and more sophisticated. And you know, and to Claire's earlier point, we've gotta make sure the sponsorship keeps up or gets better than those other marketing channels. So I think there is a different context in terms of other parts of the marketing mix that didn't exist 15 years ago until less extent, 10 years ago. And as we alluded to before, there's also just increasing standards of, um, governance and procurement. And, and, and we can't get away from this. And I know there's some people in the industry wanna keep denying the role of procurement sponsorship, but it's only gonna go north. quite frankly, we see some really positive impacts on procurement as well.'cause it does actually legitimize sponsorship and it does have a really exhaustive process and it does ask the right questions. And, we know that, you know, I was talking to someone in the banking industry the other day and they were talking about the difficulty of getting clients to come to their events now because every client's got a sign off, you know, conflict of interest clauses. And so it's getting more and more. Challenging. So it use your sort of analog versus digital, um, there. Yeah. It's changing and, and we, and as an industry we can kind of keep laughing about it and sort of pretending that we're getting away with it or we can actually embrace that challenge and, and move things forward. Um, that, that's a bit that we're excited about because it's absolutely solvable and it can get better. Um, and it needs to get better to sort of backfill some of those revenue shortfalls from broadcast, as we said earlier.

Richard: 23:29

What happens with, I'm just, just build on that slightly in terms of the procurement or the impact of the presence of procurement in much more central in the decision making process on the client side, and I, and I completely think that's, I. True. I'm just wondering what happened. I mean, sometimes the feedback about procurement is, oh, it doesn't understand us. Sport and sponsorship is too niche. It doesn't understand the mo, the hydra, the multi-headed hydra. That is the sponsorship deal. It does so many different things. It wants to turn sponsorship into a media sales thing because it's just a simpler animal, simpler beast to measure. What do you think about those arguments that are sort of, again, resistance to the procurement thing, which feels like a dead inning thing? Always quite often presented as a sort of, oh, fucking yeah. No one love, you know, you are the only person I've ever heard, you know, liking pro procurement, Rob.

Rob: 24:23

It's, it's a lovely, convenient argument for certain industry to run, isn't it? But, and with all due respect to the, to, to your marketing channel, probably the best marketing budget we spend is gonna procurement conferences. Now we literally, our teams are gonna procurement conferences and.

Richard: 24:38

I mean, I, I, I, you know, we slag off conferences for being a bit teeter, but a procurement conference, gva, what's that Like? The parties, the parties are really, really, you know, one glass each.

Rob: 24:51

Procure column, though. It's pretty cool. Procure comm. See, see how they did. Um, but in all, in all seriousness, I think, um, we, we've found quite the opposite. And, and I know we are, the outliers on this is, but we actually see that by going through procurement the sponsorship departments are more likely to get signed off from boards and C-suite because it's been ticked off. So I think as an industry we can keep sort of being in denial about this, um, or we can embrace it. And then, as I say, we, we, we are directly working with procurement to actually,'cause what they've recognized to their credit is they don't have the metrics. So if they get a brief on a digital campaign, buy or. Buying some, you know, new reams of paper. All the things that procurement have gotta do. They've got benchmarks and rates, whatever. What they're looking for well, how do we get rates and benchmarks to help us understand that we're paying a fair market price? So they're actually engaging agencies like us to actually help'em do that. So they're not sitting there, know, the good ones aren't, anyway sitting there, you know, making this up. They're going and engaging professionals. And I think, we, we are seeing evidence with our client base that are actually happening quicker when procurements evolve because they get ticked off.'cause the reality is, and and was really interesting I think, because there was plenty of boardrooms and C-suite meetings in all parts of the world where everyone was looking at costs and that went, what do you mean? We committed to five years on that deal and it wasn't signed off by the board or, you know, you know, you know, always amazed me that. bit of capital that they would be spending on would have to go through a whole capital expenditure committee and all these processes, yet a sponsorship deal gets done there's not much, you know, uh, sort of due diligence or procurement around it. And I think, you know, it's been interesting, I think post Covid that I think that's accelerated that procurement, um, uh, trend because there was a little bit of awakening that these things were being signed off without proper due diligence and, and that, and that ain't going back. That's not turning back now. So embrace that and, and let's own it and let's work the procurement and make them really good partners in the process rather than going, no, no, no, we don't wanna talk to you because it's not gonna go away. think that's. We sort of picked up on this a bit before Richard. I think the buyers are quite rightly gonna be a little bit more definitive around how deals are done, how things are valued and priced like we see in other media channels. And again, as an industry, let's embrace that because you know, if we get engaged buyers who have confidence more likely to get more money to the industry.

