The Rapid Shift in Consumer Sentiment

In North America, prior to the coronavirus pandemic, consumers were already beginning to show signs of change in how they engage with live events across sports, music, arts, culture and community.  

This shift is primarily driven by evolving demographics. Younger consumers are engaging with professional sports very differently, which has put downward pressure on gate attendance and broadcast numbers (and revenue).  MLB teams and NFL teams, for example, continue to see the average age of their fans rising. Both leagues, and their respective teams, are finding it more and more challenging to recruit and engage younger fans.  E-sports continues to grow its prominence and while likely over speculated, is clearly here to stay.

Across North America, festivals (arts, culture, community, music) are growing in both number and size. Consumers are seeking more analog experiences and more ways to connect with others in a physical context, in an increasingly digital world.  Younger consumers, more interested in community-oriented activities and in giving back, are engaged in the donation of their time and resources, making community organizations and causes stronger connection points for brands.   

The pandemic, with cancelled events, shortened or reconstituted seasons has had a significant impact on the assets that a rights holder has been able to deliver to its sponsors.   

It has also caused many brands to realize that their sponsorship agreements with rights holders were inadequate, and how they manage their sponsorship investments with properties has not pressure tested very well.   

In the early months of the pandemic, we were supporting clients with assessment and renegotiation of lost value from sponsorship deals. There wasn’t a one-size-fits-all solution across properties and across client sponsorship portfolios. We advocated for a partnership minded approach and worked with properties to unlock new value where possible.

In renewals, and even in some cases – net new deals for client brands, we are predicting that sponsorships are going to exist in a period of greater uncertainty for the next 24 to 36 months. This will impact rights fees and the need to build greater flexibility into deals even more essential (this anchoring to flexibility will sustain past the pandemic).  

In a previous post, we discussed how this flexibility will need to manifest in the form of more digital asset led packages. The media landscape is changing rapidly as is the fan mindset. The ability for sponsors and properties to pivot collaboratively through social and digital assets will ensure both can nimbly react to these shifts.   

We were already big proponents of variable compensation packages between sponsors and properties.  The uncertainty coming out of the COVID-19 crisis makes variable compensation on rights fees even more important for brands and we continue to advise our client’s as such.  Asking rightsholders to put some proverbial ‘skin in the game’ is how sponsors can ensure properties are effectively partnering in supporting the brand’s goals and objectives. 

Force majeure language in sponsorship agreements is forever changed.  In renewals and new deals, we have gone beyond pandemic considerations to better contemplate what might impact a property’s ability to deliver sponsorship assets and entitlements. More deliberate contract language helps proactively consider eventualities and facilitate remediation more easily when needed.   

The economic fallout of the coronavirus pandemic has taken some brand industry sectors into near existential spaces – airlines, hotel brands to name only two.  

Many brands, while having managed through a myriad of challenges in 2020 including supply chain and production issues, have benefited as consumers have migrated to more trusted brands.  Many of these brands benefited from a rise in market share without much marcom pressure at all.  Now the challenge will be to maintain those pandemic related share increases. Sponsorships provide an opportunity to create and leverage emotional docking points for those brands, with an ability to impact both mid and lower funnel metrics, including shopping behavior and sales.   

As we track consumer intent during the pandemic, there is considerable latent demand for live events of all kinds; professional sports, concerts, festivals, community events.  According to the latest report from a multi-phased IMI research study, there is significant pent-up and growing demand for everything live.  

As a vaccine starts to deploy and as consumers begin to slowly reengage with the world around them, we’re predicting a rise in the importance of ‘local’ over the next two plus years.   

We think of that consumer reconnection in the form of concentric circles moving from the household, to the neighborhood, to the wider community, to the region, and then outwards from there – consumers will look for brands to be there alongside them on that journey. 

Even when larger events become safer to attend, we predict people will slowly and cautiously reengage to scale. Closer, more familiar, and more psychologically safe opportunities to connect locally will become more important over the short and mid-term. Consumer sentiment shows that during the pandemic, they have felt more connected to their neighborhoods and to their communities. We believe a lot of the good that people have discovered in what is close and familiar to them will sustain once the pandemic is behind us.  

Coupled with many brands taking a wait-and-see approach to large-scale sponsorship, this creates tremendous opportunity for small, locally-focused properties that will be neighborhood, community, city, and regionally focused. Events people can walk to or are just a short drive away – food, music, arts, community – will rise in importance. 

Brands looking to engage with consumers will need to be prepared to follow these trends, while being nimble, protecting for downside and being efficient with their spends. 

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The Rapid Shift in Consumer Sentiment