Is “Pay for Performance” the Newest Sponsorship Trend?
Posted: 9/29/2010 8:40:27 AM by
Jon Kander | with 0 comments
The French Football Federation (“FFF”), the national soccer body, is still feeling the effects from its less than stellar 2010 World Cup performance. The FFF recently had to pay out €4.5 million to its top-tier sponsors to compensate them for France’s first round exit from the 2010 World Cup.
My colleague, Jim Andrews, detailed the logic behind Bank of America’s “pay for performance” sponsorship model in an earlier blog post. In this case, the FFF has been negotiating new contracts with existing sponsors that include performance clauses with reward and penalty payments.
I wonder if this is going to become a trend. From my perspective, I hope that it doesn’t. I understand the logic behind this type of payment model. However, “pay for performance” only makes sense when it develops rigor and accountability around things the property can control (e.g., attendance, type and prestige of outside events that are scheduled to perform at a venue).
No matter how bad a team is, the property still needs to put butts in seats and they have some control over that through their marketing efforts and ticket promotions. However, an injury to a key player that derails what would have been a successful season – a property has no control over that and shouldn’t have to pay a fee refund or provide each sponsor added-value benefits.
Many sponsors may make the claim that they have to pay extra if/when a sponsored team makes the playoffs. That can be attributed to the additional games that sponsors receive recognition during and/or are able to activate around. To me, this is not an apples to apples comparison.
Do you agree? Are more properties adopting a “pay for performance” model with their sponsorship contracts moving forward? If so, should they be?
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Filed under: evaluation, negotiating, pro sports, sports, trends, contracts