Claire: 27:26

gonna a range of brands across. Spectrum on there, and there will always be brands that don't necessarily go down that route. Maybe they're newer to market or they're not as sophisticated on that front, and we're, you know, we're not here. You know, you use the word purist, which I'm not sure. it's something either Rob and I would, would, um, would hope we would be subscribing to, like, not commercially naive to the fact that there's, there's brands that this won't apply to. I think what's really interesting is that they're specific. Industries which are gonna become increasingly regulated. And those industries have historically invested a lot in sport and entertainment. And not to always drag it back to my, uh, grocery retail days, but you know, I was involved in project, what, seven, eight years ago, um, at one of the bigger grocery retailers in the UK where they were rationalizing, um, their investment across CSR and other initiatives. And, that sector IT at the time was, was already down that track. And we know that that's the case increasingly now in financial services and, and other industries that have been so prevalent in the market. So we are not saying it's a blanket cases, it would apply to all brands, but there are certain sectors that will be tying up protocols in, in this space and as a sports industry that you know, isn't exactly sort of, um, flush with cash down every channel and projected to be over, over the coming years. Like you just don't wanna be closing down. Key REITs, unnecessarily if there's another re to, to kind of proving out that it's, um, a.

Richard: 28:52

Yeah, I mean, my head goes to the, obviously financial services, as you say, is one. It's a massive spender. It's also, that's where this conversation seems to be directly relevant, and I can see from the agency's point of view why you would do this. I mean, we, we've had two circles on here. They bought TRM for exactly the reason that, you know, to, to counter the problem of consultancy being quite difficult to make go revenue go up sharply. So you buy TRMA sales house to work under the same roof. So strategically, agency wise, I can see why this would work.

Rob: 29:28

I would say though not just big agencies. I think there's a whole lot of small, independent one man shops going around doing this stuff as well. I think there's

Richard: 29:36

right.

Rob: 29:36

going on than, there's, there's probably, obviously, you know, one's, it's easy to point things at certain people and, and again, and I think also too, you know, just to be really clear, I don't think some of those agencies are doing this all the time either. And, and it's, it's a as much as anything else. But I, I think this is, we've, he heard some horrific stories about one or two man shops doing this stuff and probably have been acting more like cowboys and cowgirl and than anyone else, quite frankly. so it's, yeah, I think it's, it's through the, through the whole system. Um, and look, and I get it. when we say we've never taken commissions, And as a business, always been really adamant we didn't do it.'cause the moment you start doing it, a whole different business model and different ethos, you know? But when, when you burn those boats behind you and say you're never gonna do it, as we've done, you know, we've been very public about that over the years. It actually forces you to invest in capability and people. So you actually go, I have to build a business that is doing that. Otherwise we, we are out business and, and the synergies and then the Karens, you know, were the same. You know, they, they, they were really strong about that. So I think for us, that's something that, because we believe in that and because we build capability to do with that, we, we've sort of, of managed to avoid that. But it, it is, I, I get it. I mean, I think if you've got, and again, I think, just to be really clear here, I mean, and the TRM two circles, one's a great example, is two circles bought an awesome sales business in TRM. That's an awesome sales business. That's fine. You know, they, they, they decided to, to move through the value chain to start selling. That's fine. I think what our concern for the industry and what more importantly that survey is saying is that where you've got people that are advising and selling, think that that's the, that's the bit, that's the, I think the, our clients and, and what the buyers in the industry are saying is a concern and what procurement departments are saying is a concern too.

Claire: 31:24

Yeah,

Richard: 31:24

I think,

Claire: 31:25

to add to your question, Richard, on who's, uh, winning and losing, I've got a sense that it's, longevity of the deal and that churn piece that Rob

Richard: 31:35

hmm.

