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Global sports sponsorship spend in 2020 is set to plunge by US$17.2b due to the COVID-19 pandemic, according to sports marketer Two Circles.
With the health crisis resulting in the mass cancellations or postponements of sports events globally, the report revealed sports sponsorship rights fees will suffer a 37 per cent year-on-year decrease, dropping from US$46.1b in 2019 to US$28.9b in 2020.
The forecasts include a 45 per cent year-on-year decrease in spend (US$5.7b) from financial services companies, who are projected to contribute US$6.9b by the end of the year. The sector, which Two Circles mentions as one of the hardest hit by the pandemic, was the biggest investor in sports sponsorship in 2019 with US$12.6b (27.3 per cent) of total spend.
The report adds that most new sponsorship agreements have now been put on hold, and many existing agreements will be ended due to companies implementing major cost-cutting measures or going out of business.
According to Two Circles, sponsors will also be given ‘makegood’ sponsorship collateral and cash rebates due to the postponement and cancellation of live sport, significantly reducing their financial outlay in 2020.
The automotive, energy and airline sectors, also affected significantly by the pandemic, are set to reduce their spend. All three ranked in the top ten by sports sponsorship spend in 2019. Notably, automotive, the second biggest spender last year, will contribute US$2.7b in 2020, according to the forecast, down from US$5.9b the previous year, a 55 per cent decrease.
The figures do not include spend on partnership activation, often non-contractual expenditure which will also be significantly impacted by cost-cutting measures.
“As a marketing platform to reach passionate and emotionally-engaged audiences at-scale in brand-safe environments, sports sponsorship is unrivalled,” said Two Circles chief executive Gareth Balch.
“However, with live sport halted globally since March, the value that sports properties have been able to deliver brand partners has been limited, with cost-cutting in sectors that invest heavily in sponsorship also presenting a significant challenge in signing new deals.”
Balch, however, believes innovation that will take place to deliver value for brands during the COVID-19 lockdown period – and a sustained period of spectator-less sport – will strengthen sports sponsorship as a marketing platform post-pandemic.
“Though every corner of sport is hurting, we remain certain that sport’s economy will thrive in the long-term, and when the impending recession bottoms-out, all sectors will rely on the best marketing platforms available to grow their businesses.
“The sports properties that use this period to invest in their sponsorship propositions, moving away in particular from analogue-led logo exposure to digitally-driven, tangible audience engagement, will be those that thrive most post-COVID-19.”
It is the second report from Two Circles in under a month detailing the knock-on effect coronavirus will have for the industry. In April, research from the agency found that the sports sector could lose as much as US$61.6b in missed revenues by the end of 2020, having been on track to hit US$135.3b in total income before the pandemic struck.