Are NBA jersey sponsorships worth it?

15 Oct, 2021 - 00:10 0 Views
Are NBA jersey  sponsorships worth it? Brooklyn Nets signed a multi-year deal with brokerage platform Webull, that will reportedly pay the team about US$30 million annually

eBusiness Weekly

With media day kicking off training camp for teams across the National Basketball Association (NBA) this week, we’ve seen a slew of sponsorship announcements over the last five to seven days.

The Los Angeles Lakers signed a 5-year, US$100 million jersey patch deal with South Korean food maker Bibigo last week, a significant increase over the —US$12 million that their previous patch sponsor, Wish, paid annually over their three-year deal.

Additionally, the Brooklyn Nets signed a multi-year deal with brokerage platform Webull this week, that will reportedly pay the championship-contending team about $30 million annually.

Largest NBA jersey patch deals

 Brooklyn Nets: US$30 million annually (Webull)

 Los Angeles Lakers: $20 million annually (Bibigo)

 Golden State Warriors: US$20 million annually (Rakuten)

The craziest part: At US$30 million annually, not only is that 50 percent more than the Los Angeles Lakers and Golden State Warriors receive from their jersey patch sponsor, but it’s also 3x the US$10 million that Barclays reportedly pays for the naming rights to their arena in Brooklyn.But the real question is — are these deals even worth that much?

Jersey sponsorships have existed in the WNBA since 2009, but the NBA became the first of the four major US professional sports leagues (NFL, NBA, MLB, NHL) to add sponsorship patches to their jerseys back in 2017.

The plan was simple: NBA commissioner Adam Silver wanted to test the concept and revisit the results a few years later before deciding whether they would permanently implement the sponsorship inventory.

As they do with most visually altering changes, people complained, but the results have been significant enough that the NBA has decided to keep the new revenue stream for its teams and players.

But here’s the thing — not only did it take multiple years for some teams to finalise sponsorship agreements, but now that the original deals are ending, it doesn’t appear that many of the initial partners are resigning or extending their sponsorship contracts.

Of course, there is a lot of nuance behind this topic. 

Only a few marquee teams — think Lakers, Warriors, Nets, Knicks, etc. — are recognized both nationally and globally. So we can talk about market dynamics, fan purchase behaviour, team performance, franchise reach, and more, but ultimately, most NBA teams are in search of regionally aligned sponsors.

For example, take the Minnesota Timberwolves. 

They signed a deal with Fitbit in 2017 that paid the struggling franchise US$3 million annually. 

Still, despite that being on the low-end of the sponsorship market (Avg. NBA deal is worth US$7m to US$10 million annually), the fitness company decided not to renew when their agreement ended this year.

Instead, the Timberwolves signed a multi-year agreement with digital security firm Aura.  The interesting part? 

Financial details aren’t public, but Aura isn’t just getting a 2.5-inch-by-2.5-inch patch on their jersey — the Timberwolves expanded their inventory.

In addition to their designation as the franchise’s official jersey patch partner, Aura will also be named the official digital security provider of the team, receive in-arena and on-court signage, and run a marketing campaign with Timberwolves guard Anthony Edwards serving as a brand ambassador for the company.

My point being, how much is the 2.5-inch patch really worth if the deal also includes a significant amount of more traditional sponsorship inventory?

Ultimately, this doesn’t mean that the jersey patch sponsorship program should be discontinued. 

Quite the opposite actually — even at US$10 million annually, that represents about a 5 percent increase in total annual revenue for the average NBA franchise.

Average revenue per 

NBA franchise

2015: US$195 million

2016: US$245 million

2017: US$267 million

2018: US$292 million

2019: US$264 million

That’s obviously significant money. But, still, I do think it’s interesting that the actions of most brands appear to indicate a belief that the majority of the value is derived early on in these deals, not necessarily from creating long-term, decade-plus strategic partnership agreements. —Huddle Up.

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