By Joseph Cheah
In 2018, sponsorships have been an integral part to the rising development of the esports industry. It was the biggest year yet where we see several well-known brands entering the esports market through sponsorships (sponsor a team or an event). On that note, it is essential to understand the basic considerations when entering into an arrangement with a potential sponsor. Here are some of the sections to be mindful of during negotiation:
It is important to clearly stipulate the duration of the sponsorship. Usually, sponsorship lasts for a length of time, but certain sponsorship deals can also be only for a specific public event (1 to 3 weeks).
Both parties’ expectations must be clearly defined. Without a clear guideline or obligations set out, it would often lead to misunderstanding and dispute, which may lead to a potential lawsuit due to a breach of contract.
Here are some of the examples where expectations can be defined:
- if a logo must be displayed, the party must set out where the logo must be placed (team jersey, social media platform, streaming platform).
- if there is an expected social media outreach numbers to be met, the agreement must clearly set out the expected numbers to be fulfilled by the team.
Apart from the team’s obligations, it is also essential to clearly set out the responsibilities of the sponsors.
If the sponsor is providing monetary sponsorship, it needs to specify the amount, and the expected date of receipt of the money.
If the sponsor is providing products, it needs to specify the products sponsored, and the team’s obligation on whether or not they are required to utilize. As products may vary, it is generally more difficult to be specific on the team and the sponsor’s obligations. Parties must be sure that they have an understanding of what is expected of them.
More often than not, a sponsor expects exclusivity from a particular category – so the same team would not have an arrangement with any of the sponsor’s competitors in the market. Parties ought to agree on the sponsor’s category and its exclusivity are thoroughly discussed.
As teams are supposed to use another brand for advertisement or promotional purposes, this section is essential to consider in the agreement. Typically, a sponsor will grant the team the right to use the brand and logo in a specified manner, vice versa.
The sponsors will also usually prefer to have a say in the messages the team spreads in its social media page. This is to ensure that the messages sent are in line with the brand image of the sponsors. These terms and conditions before posting a message should all be specifically documented in the agreement.
Every agreement must come with a termination clause. Typically, the usual provisions ought to be included – party may terminate the agreement in the event of liquidation, failure to fulfil obligations etc.
Above and beyond, parties may also wish to include a section known as the ‘Moral Clause’, where parties may cancel existing sponsorship agreement if the other party’s brand image has been damaged substantially. The idea is that it provides an avenue for a party to dissociate itself from the other party which may damage its own brand.
The above is some of the considerations a party should take into account when negotiating a sponsorship agreement. To ensure a long-lasting professional relationship with the other party, it would be wise to be transparent and up front on each other’s expectations, and accurately reflect the same in the sponsorship agreement.