Inside the business of sports sponsorship in the UAE

According to a recent PricewaterhouseCoopers (PwC) Sports Survey report, the annual growth rate for the sports market will likely slow from 8 per cent to 3.3 per cent over the next 3-5 years. However, a major driver of that market will continue to be brand sponsorships, led by investments worth tens of billions annually.

Mike Davis, regional director for the Middle East and Africa at CSM Sport & Entertainment, estimates that pre-Covid, the global brand partnership industry was worth around $70bn annually. Of that, the Middle East and North Africa accounted for around $2.8bn – an amount that although far smaller than North American and European markets, still isn’t a figure to be mocked.

With the Covid-19 pandemic taking a sledgehammer to the global economy, some of the hardest-hit industries including aviation and tourism were aware that they can ill afford to drop brand visibility.
“We have continued with a number of our sponsorships this year, but all of the overseas events have been scaled back and held without spectators including our two sporting events in Ireland – the Dubai Duty Free Irish Derby at the Curragh Racecourse in June and the Dubai Duty Free Irish Open which was held at Galgorm Castle Golf Club in September,” Colm McLoughlin, executive vice chairman and CEO of Dubai Duty Free told Gulf Business.

“All of the events still provided us with TV coverage, so our brand was visible to the international audience and the message that ‘Dubai is Open’ was very evident,” added McLoughlin while confirming that Dubai Duty Free continued its participation with this year’s Omega Dubai Moonlight Ladies Classic in November and said that discussions were ongoing with the Dubai Sports Council about the next edition of the Dubai Duty Free Championships.

“While we do not envisage a return to normalcy for any of them in 2021, we are hopeful that more will be staged next year (compared to some events being cancelled this year),” said McLoughlin.

McLoughlin’s pragmatic comments about a return to normalcy underscore the need for brands to continue to engage with sport. As CSM’s Davis explains, statistics produced by Kantar showed that 63 per cent of people are more likely to do business with a brand that aligns itself to something they’re passionate about, 74 per cent feel more loyalty to a brand that is involved in sports and entertainment, and that brand partnerships help to humanise brands and give them relevance.

“Research shows that if you perceive a brand experience to be human, you’re 1.9 times more likely to recommend that brand and 1.7 times more likely to [make a] purchase. There’s a science and methodology to brand partnerships,” notes Davis.

Major companies in the UAE have pushed forward a multi-tiered and big-budget approach to sports partnerships. Abu Dhabi-based carrier Etihad signed a reported GBP400m 10-year-deal with Manchester City back in 2011 that has gone beyond just a prominent logo on the team’s t-shirt. On the same day that the airline announced the mega deal in July 2011, it announced it would begin twice-daily flights from Manchester to Abu Dhabi the following month – showing that a sponsorship agreement has a long tail beyond the sports pitch.

“The key objectives for us are to drive awareness, positive sentiment and ultimately traffic, towards both Abu Dhabi and Etihad,” says Yasser Al Yousuf, vice president of commercial partnerships at Etihad.

“There are additional benefits that come with sponsorships such as access to data, and unique corporate hospitality experiences that allow us to entertain key partners with ‘money can’t buy’ entertainment experiences.”

Davis cites another example of Dubai-based global port operator DP World as being “a gold standard” when it comes to deep-rooted sports partnerships that make good business sense too. DP World, a company which is already the global partner of the European Tour and title sponsor of the DP World Tour Championship, came on board as global logistics partner and title partner for the Renault Formula 1 Team at the start of the 2020 season. “They [DP World] are now considered to be a partner of choice when it comes to logistics requirements for the Renault-Nissan-Mitsubishi Alliance procurement office. That has allowed them to pick up business with the organisation,” explains Davis.

Also earlier this year, DP World backed the multi-billion dollar Indian Premier League (IPL) franchise as its global logistics partner and also signed a long-term sponsorship agreement with Royal Challengers Bangalore. “With an overall viewership of 462 million, the T20 tournament is one of the largest sporting events in the world. Our partnerships highlight DP World’s capabilities in the business of sports, which not only includes creating value around major global sporting events, but also designing agile and responsive supply chain solutions for sports brands across global markets,” said a spokesman for DP World.

DP World acquired Transworld Feeders and Avana Logistek the month before inking the agreement with RCB. Keeping its branding top of mind among nearly half a billion viewers, a very large share of which is from the Indian subcontinent, can only be good for business.

Generating revenues 
The core revenue streams for the sports marketing world are broadcasting and media rights, brand partnerships, licensing and merchandising, and gate revenues. The latter two of those four streams have taken a sizeable hit due to most major sporting events being closed off to the public entirely. “Rights holders are desperate for revenue. It is a buyer’s market at the moment. Covid has exposed the sports marketing industry for perhaps not being as robust a business as it should be. Rights holders now need to think smarter and deliver more quantifiable results,” said Davis.

