On Monday the Utah Jazz became the sixth N.B.A team to sell their jersey sponsorship rights. Besides the Jazz, the other NBA teams to reach agreements with sponsors include the Philadelphia 76ers, the Sacramento Kings, the Boston Celtics, the Brooklyn Nets, and the Cleveland Cavaliers. Although only two NBA teams reached deals in the first seven months since the NBA voted to allow teams to sell 2.5 by 2.5-inch jersey patches last April, four teams — Boston, Brooklyn, Cleveland, and Utah — have reached a deal in the last three weeks.

Although, from the outside looking in, it might appear that this uptick in deals has been largely fueled by an increase an interest from sponsors, the reality of the situation is much more complex. The truth is that the virtually every NBA team has been at least entertaining conversations with potential sponsors since the league voted to approve the jersey sponsorships last April.[1]   However, despite the wide range of interest from sponsors, the factors that initially log jammed these agreements are (I) the difficulty in determining the value of the rights, (II) the perception of competition between NBA teams, and (III) the positional negotiation approach adopted by some NBA teams.

Determining the Value of a New Asset

With the 2017-2018 NBA season rapidly approaching, the inaugural season for the NBA jersey patches, the most obvious problem holding up the sale of these sponsorship agreements is the value of the rights still being relatively uncertain. Even though KIA purchased the jersey sponsorship rights for the previous two NBA All-Star Games, the unique aspects of this game and the size and reach of television audience makes it extremely difficult to even approximate the value of the jersey sponsorship rights.[2]

Additionally, despite the fact that jersey sponsorships are also extremely popular in soccer, with the top European soccer leagues collectively generating nearly $1 billion in revenue from their jersey sponsorships rights alone, the size of the logo and the economic differences between the two sports make it difficult to make any such comparison.[3]

Thus, it was not until couple of NBA teams took that plunge in the face of uncertainty, could any tangible baseline for the market could be established. However, given that the 76ers and the Kings — the first two teams to sell their jersey sponsorship rights — are perineal bottom feeders in the league in smaller markets, the annual fee they both received ($5 million), if anything, established the low end of the market.

In turn, it wasn’t until the Boston Celtics, a more prestigious team in a larger market, reached a deal for $8 million annually could the upper end of the market begin to take shape. Altogether then, it appears that teams fear of missing out has begun to substantially erode with teams from all ends of the NBA spectrum reached deals in the following 3 weeks and more expected to follow.

Perceptions of Competition & Lack of Information Sharing

Prior to the first secured jersey sponsorship agreement, teams were somewhat negotiating in the dark, perhaps the best way an NBA could determine if it asking for too much or too little would be reach out to other teams and to see what types of offers they were reaching. However, at least initially, NBA teams were hesitant about sharing information related to jersey sponsorship rights and specifics about the offers they were receiving.[4]  Even though NBA teams are typically relatively open to sharing information about the terms of generic sponsorship agreements, given that every NBA team was trying to sell their sponsorship rights simultaneously, teams likely felt that doing so would only further diminish their leverage.[5]  Thus, rather NBA teams viewing each other more as partners, their actions suggest their relationship at the time was more analogous to competitors.[6]

Debunking The Rivalry Mindset

Although NBA teams fears about information sharing may have felt they were in a situation similar to the classic bargains dilemma, a closer analysis of the 6 sponsors involved illustrates the teams were never actually competing against each other. In reality, the current 6 sponsors did not pick their teams at random or pick the team in the largest market, rather the sponsors largely selected their teams based on the location of their company.

Out of the 6 sponsorship agreements already in place, 5 of the 6 sponsors reached an agreement with the NBA team located in the same state as their corporate headquarters. Moreover, as the agreements between the Boston Celtics and General Electric and the Utah Jazz and Qualtrics suggests, sponsors are intentionally choosing to sponsors teams in their home market because they care about the community. Additionally, although the Sixers agreement with StubHub is the one exception to this generality, StubHub’s decision can largely be rationalized as a natural extension of the parties’ already existing significant business relationship.[7]

However, even with the information available to teams drastically increasing and the perception that teams are directly competing against each for sponsors has decreasing, perhaps the biggest issue holding up a number of other NBA teams from locking down a sponsor is the teams negotiating approach.

