Valuing Sports Sponsorships

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“Australian firm finds new way to value sports sponsorships”
AFR Monday, 26 February 2018, P39
John Stensholt

Gemba hopes Turnstile will value accurately sports sponsorships

How to correctly value a sponsorship of a sports league or team – or at least do it better – has long been a difficult issue for corporate Australia.

One common way has been tracking television broadcasts and media mentions of brands, a method long used by the marketing industry to measure the effectiveness of of a sponsorship or partnership deal.

But whether more exposure of a company logo splashed across a playing shirt or on a race car and shown numerous times on TV is the best way for a brand to sell more of its products or have a deeper engagement with its existing, lapsed or prospective customers is a vexed question.

It is one that boutique Australian sports consultancy firm Gemba believes it may solve with a new sponsorship valuation platform it has developed called Turnstile, which is already being used by the global owner of motor racing series Formula One, Liberty Media.

Gemba chief executive Rob Mills says his firm has developed Turnstile over two years, and will try to provide buyers and sellers of advertising packages with a holistic approach to valuing sponsorships.

"We wanted to provide a methodology that moves beyond just exposure measurement and seeks to understand the intellectual property value of sponsorship assets," says Mr Mills. "The industry does not need more media equivalencies – it needs a robust approach to pricing usual actual market benchmarks."

The Gemba platform has tried to value sponsorships based on three components: benefits, exposure and intellectual property.

Benefits includes tickets, hospitality, media assets and other inventory provided to sponsors based on market rates, while the exposure component uses Gemba methodology to measure the logo exposure and then output values based on market rates across the sponsorship industry.

In terms of intellectual property, Gemba has developed an algorithm that calculates the fan base that can be reached by a sponsorship property, along with consideration of fan engagement levels and the purchasing power of fans of a particular sport.

Gemba and Formula One management presented a paper at the MIT Sloan sports analytics conference in Boston on the weekend, revealing how the motor sport – which Liberty took over in a $US8.5 billion deal in late 2016 – is using the Turnstile system to measure and value its sponsorships around the world.

Formula One is not without its issues, with the NASDAQ-listed Formula One Group having lost more than 10 per cent of its value in six months, and having been questioned about strategic manoeuvres ranging from a change of its logo to the banning of grid girls at races this year and how it can maintain the large fees it charges of every race organiser around the world.

But the sport believes it can get a better handle on its sponsorship portfolio by working with Gemba and its Turnstile system, which it will need to placate some worried teams on the grid that are receiving slightly less in team payments and will compete for about 5 per cent less prize money in 2018 than last year.

"It's now front and centre in all our sales pitches," the head of global sponsorship & commercial partnerships for Formula One Murray Barnett tells The Australian Financial Review.

"It certainly resonates, especially with brands that were previously sceptical of a relationship with F1. The days of sponsorship being 'the chairman's whim' are long gone and tools that show a meaningful connection to the desired target market are essential. Increasingly brands are looking for real insight into consumer behaviour rather than pure brand visibility, although that remains an important component of the mix."

Mills says the Turnstile system is the culmination of about two years of work by an in-house team at Gemba, which tested its approach on AFL assets in Australia and sports and entertainment contracts in China, where it has established a fledgling business. It also had a staff member working out of the Formula One office in London for five months last year.

The development process included several research studies, including work looking at how consumers recall brand exposure at sports events and how that may impact on their consideration of the brand.

Gemba also studied 20 countries around the world – "we chose the biggest 20 countries that account for about 80 per cent of the world GDP [gross domestic product] as those are the ones global brands generally talk about," says Mills – to develop its intellectual property algorithm, including fan engagement with brands and sports and how that may effect their propensity to purchase goods or products.

Next for the firm, which has a staff of about 40 mostly across Australia and New Zealand, comes pitching the products to the individual Formula One teams, which Mills says he has already begun meeting, and then potentially other sports in Europe.

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A bit more than just sticking a brand logo on the side of a car...