Claire: 31:36

about earlier. So probably our point in time, you know, it's, it's, it's a great good deal all around probably for the, for the folks involved. And, um, you know, obviously it's important that the properties are, are able to get in the, the revenue through, through this channel'cause it's so significant. But it's, when that deal then churn 12 months, 24 months in because there's a realization that actually there wasn't value there or there was a mismatch on target market expectations versus reality. Then at that point of churn, only really the agencies winning because it's gonna be cost on the rights holder and on the brand side to have to renegotiate, know, rework out assets, reeducate, um, existing supporters on that, on that change. And, and obviously at, at that point of churn, you know, you could argue, well, you might get a better deal at, at, at, in a short time horizon. But we think the best outcome for, for the right soldier is, is that longevity of deals where you can genuinely build value over years, um, and really start to work. Um, hard on that more like symbiotic relationship, as I

Richard: 32:44

Yeah, and it was, I need to credit them. It was at Leaders, so they were, uh, Martin Sol or So Martin Sol, and it, he did a thing where, and the main outcome, you know, the, the sort of takeout was the biggest decision is the, you know, the first day the buying decision. And then longevity is enormously underrated in terms of, you know, the sponsorship, the great sponsorships have been, had a tenure, and the marketplace for sponsorship is, you know, incentivized for short term. Deals. And so, you know, exactly to your point about the re-ups, renewals are downgraded a new thing, a new fee. There's the other bit is the activation. Whether or not, because the market, the agency market's essentially an activation marketplace. You are incentivizing activation over traditional, more traditional sponsorship act, brand presence, et cetera. So there's a, there's a whole load of things in there that are directing you to keep changing because, and, CMO tenure, all of these things are working to, to shorten sponsorship contracts.

Claire: 33:51

Yeah. And the reality is when you, you know, as, as you know, we do, and a lot of agencies do, like we, we evaluate the effectiveness of, of sponsorships. And it's not a huge surprise that it takes some time to drive a, a degree of awareness consideration, let alone down the purchase funnel to intent to purchase an actual purchase. Mm-hmm. And so, you know, you, you're not gonna recognize that value if you're rolling in and rolling out over a two year period because it is gonna take you half that time just to get a level of cut through an awareness. and are you gonna realize the, the kinda outcome that you want on the flip side of that? Well, it depends what you're looking for. Um, you know, if it was only awareness, fine, but it's a level of familiarity, consideration and purchase intent. Um, then that money arguably may not have been, uh, you know, well spent if the, if you don't get the longevity on the, on the other side of it.

Richard: 34:43

there's a. Bigger question that you are asking actually, or, you know, one of them is just about the nature of value and this comes out of, we are, you know, uh, the Ft business of football thing yesterday. And there was a, a really nice panel about talent representation and, you know, player, agent marketplace. And a lot of the themes we are talking about here are quite analogous there. And one of the, one of the questions was about, where value resides. On the buy side and the arbitrage of trying to sort of obviously get something at a lower price, but knowing that there is enormous value for you, which you don't share and don't reveal to the seller because why would you? And you are getting a, you know, a deal there. And we were talking about, you know, they were talking about footballers and it's the old Moneyball thing about, you know, we want them for this, but they're slow, but we want them for something else. I think there's sort of that bit of the conversation within sponsorship is quite underplayed, I think. And I, and again, the other analogy is when we, I've talked about this with people who are negotiating media rights deals with Netflix, for example. They ain't the same as negotiating with Sky or Fox Sport. It's because they're a different animal and they're doing it for different reasons and they're doing it for reasons that are quite opaque to the seller. And so therefore your perceptions of value of what this thing, what price, this thing I'm gonna pay, or they, we are gonna sell it for. It's really hard. It's all over the place. What do you think about that?'cause there's something in there about where sponsorship plays'cause it, it, you know what it's doing for you and how you then work out how much to pay for it.