Line in the Sand: Adopting the Distributive Approach

As all good negotiators know, one of the most important aspects of negotiating a good deal is opening with an optimistic offer. On the other hand, there is fine line between an opening with an optimistic offer and opening with an unreasonably high offer. For example, when you have teams like the Golden State Warriors, among others, frequently publicizing that they want a deal worth between $15 Million and $20 Million dollars annually, between 3 and 4 times more than the Sixers and Kings received, it difficult for sponsors to even explore their interest in purchasing their rights.[8]

As a result, what Golden State is actually doing is making potential sponsors perceive zone of possible agreement to be much smaller than it actually is by limiting its scope to strictly monetary terms. However, if we have learned anything from the 6 jersey sponsorship agreements so far it is that teams can find significantly more value by extending the scope of the agreement beyond monetary compensation.

Expanding the Pie: Overcoming Positions by Finding Win-Win Solutions

For starters, even though the Utah Jazz’s agreement with Qualtrics has the lowest monetary value thus far, $4 million annually, it is clear that the other substantive terms of the agreement provided significant value for the Jazz. If you had never heard of Qualtrics before yesterday, you were probably unaware of the fact that Qualtrics is a software company that works with 75% of the Fortune 100 companies and ninety-nine of the top-100 business schools.[9]  Thus, from the Jazz’s perspective a key aspect of the deal was the fact that Qualtrics would become the team’s exclusive Fan Experience Insights and Analytics provider. In particular, the Jazz will be looking to utilize the technology provided by Qualtrics to revolutionize their fans experience by making changes to everything from parking, concessions, to apparel, and in-game entertainment.[10]

However, the Jazz’s agreement with Qualtrics isn’t the first of its kind. In fact, the Jazz’s agreement closely mirrors the agreements recently reached by the Boston Celtics and Brooklyn Nets. More specifically, as part of the Celtics’ agreement with General Electric, GE will become the team’s exclusive Data and Analytics Partner and will serve as a consultant to the Celtic’s medical staff.[11]  Moreover, GE will also provide significant technological assets and medical equipment to help optimize the Celtics’ new training facility.[12]

Similarly, the Nets’ partnership includes integrating Infor’s cloud based software to help improve the team’s performance, fan experience, and business operations.[13]  In particular, as part of the agreement Infor’s Dynamic Science Labs will develop digital hub for the Nets which will provide analysis based on a vast array of data and propose strategic solutions in real time.[14]  Ultimately, the Nets are hoping that the technology will help improve their communication and collaboration between the organizations departments on and off the court.[15]

Finally, although significantly less involved, even the terms of the agreements reached with the Philadelphia 76ers and the Sacramento Kings expanded the scope the agreements with their respective sponsors to go beyond including just the right to the jersey patch. Although the Kings’ agreement with Blue Diamond involves the lowest amount of collaboration, as part of the deal the Kings will begin to sell all of Blue Diamond’s at their arena.[16]  Moreover, as part of their agreement the Sixers website will now direct fans to purchase their tickets through StubHub, who will in turn help the Sixers improve their customer database and provide a more personalized experience to fans.[17]

Here Today, Gone Tomorrow

In conclusion, based on the agreements that have been reached so far it appears that sponsors are perceiving the value of these similar to how suggested Adam Silver when he announced the NBA’s plan to allow teams to sell jersey patches to sponsors. As Silver stated “jersey sponsorships provide deeper engagement with partners looking to build a unique association with our teams” and as the current sponsorship agreements illustrate, sponsors perception of that “unique association” with NBA teams as being largely tied to the territory in which they operate.[18]

Moreover, in light of the recent uptick in jersey sponsorship agreements and the fact that 80%, I expect that the next 6 months will be filled with a have been flurry of deals. Moreover, just as each sponsorship agreement so far has continued to push the envelope in terms of what is possible with these agreements, it will be interesting see how the agreements to come will continue to build on these innovations.

