Coronavirus: what it actually means for sponsors if 2020’s biggest events are disrupted
The Tokyo Olympics, Glastonbury, Euro 2020, Cannes Film Festival, SXSW and Cannes Lions. These are just some of the major events that hang in the balance as the coronavirus continues its global spread.
At the time of writing, Covid-19 has infected 98,851 people around the globe, with the death toll sitting at 3,390. The World Health Organisation (WHO) has warned that society is entering “unchartered territory”.
Disruption has ranged from school closures around Italy – Europe’s worst-hit country – to new James Bond flick No Time to Die having its premiere delayed. The Premier League has suspended its ‘fair-play’ handshakes before kick-off and retailers have been warned by the UK government not to “exploit” pricing for products like hand sanitiser and face masks.
Faced with both a ticking clock and an extremely tough call, events organisers and sports rights holders are now under pressure to clarify if – and how exactly – their best-laid plans will proceed in lieu of a solution to the virus’ rapid spread.
In the ad and tech industries alone, several events have already been shelved for this year, including MWC, MIP TV and Facebook’s F8. Others have been moved online, including The Drum’s own pub activations in London and Austin along with Adobe’s annual summit.
SXSW is under growing pressure to cancel amid pullouts from Apple and Netflix and a 50,000-strong petition underscoring public health concerns. Agencies are taking a wait-and-see approach to Cannes Lions, but organisers insist it remains “firmly open for business”.
The president of the Tokyo 2020 Olympics organising committee said on Thursday (5 March) it would be “impossible” to cancel the Games as a result of the outbreak. There are options to stage them differently, however, with the New York Times reporting that during a conference call with WHO last week, sports federations discussed holding the event behind closed doors, without fans.
Ahead of the Euro 2020 football championships – scheduled to be hosted in 12 cities across Europe – Uefa is observing the situation “country by country”. Glastonbury is still preparing for its June festival, but also “closely monitoring developments”. Cannes Film Festival says there is “nothing to indicate” that its own event will not take place.
While delegates, musicians, studios, players, governments (Japan has reportedly funnelled $30bn into Tokyo 2020) and fans wait with bated breath, so too do sponsors – with some of the world’s biggest brands having already started to funnel cash into activations around the Olympics and Euros especially.
But what does it actually mean for advertising partners if the event they are backing gets cancelled, postponed or disrupted?
The legal in and outs
The list of big names attached to 2020’s events reads like a who’s who of brands and shows the many guises in which sponsorship can manifest itself.
Airbnb is a newbie on the flagship official Olympic sponsor roster, joining longtime partners like Coca-Cola and Visa. FedEx has a deal for the Euros along with Volkswagen. Carlsberg is due to be served for the first time as the official beer of Glastonbury.
Nick Breen is senior associate at law firm Reed Smith, where he works with clients including event organisers, broadcasters and advertisers advising on commercial matters. He believes the implications of a big cancellation will be significant for brands – especially if they’ve stumped up cash already.
“A sponsor might find themselves in a position where they have paid a significant sum for rights and have those rights severely diluted in value or become worthless,” Breen explains. “They will likely have been developing marketing assets, perhaps engaging third party agencies to help, running prize competitions for tickets, and otherwise incurring considerable time, cost and resource in preparing for the event.
“If an event is cancelled then the sponsor will have had very limited ability to extract the value of the association. Since sponsorship of major events can often contribute to a meaningful portion of the brand’s overall marketing strategy and budget, this can have drastic consequences.”
However, if a mammoth event like the Olympics was instead to be postponed – a possibility the IOC has floated – then marketing departments wouldn’t feel the impact as sharply.
“The effects are less severe where the event is merely being rescheduled and, where the event is an annual, repeated event, then a sensible solution may be for the sponsor and promoter to simply carry over the sponsorship to next year’s event.
“It won’t always be clean or even possible to reschedule an event or defer a sponsorship to a subsequent event, but in the majority of cases, sponsors and promoters will need to find a commercial and pragmatic solution, rather than resorting to a legal dispute.”
