30-second advertising spots during the February 4th Super Bowl are selling for more than $5 million (40% of U.S. TV households will be watching), but a collaborative study between Stanford University and Humboldt University (Germany) found that Super Bowl advertisers continue to see meaningful post-game sales during other major sporting events (i.e. March Madness, World Series), within the same calendar year, indicating the spend is worth it. Those that built a social media presence or digital campaign to follow their Super Bowl ad, were successful in keeping their product(s) on the consumer’s mind through baseball season. Companies that were the sole advertiser within a specific product category received the greatest long-term value (see: BUD, PEP). Long-term advertisers received a boost in sales during Super Bowl week, despite the product being purchased before the event (i.e. the ad has yet to run).
Howie Long-Short: Just 10 Super Bowl ad spots remain, so the study is unlikely to impact ad sales (and NBC’s bottom line) for this year’s game. If there are going to be immediate beneficiaries, it’s going to be CBS (rights to ’19 SB) and FOXA (rights to ’20 SB); the rights holders of the next 2 Super Bowls. NBC Universal (CMCSA) said it expects to generate $500 million in Super Bowl ad revenue, a figure in line with the total generated for the last 2 years. Advertisers aren’t worried about the NFL’s declining attendance, that trend hasn’t translated to the Super Bowl; last year’s game drew 111.3 million viewers, the 5th most watched TV event of all-time.
Fan Marino: Mean Joe Greene and Joe Namath participated in iconic Super Bowl commercials, but a lesser known collegiate All-American starred in one of my all-time favorites; Terry Tate as “Office Linebacker”, installing workplace discipline in a 2003 Reebok spot. At 6’5, 300 pounds, with 4.3 40 (yard dash) speed and collegiate All-American (Morgan State) game tape, Lester Speight (his real name) should have been an NFL star; position changes and injuries derailed his promising career. He never played in a professional football game.
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The NBA and Take-Two Interactive Software (TTWO) are launching the NBA 2K League in 2018; 17 NBA teams have committed to participating for a period of 3 years. Each franchise will have the opportunity to select 5 gamers at the March ’18 draft (tryouts begin in January), with the 15-week season (followed by 2 week post-season) set to begin in May. TTWO sold 43 million copies of “2K18” within the U.S. and China, so the NBA is convinced the league will be a success; but as it currently stands, there’s work to do. The NBA 2K League remains without a broadcast partner, a central gaming location (for competition) and has yet decide if competition will be held on Xbox or Playstation systems.
Howie Long-Short: The NBA isn’t the only business convinced esports is going to provide a significant return on investment; through 2016, 50 non-endemic brands had invested within esports and that number has more than doubled over the first 9 months of 2017. Non-Endemic? The term describes a second class of sponsorship; brands not traditionally tied to the business being advertised or product being sold (i.e. NBA – sneakers, balls etc.). Need an example of a non-endemic brand that earned endemic status? PepsiCo (PEP); NFL fans didn’t associate the brand with the sport until the company invested in the Super Bowl halftime show.
Fan Marino: Caps & Wizards owner Ted Leonsis believes “very quickly, esports will be the largest participatory sport with the most active participants”; further projecting the league will generate revenues that “dwarfs the NFL”. Leonsis is bullish because esports is a “global phenomenon”, but so is the EPL (players from 113 different nations have played) and that league generates less than half the revenue ($6 billion) of the NFL ($14 billion). I tend to believe what former AFL Commissioner David Baker recently told us; “it takes 60 years to grow a major league” and to while you can “flash”, to sustain success “it’s got to be multi-generational”.