[1] Darren Rovell, NBA Uniform Ad Sales Face Complications, ESPN (Oct. 10, 2016) http://www.espn.com/nba/story/_/id/17738528/nba-uniform-ad-sales-face-complications

[2] E.J. Schultz, Kia Ads on NBA’s All-Star Jerseys Pave the Way for Brands During Regular Season, Ad Age (Nov. 3, 2015) http://adage.com/article/cmo-strategy/regular-season-nba-jersey-ads-a-slam-dunk/301189/

[3] Kurt Badenhausen, Soccer Shirt Sponsorship Revenue Hits $930 Million in Europe This Year, Forbes (Mar. 23, 2016) http://www.forbes.com/sites/kurtbadenhausen/2016/03/23/soccer-shirt-sponsorship-revenue-hits-930-million-in-europe-this-year/#4cd8e3367b83

[4] Darren Rovell, NBA Uniform Ad Sales Face Complications,

[5] Darren Rovell, NBA Uniform Ad Sales Face Complications,

[6] Darren Rovell, NBA Uniform Ad Sales Face Complications,

[7] Kia Kokalitcheva, StubHub Becomes the Philadelphia 76ers’ Official Ticketing Service, Fortune (Feb. 8, 2016) http://fortune.com/2016/02/08/stubhub-primary-ticket-sales/

[8] Darren Rovell, Warriors Seeking NBA’s Highest Fee for Jersey Sponsorship, Real GM, (Jul. 15, 2016) http://basketball.realgm.com/wiretap/242865/Warriors-Seeking-NBAs-Highest-Fee-For-Jersey-Sponsorship

[9] Utah Jazz and Qualtrics Partner to Revolutionize Fan Experience and Analytics and Accelerate Efforts to Eradicate Cancer, NBA.com: Utah Jazz (Feb. 13, 2017) http://www.nba.com/jazz/news/utah-jazz-and-qualtrics-partner-revolutionize-fan-experience-and-analytics-and-accelerate/

[10] Utah Jazz and Qualtrics Partner To Revolutionize Fan Experience and Analytics and Accelerate Efforts to Eradicate Cancer,

[11] Jared Weiss, Boston Celtics and General Electric Announce Jersey Sponsorship, SB Nation (Jan. 24, 2017) http://www.celticsblog.com/2017/1/24/14379056/boston-celtics-general-electric-ge-announce-jersey-sponsorship-wednesday

[12] Jared Weiss, Boston Celtics and General Electric Announce Jersey Sponsorship,

[13] Brooklyn Nets Form Wide-Ranging Partnership with Global Software Leader Infor, NBA.com: Brooklyn Nets (Feb. 8, 2017) http://www.nba.com/nets/news/2017/02/08/nets-partnership-with-infor

[14] Brooklyn Nets Form Wide-Ranging Partnership with Global Software Leader Infor,

[15] Brooklyn Nets Form Wide-Ranging Partnership with Global Software Leader Infor,

[16] Dale Kasler, Kings Players Will Sport Blue Diamond Logos on Uniforms, The Sacramento Bee (Oct. 10, 2016) http://www.sacbee.com/sports/nba/sacramento-kings/article107246067.html

[17] John George, Sixers, StubHub Ticketing Platform is Now Live, Business Journal (Sep 27, 2016) http://www.bizjournals.com/philadelphia/news/2016/09/27/sixers-stubhub-website-buy-tickets-flex-pricing.html

[18] NBA Board of Governors Approves Jersey Sponsorships, NBA.com (Apr. 15, 2016) http://www.nba.com/2016/news/04/15/nba-board-of-governors-approves-jersey-ads-for-2017-18-season/.

 

 

 

 

 

 

 

 

 

 


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