Alex Kelham, a commercial and IP lawyer who heads up Lewis Silkin’s sports business division, agrees that in the interest of maintaining commercial relationships, sponsors and brands will likely hash issues out outside of a legal setting.
“A lot of this stuff is done as a genuine partnership,” she says. “A lot of the sponsors are really invested in the event. Because of this relationship, most things will be worked out on a sensible basis partner to partner, rather than digging out the contract.”
However, both Kelham and Breen highlight how sponsors for major events like the Olympics will likely be anxiously scanning their contracts for a ‘force majeure’ provision which covers ‘unforeseeable circumstances’.
“This often-over-looked provision is frequently (and mistakenly) described as ‘boilerplate’,” explains Breen. “The basic concept is that a party to a contract will not be liable for a delay in performance or non-performance of its obligations where such delay or failure is caused by a force majeure event.”
He adds that more “sophisticated” promoters and sponsors will negotiate this clause carefully but often it is overlooked or sometimes omitted altogether.
“Force majeure provisions should detail with specificity what amounts to force majeure, but it is common for short-form versions to simply refer to ‘events outside of a party’s control’.
Kelham adds how in the context of coronavirus, if a force majeure does not specifically highlight epidemics or diseases, a promoter seeking to rely on it will need to try to apply the coronavirus situation to a listed event.
For example, a brand would need to argue the case that the outbreak was an ‘act of God’, a term commonly found in these provisions and what Breen calls a “hangover from the insurance industry”. Both also stress though that acts of God are typically linked with natural disasters, such as floods and fires – so going down this route may not be successful.
If they do tread this path, brands will also need to demonstrate that no reasonable steps could have been taken to avoid the force majeure event.
“Although the coronavirus outbreak is evolving day-by-day, there have not, at the time of writing, been any outright bans on events taking place by UK authorities,” says Breen.
With most decisions to cancel are currently being made by choice, rather than obligation, the force majeure protection is unlikely to cover brands’ backs entirely.
A more digital future?
Though the Olympics is the biggest event that could be rocked by the coronavirus, its ripple effect is now being felt by other organisations and brands in sport already, with several key events across the world over the coming months that act as run-ups to the Games also under threat.
Communication will be key for all involved in live sport over the coming months, says Steve Chisholm, an ex-BBC journalist and founder of sports PR firm Run Communications.
“There is a job for some sports organisations that are organising and hosting public events between now and Tokyo to keep their audiences informed of how such events might be impacted, the practical considerations that any spectators attending events must be aware of, and primarily that they have the best interests of their athletes and fans alike front of mind,” he says.
He does highlight an opportunity, however, for digital to play a role in delivering new experiences to fans.
“The way fans engage with live sports events has changed hugely over recent years, and while every athlete dreams of winning medals in front of packed stadiums they’re also now able to engage with fans via digital media and social channels like never before.”
He points to Facebook’s “staggering” interactions data from Rio 2016, where 277 million people had 1.5 billion interactions related to the Olympics during the course of the Games themselves.
“Whatever happens between now and July when the Games are set to kick-off, Tokyo 2020 will likely be the biggest ever global sporting event to date and that will be thanks to continued proliferation of digital media across the globe.”
Tariq Duff, head of client partnerships at production firm Unit 9, agrees that it is time the IOC took a leaf out of Boiler Room and esports’ playbooks amid the looming threat of postponement or cancellation.
For Tokyo 2020, he suggests a ‘closed doors’ scenario where two-way interactions can happen via streaming services without a physical process.
“When millions have been poured into sports sponsorship and television rights, the show must go on,” he says.
“We must think of different ways to interact,” he adds. “We can still take part and view and event whether it’s being streamed or behind closed doors. Purists can argue that the performance of the players won’t be as high or the vibe would be killed, but we’re thinking in a digital way about how events can be viewed and pulled together.”