Australians are reeling over the cancellation of their favourite sporting events as a result of COVID-19. Many sporting codes are on the edge of financial collapse and their fans are reduced to either reading about the internal squabbles plaguing their sport’s administrative bodies or shaking their heads over player scandals. As a sponsor you may be looking for other opportunities. Perhaps you have made the decision to leave the physical world behind and jump into the virtual world of eSports?
What should be in your sponsorship agreement?
As eSports expand in popularity, they are being hosted not only on gaming platforms like TWITCH but also on mainstream cable channels. Brands looking for ways to advertise to an increasing viewership are moving into this space. As in the real world, there are some things to consider when entering into sponsorship agreements.
What are you getting for your sponsorship dollar?
Are you paying for a few social media posts, streaming rights or are you ‘the official energy drink’ of your player or team? Your sponsorship agreement must define what types of products or services you will be allowed to associate with a player.
Commercial partners will want the ‘brand sector’ they are sponsoring to be as broad as possible, for example, you may want to become the ‘official equipment sponsor’ of a player but the player themselves wish to limit your sponsorship category to ‘headsets’ so as to encourage other commercial partners to sponsor ‘mice’ or ‘keyboards’.
You must also understand what other deals a player or team may have. Sponsorship arrangements entered into by individual players may prevent you from successfully exploiting a team sponsorship and vice versa.
Timing of the agreement
You want your sponsorship agreement to cover the period where you will get maximum exposure for your brand, including:
- The tournament: Obviously, you want your sponsorship to coincide with a particular tournament or playing season to get the biggest bang for your buck; and
- The leadup to the tournament: As in any sport, there is no guarantee that your player or team will qualify for a tournament, so the ‘practice sessions’ streamed by a player or team is where the player or team builds up their community and communicates most regularly with their fan base and shouldn’t be overlooked by a sponsor.
As a sponsor you may wish to ‘lock in’ a player or team for several years, particularly in the case of ‘up and coming’ players and teams. The benefit to you is the rights to the sponsored player or team may be relatively cheap to acquire at the beginning of their career, but what happens if potential is not realised? You need a termination clause that allows you to end the agreement if specified conditions are not met, such as a player qualifying for certain tournaments.
Let’s be optimistic though and assume that your hope of sponsoring a ‘star’ player or team is realised. Your sponsorship agreement needs to contemplate ‘renewal rights’ that allow you to extend the term of the arrangement or ‘matching rights’ that give you the opportunity to match offers made by competing sponsors and retain the contract.
Conditions of sponsorship
Traditionally team rosters fluctuate frequently. The movement of star players between teams can change the fortunes of a team dramatically from one tournament to the next. Teams also change leagues and competitions regularly and it is not unusual for the format of the leagues and competitions themselves to look quite different from one season to the other. For this reason, sponsors should ensure that the sponsorship arrangement is contingent on such things as:
- a player forming part of a team;
- a team continuing to play a particular game;
- a tournament being held in a certain region; and
- a team qualifying for a tournament.
You may also wish to include terms that allow you to terminate or reduce your sponsorship for player or team behaviour (on and off-line) that affects the reputation of your brand or for ‘unsportsmanlike behaviour’. What constitutes sportsmanship depends upon the game itself and the demographic it appeals to, so do your research here. Some fanbases are much more accepting of aggression and trash talk than others!
Intellectual Property (IP) rights
Both parties need to be clear about what IP they own and can use in the wider context of the gaming world. As a sponsor you must ensure your IP protections are sufficiently robust in the necessary jurisdictions your logo is being promoted in. You must also ensure that:
- the player or team owns the IP rights in their logo in the appropriate jurisdiction; and
- it can be licensed to you to show the player’s or team’s connection with you.
IP warranties and indemnities, as well as approval processes for use of IP, should be given detailed attention in your sponsorship agreement.
Clarity about payment terms is important for both the sponsor and the player or team. Payment is often timed around defined periods rather than actual dates. For example, a percentage may be paid at the beginning of a season or event and the balance at the end. If the term of the sponsorship agreement lasts for years rather than just for a season or an event, this allows flexibility when actual dates are not known.
It is not unusual for some payment to be made upon the announcement of the sponsorship deal and for staggered payments to be made throughout the term of the agreement in line with tournaments and events.
Jurisdiction of the law governing the contract
eSports is truly global in its nature and transcends borders. Players all over the world may at the same time be participating in a tournament hosted in yet another location. It is therefore very important that the law governing your sponsorship contract is the law of Australia and the courts of this country have jurisdiction. This gives you certainty in the event of a dispute and will save both time and money.
How we can help
We understand that sponsorship is about partnership. We will help you negotiate and prepare a sponsorship agreement with eSports players and teams that will maximise your association with them. Call us on 1300 654 590.