Can Jersey Sponsorships Actually Damage Long Term Revenue?

It seems that jersey sponsorship has come fast and furiously the past few weeks. First the Phoenix Mercury breaking ground in the WNBA, then Man U striking a major deal with Aon showing pro teams how much revenue potential jersey sponsorships can have, followed by rumblings of NFL teams on the verge of deals for patches on practice jerseys and rumors of more WNBA teams jumping on board.

Inevitably, the debate turns to the MLB, NFL, NBA, and NHL. Will commercialization outweigh tradition in these sports? For the most part, over the years, business in sports usually wins out over tradition…eventually. TV schedules, start times, the wild card, stadium naming rights, the list goes on. But, this is one case where tradition may actually be the better business decision.

Put the WNBA aside, which has a small, yet loyal fan base, but lacks the tradition of the big leagues and is not a big money sport. Each of the four major leagues has built substantial properties businesses over the past 10-20 years. Merchandise and licensing is a significant revenue source for players, teams, and leagues – led of course by jersey sales. If Warner Bros. replaces Lakers on the front Kobe Bryant’s #24 jersey will it have the same value? Will fans still want to buy it? Better yet, will removing the single most recognizable team image devalue brand affiliation in the long run, thus damaging overall merchandise sales?

Team Presidents starved for revenue should consider these questions before entertaining jersey sponsorships – if the leagues decide to allow it. A patch on the uniform is one thing, but headlining the jersey is another, which is how the WNBA deal works. Companies come and go, change names through merger and acquisition, or simply decide not to renew sponsorships, just look at the stadium/arena naming rights landscape. What happens to teams that decide to sell jersey sponsorships and wind up with 3 or 4 different names on their jersey over a decade, or have the next Enron plastered on the front. Will anyone actually want to buy that merchandise?

Think 10, 20, 50 years out with generations that grow up without any affiliation to the team logo. It could go two ways – people accept it and consciously like to buy it, or it could destroy what has become a lucrative team merchandise business. It’s an interesting study for teams to consider when making these decisions, and when structuring contracts for jersey sponsorships.

On the flip side, if it hurts sales and teams decide to build that economic value into the sponsorship to make sure they profit from the deal, do sponsors have any chance for a positive ROI? Without delving too far into the ROI debate, which is not quantifiable yet, what is the difference in value and impact between a patch on a jersey and title sponsorship?

The jersey sponsorship question goes much further than commercialization vs. tradition. It lies in a detailed team business analysis that could have substantial long term revenue effect.

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