First off, we'll take a look at what a licensing agreement is, and look at a recent example that involves video game giant EA Sports.
A licensing agreement is a deal between two parties, referred to as the licensor and the licensee. The licensor grants the licensee the rights to use their name, image, or trademarked property and sell products that feature those assets. In return, the licensee agrees to pay the licensor a pre-determined amount of money, also referred to as royalties.
As the founder of my own website, College Court Report, I have looked into the option of starting a clothing line that sells sport-specific items featuring NCAA logos and team slogans. I have reached out to the NCAA to look into licensing options, but have yet to hear anything back. If things were to go through, and we entered into negotiations, I would be the licensee (looking to use NCAA trademarks), and they would be the licensor (granting the permission). Another example can be seen out at the Pen Centre. If you take a trip into Campus Crew, you will see licensed products that feature the likes of NHL and NFL teams, and the Niagara IceDogs if you're looking for a smaller-scale licensing agreement.
However, EA Sports and FIFA have struck a large licensing agreement that will allow the video game titan to use the names and images of the players and teams from FIFA in their video games up until the year 2022. This deal grants EA Sports exclusive rights to launch FIFA-branded soccer games.
Now, we turn our attention to sponsorship agreements, which are a little bit different than licensing agreements.
As defined by Professor Corbett in Sport Management 4P07, which is Sport Sponsorship at Brock University, sponsorship is defined as a cash and/or in-kind fee paid to a property in exchange for access to exploitable commercial potential that is associated with that specific property. Typically, sponsorship focuses around sport and the arts, and we will take a look at the sport side of things.
There are several different forms of sponsorships in sports. Some of them include:
1. Sponsorship of Individual Sporting Teams
2. Sponsorship of Governing Bodies
3. Sponsorship of Events
4. Sponsorship of Individual Players/Athletes
These are the most common ones that people encounter on a daily basis. As I have stated in past posts, and will reiterate again in future posts, I have a big interest in NCAA sports and college basketball, so I will turn to an example in that regarding sport sponsorships. Since players in the NCAA are considered amateurs, they are unable to sign individual player sponsorship deals. I touched on the story of Emmanuel Mudiay in one of my initial posts, about how he revoked his commitment to Southern Methodist University to play professional basketball over in China. By going over to China, he was then eligible to sign individual sponsorship deals. Within a couple of months, Under Armour announced that Mudiay has signed a shoe deal with the company.
Event sponsorships are something you will see on a regular basis. The Tim Horton's Brier, the Mastercard Memorial Cup, and the McDonald's All-American Game are all great examples of companies sponsoring sporting events around North America.
The sponsoring of individual teams can be profitable for the teams who receive the sponsorship. There is a buzz going around that the NHL could soon see sponsorships on their jerseys in the coming future, and that could result in upwards of $120 million in revenue for the league as a whole. When you look at the sponsorship deals that teams have received over in Europe for soccer (see Manchester United's deal with Chevrolet for 47 million Euros per year), it's hard for the NHL not to ponder what could be for their league in terms of sponsorship revenue.
Hopefully this provides you with some clarity when looking at sponsorship deals and licensing agreements!
- T.B.