‘It will dwarf the NFL’: The NBA’s going all-in on esports with the NBA 2K League
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NBA sponsors spent a record $861 million during the 2016-2017 season, a 7.8% jump from 2015-2016 and a significant increase from the projected 4.3% annual increase in overall sports sponsorship expenditures. Sponsorship dollars are expected to rise again during the 2017-2018 season, with a new 8 year/$1 billion Nike (NKE) uniform deal beginning and teams selling advertising patches on their jerseys for the first time. State Farm, Anheuser-Busch Inbev (BUD), Gatorade (PEP) and Tissot (OTC: SWGAY) were the league’s most active sponsors during the ’16-’17 season.
Howie Long-Short: The data was compiled by ESP Properties, a sports & entertainment research and consulting firm owned by WPP (WPPGY), an international advertising & PR firm. Back in August, WPPGY cut full year revenue projections to between 0-1% for 2017 as some of their high-profile clients have cut back on ad spend (the consumer goods sector, in particular). CEO Martin Sorrell warned that Facebook (FB) & Google’s (GOOGL) dominance as advertising platforms and Amazon’s (AMZN) disruption of the retail sector are holding back ad growth world-wide. If he’s right, things are going to get worse for WPPGY (and others in the advertising world) before they get better.
Fan Marino: 9 of the league’s 30 teams had team sponsorship revenues below the league average last year; Charlotte Hornets, Denver Nuggets, Detroit Pistons, Milwaukee Bucks, Minnesota Timberwolves, New Orleans Pelicans, Philadelphia 76ers, Sacramento Kings and Utah Jazz. Only Charlotte and New Orleans do not have jersey patch sponsorships in place for this season. Is it a coincidence that the other 7 were proactive in securing lucrative ad patch deals? Probably not.
Sponsorship Spend On NBA Tops $880M, Will ‘Skyrocket’ With Nike, Jersey Deals
Gatorade (PEP), the official sponsor of the NBA’s developmental league, is using their partnership with the G-League for more than just branding; they’re using its players as “lab rats”. The G-League and the Gatorade Sports Science Institute are working together to test product formulations and ingredients that will advance hydration and fueling techniques. Gatorade Head of Consumer engagement Kenny Mitchell describes a process where new products are tested at the developmental level and then launched with NBA players, who have the reach and influence to showcase the latest innovation.
Howie Long-Short: Gatorade recently introduced the GX sports fuel customization platform. The GX ecosystem combines Gatorade’s science-backed products with newly designed equipment and real-time biometric and tracking technologies, to provide athlete specific fueling recommendations. Technological innovations include a smart cap (for squeeze bottles) and a digital sweat patch. I like the decision by the Pepsi Co. subsidiary to go down the sports science route. Performance fuel pods and personalized bottles are new revenue streams for a company that needed to rebrand itself, as sales of its sugary drink have declined.
Fan Marino: Gatorade was recently fined $300,000 by the California AG for disparaging water. Yes, you read that right. In 2012, the company released an iPhone game called Bolt! The premise of the game was to run through the levels, drink Gatorade to remain fueled and avoid dangerous water that would compromise the game character’s performance. AG Xavier Becerra found the message to be “morally wrong and a betrayal of trust”. It was a video game targeting teenagers. The taxpayer’s dollars spent prosecuting this case should have been used elsewhere.
Gatorade’s NBA Partnership Focuses On Innovation, Not Just Rebranding
Looking to invest in sports, but not confident in your ability to select individual equities? SportsETFs has launched a Pro Sports Sponsors Index, consisting of 66 companies that are official sponsors of the 4 major sports leagues. Trading under the symbol (BATS: FANZ), the equally weighted index is a collection of highly recognizable brands including Coca Cola (KO), Pepsi (PEP) and McDonald’s (MCD). With sports media rights set to increase at a compound annual rate of 5.5% through 2020 and with sports sponsorships expected to increase at a compound annual rate of 3.9% over that same time period, the ETF hopes to capitalize on the growth potential associated with pro sports league partners.
There’s a new way to bet on the companies that bet on sports
Fan Marino says: I found it noteworthy that NASCAR sponsors were not included. I was looking forward to seeing Carl Long’s marijuana-vaping company, on the list.