Rob: 36:17

Yeah, I think what we see a little bit of that in some of the turnstile intellectual property values. So as, as we do, you know, got about best part of$5 billion for that model now. So you start to get a pretty goods sort of sense of the market's buying and how the market's describing value, whether that's right or wrong, let's park that. Just actually what's happening and, and what you start to see is that certain categories, for instance, will pay. More on a profound basis for intellectual property than other categories. And it, and it sort of makes sense, like it's the endemic ones like sports brands or um, alcohol brands or betting companies who need that proximity to the fan because they're a really key part of their business. So you can, now, I suppose you, if you extrapolate that one step further, why are they paying more? Probably inherently because they've got an ROI behind that, that means they're comfortable to do that. And so Claire's earlier point, every one of those categories will have different ROIs in every brand world. But we are definitely seeing that and, and I think that's you know, trying to build transparency and understanding for industries that. That's been an interesting tool for both buyers and sellers to understand that when we're talking to a brand, we're saying, look, you are probably gonna have to pay more for this category because it's endemic and, and the, and the market is telling us at the moment you'll pay more for IP than other category. And similarly for the rights holder to understand that as well. Um, you know, and we've had some really lovely use cases where, um, which one of which we can talk about now, where we valued the, the World Cup Women's Program for FIFA a few years ago. Um, and then a, a brand and engaged us to value it as well. And, and we're always very upfront that we're gonna work on the buy and sell side'cause we're not being commissioned. So we can do that. But the lovely thing was they were both sitting in the room with the same numbers and they might've been ling over the package design and everything. and again, using that media analogy, that's what we should be doing. You know, we shouldn't be arguing over the metric. It's a cost per thousand or cost per click or whatever it is. What we should be doing is working out the transaction price as quick as we can and spending the higher value time trying to work out how to make that relationship work. At the moment, we're spending all the time, you know, starting off with ridiculous media ancy number at one end of spectrum, and then ano another number and trying to spend months trying to get down to the, down to a transaction price. get to that transaction price quicker through transparency and, and, and rigor. And then spend a more time working on actually how to make that relationship work, you know, and to make them last longer. So I think part of the, sort of the maturity of the category going forward for sponsorship is to start trying to get those hygiene factors taken care of quicker, and then doing the more higher value creative work, which is really gonna drive value for.

Claire: 38:50

I also think there's, um, quite innovative ways to think about value, um, for different brands and different categories, which I think would be really interesting to, to explore more as an industry. So, you know, if you are a, a well-known drinks brand sponsoring a well-known, rugby tournament, um, and you've got the front of share or you've got the title partnership. much is the value derived from that partnership about being on the plinth end of a supermarket during the course of that tournament and the product sell through rate that you achieve as part of that versus what you're getting from being on the pitch or, um, being, you know, um, LED round the ground. And that facet of the sponsorship value, I think probably for some more sophisticated, um, and brands and rights holders is, is already being discussed, but I don't think it's being discussed in every conversation. And that's really exciting. It's really interesting. It's like, you know, you start to think about, well, what is that? Um, in that specific example, where is the value, um, from the retail sell-through, and how is that reflected in the negotiation? That becomes really interesting. Or for an example, if you are an insurance, um, agency or insurance business, and you are having a conversation with, let's say, I know, let's say British cycling as an example. And you are about sponsorship with them, is the value for you in the fact that you want to leverage the ability to contact everyone with a bike in the uk because you are able to ensure them if you can start to target them versus the actual, you know, on front of share, um, value of that sponsorship in terms of eyeballs. And actually I think if you, if we can start to explore other ways to negotiate sponsorships around those sorts of value add, then I think that becomes more interesting, more man, more trackable. Um, you know, similarly like so that kind of data clean rooms example is a proof point of value. You know, I know that there's a lot of nervousness around the, you know, agile Barcelona, Spotify example that gets, um, thrown around where, you know, Barcelona lift the lid on their contactable database and it's not as big as, um, first been thought by by Spotify, but there's some brilliant B2B use cases for data clean rooms. You you take a technology business that's sponsoring F1, um, or an F1 team, they really care about other 150 CEOs in this contactable database that I can market my technology product to. that's what they're interested in in terms of a sort of inverted comm, ROI is that what's my ability to drag those 150 CEOs from F1 into my contactable database and my ecosystem so I can directly target them? That's almost like one of the key tenants of value there that will drive you down the funnel. But how much of that sort of tracking metric or understanding that that's a core KPI is actually being up into either the value or the evaluation of a of a deal. And I think the more we can start talking about more real life examples where, um, the value of the, the partnerships being really leveraged and commercialized, um, by the brand, and the more it'll increasingly feel kind of credible.

Richard: 42:10

I mean, we had the, um, the guy who was the team, viewers sponsorship. Got it. And one of the interesting things there, they obviously, they just bought the Man United shirt for a lot of money. And actually when you drill down, they were a B2B Tech brand who were trying to reach about 200 or 500 tech CTOs or whatever they are, you know, and you sort of think, well, there's a lot of wastage in that price, you know, in terms of trying to get from one to the other. And

Rob: 42:38

maybe not.