But before Davis and his team, whose clients include DP World, Saudi Arabia’s Public Investment Fund and NEOM as well as Bahrain sovereign wealth fund Mumtalakat, talk about quantifiable results to their clients seeking to partner with sporting events, they discuss a value-to-cost ratio with them. “We establish a valuation of how much they would pay if they were to buy those rights on the open market – whether that is the media value or the hospitality value of the experience – and overlay them with the cost of the brand partnership itself. If the rights holders are asking for $1m, and the value being derived from it is $4m, then you have a value-to-cost ratio of 4:1. Typically, you’re looking for a value-to-cost ratio of anything north of 2.2:1 that demonstrates good value,” explains Davis.

Determining a good value-to-cost ratio may result in negotiating a contract successfully, but then as Davis says, the amount paid for the contract often neglects a vital component of any brand partnership – the activation fee. “Often people forget when you enter into a brand partnership that you pay a rights fee, but you also need to activate it. Research tells us business to consumer brands spend on average 2.2 times more than the rights fee on activation. In business-to-business brands, that comes down to 0.83 to 1. So for every $1 I spend on my rights fee, I spend $0.8 more in activating it.”

That activation fee is spent on three main areas: live experiences and creating bespoke events for the brand’s stakeholders; furthering its storytelling through PR and social media; and the all-important area of measurement evaluation. “Success is measured in two areas: one is the footprint of brand partnership which is the metrics you get from what media value did you get, the levels of attendance, the number of customers or prospects you engaged with – those are quantifiable immediate results. The other is measuring the impact – if one of your objectives was to engage with customers to drive more revenue, then you need to have a way of measuring that. You need to be able to say that I invited customer X, they had this experience, and it led to this outcome.”

Several brands have instituted comprehensive measurement systems – and recorded equally impressive metrics justifying their investment. “Dubai Duty Free commissions third-party brand evaluation companies such as YouGov Sport, Neilsen or SMG Insight,” says Dubai Duty Free’s CEO McLoughlin.
“Last year’s Dubai Duty Free Irish Open in Lahinch Golf Club generated over $243m worth of media value of which $74.2m is for the Dubai Duty Free brand alone, while the media analysis for the Dubai Duty Free Tennis Championships this year generated an estimated $1.53bn worth of TV exposure for Dubai, of which $737m is for the Dubai Duty Free brand alone.”

Resonating those huge returns on investment, CEO of cycling outfit UAE Team Emirates, Mauro Gianetti reportedly said last December that the team generates $400m in returns for its sponsors. With Tadej Pogačar clinching victory at this year’s Tour de France, that figure could only be enhanced. That Emirates continues to associate itself with a wide range of sports including football, rugby, baseball, horse racing, motorsport, golf and tennis, means it has one of the best represented portfolios of sports sponsorships among its UAE counterparts.

Meanwhile, to encourage a more direct way for brands to measure their returns, Toli Makris, a Greek entrepreneur and mixed martial arts promoter who is also the co-founder and CEO of EX Sports, recently introduced a digital collectable platform based on blockchain technology.

Through the EX platform, fans can buy collectables backing their favourite players. Should their chosen player win, the fans will receive tokens which can be spent within the ecosystem itself and on the participating sponsors. So for example, these tokens can be redeemed for airline miles by an aviation sponsor or for room upgrades by a hospitality partner which will thereby incentivise spends by fans and will also allow these brands to measure their returns effectively.

The future of sponsorships
If there is one sport that has leapfrogged the competition to become one of the most sought-after sports for brands to back, it is esports.

“The League of Legends final commanded 22 million live viewers. In context, the NBA finals commanded 18 million and basketball is the third-most followed sport in the world. We’re seeing a 43 per cent year-on-year growth in the number of professional esports athletes coming to the market, and a 42 per cent annual tournament prize money growth,” says Davis.

It’s reason enough for the likes of BMW Middle East, for example, to launch a three-day Fortnite Summer Gaming Festival with prize money of up to $10,500 earlier this year. But Davis cautions that brands won’t have a slam dunk entry into esports which has a young, switched-on audience. “The audience within esports is very critical of anyone who comes into their ecosystem. My advice to any brand considering esports is that they need to have absolute clarity on the value they will bring to that audience.”

Bringing added value to that esports audience will be EX Sport’s Makris with the upcoming EFN Champions League, which will be held in Dubai next year. The hybrid event will include live mixed martial arts events and esports too. Each team will have players participating in live Muay Thai and Jiu-Jitsu events, while under the same roof their gaming counterparts will be competing virtually on esports games including Mortal Kombat and Street Fighter.

Overall, rather than cutting back, brands have taken a counterintuitive approach to continue their plans with brand sponsorship. Last month, Etihad signed a multi-year sponsorship deal with the UAE Football Association to support UAE’s national football teams, including the First team, Olympic team, and the Youth teams.

The new Etihad Arena in Abu Dhabi will also be the new home to the UFC, another sport that can likely attract bigger sponsors as it continues to stage events despite the pandemic.

With none of the other big companies in the UAE including Mubadala or ADNOC changing the course with their major sports partnership agreements, they’ve made it clear that their strategy is long-term and robust.