When “Official” Isn’t So Official

As our sports culture has developed, so has our desire to market to that culture.  You can’t turn your head without seeing an advertisement for a product with a tie-in to a sports property.  Whether it’s the Olympics and Visa, NASCAR and Sprint, or the NFL and Coors Light — Official Sponsors are all around us.  Sports properties, like most businesses, want to maximize revenue. If there’s an official category that they can sell, they are going to sell it.

As an attorney, I deal with Official Sponsor agreements all the time and often get the question: “What does it mean to be an Official Sponsor?”  Well, the fact of the matter is that without knowing the context of the sponsorship it means next to nothing!  The terms of each specific contract determine what “Official” means.

Generally, Official means that the sponsor will be the exclusive sponsor of the property with respect to its category, but this is only true if the contract says they’ll be exclusive.  That is, the property will not accept another similar sponsor (think Coors Light and Miller Lite). I’ve seen contracts where Official was mentioned all throughout the agreement and it certainly would make you feel as though the intent was for the sponsor to be exclusive, but upon further review there was no language stating that the deal was exclusive.  Such an issue is either bad drafting or the property trying to pull a fast one.  Either way, it’s a poorly drafted contract.

To address this issue, there are two threshhold questions to ask when deal with an “Official” sponsorship negotiation.  One: is this an exclusive sponsorship?  If so, language specifically stating that the relationship is exclusive needs to be in the agreement.  “Official” just doesn’t cut it.  Two: what is the scope of the exclusivity?  Even if the agreement states that it is exclusive, there should be some language defining the scope of the exclusivity.  For example, if it’s a beer sponsor – say Miller Lite – the language should specifically define the category.  Otherwise, expectations may not be the same one each side.  What if Miller Lite thinks that they are receiving exclusivity within the entire category of alcoholic beverages, but the property intends the exclusivity to apply only to other domestic light beers, as they have an imported light beer that they also want to sign as a sponsor?  Both parties expect some measure of exclusivity, but the breadth (and presumably value) of the two is incredibly different.

In light of the foregoing, it is vitally important to specifically define the category of exclusivity.  If the category is “U.S. domestic light beer,” then the contract should specifically state as much.  This is not just a legal issue, it is also vital to long-lasting relationships.  As with any good or service transaction, both parties must understand the desires and expectations of the other, or else the relationship is destined for failure.  Those sponsors and properties which understand this concept naturally forge longer and more beneficial relationships than those that are just looking to close the deal and move on the next target.