Richard: 42:41

no, I, I'm not, I wasn't, yeah, I know. And I guess the intangible bit, which I think is, I think that, we, we obviously. done a lot with turnstile over the, over the years. I think the most interesting part of the model, and the bit that catches my imagination, is the actual, the, the conversation about the intangible element within deals and how that, the nature of that and how it plays out in different, you know, for different sectors at different, different points. because obviously that's involved in like, uh, the team viewer experience, you know, is, is well the halo of Manu United then you get to, so one of the, the questions I was thinking about as I was reading some of the stuff that you'd put out was, is the purest, I mean, purest again is the purest form of a sponsorship market, a sort of online marketplace. is that where it's going? I mean, I've, we, I still bear the scars of sport business launched one about 25 years ago and you know, it didn't turn a pound, you know, so, but it was, it was in the dial up era. Some would say that the tech wasn't quite there. Um, but there's a bit of a market which you could sort of see it would, might apply to, I don't know. Is that, is that where the, where the thing is going? It's almost like a programmatic sort of element to it.

Rob: 43:52

It's probably a whole other podcast in this, but we we're doing a lot of thinking at the moment around, so my contention is that the, big meaty sponsorships will still be done in a, you know, sort of face-to-face negotiation.'cause they're

Richard: 44:06

Smoke field rooms.

Rob: 44:07

well they're just big deals. They're multi-year deals and they're complicated. So I think they're hard to trade, but think there's an element of the inventory that could be locked into programmatic exchanges. Um, we, there's a whole lot of people in big cities around the world who are trading media and this, our industry is just not in the conversation. and probably if we could work out a way of actually interfacing with'em, they would like to. So I think it's, I think it's gonna be nuanced. some of the Champions League, they might sell 95% of their inventory through sort of traditional face-to-face deals with eight partners, maybe a lower league, premier League team could sell 50, 60% of their inventory through programmatic exchanges. And I think they're, they're the types of things, again, in terms of unlocking value in sponsorship, we've gotta be really thinking about these things as an industry because there's no one size fits all to that. But there's so much unsolved digital inventory and tickets and hospitality and things that just every week just disappear. And there's probably a whole lot of buyers out there who would access some of that if there was an appropriate way of doing that. And as an industry, we so far to, yeah.

Richard: 45:15

Yeah. Yeah. Claire as you were saying there about the, Guinness, six Nations or whatever, sorry, the, you know, the, the, the alcohol and rugby. Um,

Claire: 45:23

Put words

Richard: 45:24

how, yeah, yeah. Sorry. I, yeah, but how difficult is that because you'll get, you were sort of talking there and I went to sort of Byron Sharp, you know, one of the, um, Rob's country folk, but you know, that's mental and physical availability. And actually for that to work there is obviously a sort of joined up. Aspect to it, and I could see that Guinness and the Six Nations, yes, I need to have a supermarket strategy champion. You know, you see it World Cups, champion league fight, you need, uh, Heineken appears or you think, okay, well at least there, there's departments talking to each other within the companies. Once you get below a certain level, I think, well, that starts to break down. And, and there, there are only so many properties that can carry that level of responsibility within a supermarket, for example. But how difficult is that? How, you know, is it just people not talk? Is it just a silo question on the brand side, or is it, is it, is there anything that the property can do that helps that problem?

Claire: 46:24

Yeah, I mean, as a sidebar by sharp and mental, physical availability is my, uh, favorite, favorite topic. So I'd love to get into that at some point, uh, about how you create brand saliency. But I think the reality is, I think the rights or they can, um, can really help, um, broker those conversations because they can get in the middle of that between the, the retailer and, and the, um, and the brand they're sponsoring. And so if there's an open-mindedness across all three, then I think that conversation can accelerate quite quickly. Now the reality is. As we know, only certain brands, um, with a certain level of mental availability and physical availability to actually get on plinth end. so there's an extent to which it's gotta be, you know, a big enough product that the, in this instance the retailer can feel confident selling on promotion, but also the property in question has actually got enough, clout in the market that, and excitement, with consumers that they would actually deserve that spot on, on clinical and obvious. See, a lot of that's out of the control of, of either the brand or the property.'cause that's really up to the, the kind of the retailer, to determine. you're right, there is a degree of which, you know, that that's probably for the, for the majority. But I do think that example morale, like the insurance piece is, is quite interesting because it's you, you're going like, let, should we just reframe why we're actually trying to sponsor here? And can we bring some of that. understanding to the negotiation and then understand more directly, well, how are we gonna be able to drag that understanding of, my basic example of, um, cyclists in the UK into that, um, insurance ecosystem. How much is that being talked about? How much is that being worked on together in both parties to be able to help, drive the right marketing opt-ins, the right data capture moments? Because if you both go in with the same outcome and then that's measurable, it becomes much more easy conversation around renewal, doesn't it? And around, you know, an attempt because you started with that premise, you work together on trying to achieve it, and then you measured at the end. And I think so many of, these. Partnerships that we're speaking to. You know, obviously we speak, we work on brand side, on rights holder side. They don't really have beyond that sort of top of the funnel awareness, familiarity, consideration. There isn't that much more granular detail around what are they actually trying to achieve. So I do think it's possible to get to a more, um, specific and defined, set of objectives that are measurable.

Richard: 48:49

but that means presumably that, I mean again, the, the cycling insurance thing is, is really interesting. And again, you have had far more than I have just conversations with, say, international federations of. F you know, whatever the, whatever the thing is, the clay. And it gets back to the Barcelona, Spotify case study of how many people are you actually in contact with? How many people are you actually delivering to an insurance sponsor? Are you delivering every cycl, you know, is British cycling delivering every, cyclist? No, obviously not. Could they, what is the problem with that? Is that a tech problem? Is it a resource problem or whatever? Or is it just something else? And what would happen to the value of a cycling sponsorship if that was that deliverable was met? Again, it's just hypotheticals. But, the other question is that makes it a really performance based sponsorship, and do you need the sponsorship in the, you know, to do it? And it's just, that's a d it's not a sponsorship at all. It's just, it's a, it's a sort of CRM

Rob: 49:50

I think though, in fairness, and we, and we do know there's some research that we've done and, and other people have done over the years, I'm far more likely to engage with something that's coming from a passion point of mine though. So it's not a, I'm not just buying a database, I'm buying a relationship with my club or my cycling club, whatever. That gets me engaged. And I think that this is the, this is the thing that, you know, and obviously we, we talk a lot about intellectual property, but it's, it's the raw mechanics of a, of a database, which is great, but it's that intellectual property that wraps around it. And again, that's why I think IP and our industry is such a critical thing because we're selling engaged, passionate fans as well as these sort of more tangible benefits. And we need to better have numbers and metrics that properly articulate that value. Because we do know that if I do get a email from my football club versus just an email that's coming cold, I'm more likely to click it and open it and have a look at it.

Claire: 50:41

that's the crux of that bar and Sharp brand Saliency point, isn't it, is to go, okay. It is not just about physical availability, which is at the point of transaction, do I have the product at the right price in the right channel for a given customer? going, have I got the mental availability where they think the first thing they think of when they want to buy in a particular category or for a particular event or for a particular occasion. That that brand has got that top of mind, um, consideration, and there is absolutely no doubt that the superpower. Of sport. Sport is that it can drive that mental availability because it's got that passion, that loyalty, that emotional connection that could drag you forth on the list in terms of mental availability to first on the list. And that's what's really exciting about sport sponsorship because it has that superpower that other, um, industries don't have. So I'm a huge believer that it's more than just the CRM, database benefit. Um, and that ability to combine mental and physical availability will drive, but it, that's a sort of long play there are some short, short, um, um, immediate revenue wins that you can get. I think in parallel to that, which is perhaps some of, if assuming you've got the right connected ecosystem and in place that you can also, um, reach in, a time.

Richard: 52:09

We are gonna finish off, but I, there's a, there's something I want to talk to you about, which is, I was watching, Elon Musk as he, as we all do, and the Doge thing, and don't worry, this is not gonna be a about, you know, American politics, but I sense, and I, I thi I get it already, that there is a sort of appetite amongst corporates for a sort of zero budgeting trend. There is gonna be a sort of purge of. Stuff I can, you could, you could feel it. People are starting to say, why don't we do what they're doing to the American government? I don't agree with it. I don't, you know, I'm not asking for your views on it, but I think sponsorship is vulnerable to such a trend because I think there's a lot of wastage within a package. Packages of sponsorship are stuff that, you know, you buy one thing and you are getting loads of other things, days out, days of things, tickets, all of the, the traditional sponsorship bundle. What would happen is a question, and I'm wondering if there is a sort of secondary marketplace that could then evolve. So if I bought a rugby sponsorship and I've got, okay, I don't want 200 twickingham tickets this season, or other inventory, what are the implications of that? If, if brands start to say, you know what I. We're gonna really push hard on this and it just bouncing off it. The thought was your covid example, Rob, in terms of people suddenly thought shit, I dunno how secure we are on this, and you know, all of those things. But just as a hypothetical, just a thought experiment. You get what I'm trying to say? What would happen or what's, what's your sense of the sort of level of wastage within the sponsorship industry?

Rob: 53:46

Yeah, I dunno. The level I, I think it's hard to quantify the level of wastage. I think what I would say is that, you know, just probably gets back to the theme for generally today, is that without good analytics and good numbers, it's very hard to defend sometimes. And I think that that's the risk when you walk in and, and again using that code analogy when you're walking in a budget to being cut, the marketing channel with the best tr you know, best transparency, the best ROIs, you know, probably won that discussion. Um, and I think it's, it's a real scenario that I think you, I don't disagree with the contention there. I do think that that's coming and I think, again, that's probably part of the reason why we've gotta shore up sponsorship with better, better metrics. The, the secondary market's interesting one, isn't it? Because I suppose contractually you, I've spent I think probably the most contentious. Sponsorship contract clauses I've ever been involved in writing a pass through clauses, um, where you can, you know, you know, holders and justifiably so really locked down and you just cannot pass those rights through to somebody else. And if you're Coca-Cola you wanna pass through rights to retailers and that's always been an issue. So I suppose contractually at the moment, probably the industry wouldn't let that happen too much, to be honest with you. Um, which I don't think is a bad thing because I think otherwise the right side loses complete control of where their assets, um, that end up. So even if the brand wanted to do that, I, I just actually don't think there's much rally about to do that, to be honest with you.

Richard: 55:04

So without a covid like sort of incentive to do it or, or legal sort of back door,

Rob: 55:10

Yeah. I.

Richard: 55:11

it's gonna be locked down.

Rob: 55:12

one was because we had forced majeure issues, essentially, where things were not being delivered. So there was trigger points where contracts, inverter, commas were being breached. And again, was really interesting and, and I, I found that process quite fascinating because both buyers and sellers were looking for solution there because. You know, obviously the, the sellers were going, hang on, I'm gonna try and protect as much revenue as we can, which is fair enough. And the most of the sponsors to their absolute credit were saying, look, we don't want to stop everything here, but we need to go back to our boards and better justify something there. And I think the big sort of, aha, I think for a lot of people in the industry there was because we've become so reliant on exposure and these ridiculous numbers that are bigger than contract value, that's all good until you can't deliver exposure and all of a sudden that number works against you. So part I suppose, of what our success was for both buyers and sellers was trying to better articulate the intellectual property value and all these other things that yes, you may not have got the eyeballs, but Toyota, you still leveraged that sponsorship and you still told that story during that period. So to me, that was a good example of more rigorous metrics can actually help help both buyers and sellers.

Richard: 56:20

a defense against the sort of doge musk and purge is actually ip, isn't it? So IP value is harder to to

Rob: 56:28

Yeah,

Richard: 56:29

go after if you want to go after, rather than the sort of tangibles. Yeah.

Rob: 56:34

ip but I think it's also too, you know, to Claire's the previous point about building effectiveness models that show these things work. So you can walk in the room and defend the number because,'cause let's not kid off, that's the reality isn't it? Is that the sports marketing person and the digital person and the traditional, they're all sitting in a room and they're all gonna be probably fighting for, to minimize their budget cuts. And there's some marketing director sitting above it who's trying to make a sort of a strategic decision about where they invest. So better metrics are always gonna help that conversation and, and take the emotion out of it.

Richard: 57:05

Brilliant as ever. I'm betting Claire that your record will be safe.

Claire: 57:09

We know if it.

Richard: 57:19

Rob, the Rob Mill effect. I will be all over the data. Don't you worry. I'll, uh, I will sort that out. Right. Claire Kelly, Rob Mills, thank you very much for your time.