Why Invest In Companies That Partner With Sports Leagues?

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Includes: AMZN, AXP, BAC, BCS, BUD, CSCO, DFS, DNKN, F, FANZ, GM, KO, MC, MCD, MSFT, NKE, PEP, TAP, UA, V
by: SportsETFs, LLC

Summary

Many companies choose to partner with the major U.S. sports leagues.

Sports sponsorships yield potential benefits.

Potential benefits are both financial and increased brand recognition and loyalty.

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Many companies choose to partner with the four major U.S. sports leagues as a way to promote their brands. These partnerships confer many potential benefits including increased sales, higher brand awareness, help the company reach a loyal audience and promote internal company engagement.

Investors looking to capitalize on these benefits can purchase shares of companies who partner with the major sports leagues. Many of these are well-known names such as Coca-Cola (NYSE:KO), Anheuser-Busch (NYSE:BUD), and PepsiCo (NYSE:PEP). Alternatively, investors can purchase FANZ – the ProSports Sponsors ETF – which purchases shares of companies that are partners with the four major U.S. sports leagues, namely, football, baseball, basketball and hockey.

How Common Is Sports Sponsorship?

You are a sports fan. Do any of these seem familiar:

  • You own a pair Nike (NYSE:NKE) or Under Armour (NYSE:UA) shoes.
  • Have driven in a Ford (NYSE:F) or GM (NYSE:GM) product.
  • Tasted a Coke, Pepsi, Budweiser, Miller or Coors (NYSE:TAP) beverage.
  • Feasted on McDonald’s (NYSE:MCD), Taco Bell, Krispy Kreme or Dunkin’ Donuts (NASDAQ:DNKN)
  • Paid with a Visa (NYSE:V), MasterCard (NYSE:MC), American Express (NYSE:AXP) or Discover Card (NYSE:DFS).
  • Banked at Bank of America (NYSE:BAC) or Barclays BCS).
  • Bought something on Amazon (NASDAQ:AMZN). Used a Microsoft (NASDAQ:MSFT) device through a Cisco (NASDAQ:CSCO) built network?

If any of these companies, and their services, seem familiar to you, they should. These are just a few of the 106 companies (as of 4/30/18) who are official partners/sponsors of one of the four Major U.S. Pro Sports Leagues.

Why We Believe Pro Sports Sponsorship Works

What makes professional sports sponsorship powerful is that it gives businesses a unique connection with millions of engaged people around the world at an emotional level. Sports sponsorships acts as an active conduit between businesses and fans. This connection allows companies the opportunity to drive sales and increase brand awareness through an active engagement involving traditional routes and the ever-growing social media platforms. The key for businesses is return-on-investment (ROI). A 2014 McKinsey study showed “executives who implement a comprehensive approach to gauge the impact of their sponsorships can increase returns by as much as 30 percent.” This is the basic premise for investing in companies that sponsor sports leagues; these companies are getting a better ROI on key marketing dollars spent than their competitors which has the potential to drive revenue and profitability.

What is Sports Sponsorship?

A Sports Sponsorship is a commercial agreement between a company and a sports league who enter into a joint venture to promote their mutual interests. In return for a financial contribution from said company a sports organization will allow the use of its name in commercial activities.

These activities can be as creatively entrepreneurial as the imaginations of the participants. But the ultimate measure of success is a positive return on investment.

Companies using these partnership/sponsorship opportunities seek to do a number of things.

  • Increase sales
  • Drive brand awareness
  • Reach a loyal and passionate audience
  • Promote internal company engagement

Sports Sponsorship help companies build their business by association with a brand loyal customer base that wants the best for their home team and may support their sponsor/partners.

Brand Awareness

Hyundai has used its NFL partnership to grow brand awareness in North America. A letter to Automotive News, CMO Dean Evans stated, “in just two seasons of sponsorship Hyundai has achieved substantial awareness of its sponsorship among NFL fans and those fans have a much higher opinion, consideration and purchase intent for Hyundai:

  • 34 percent of NFL fans are aware of the Hyundai sponsorship with the NFL.
  • No. 1 awareness among automotive companies from a Hyundai sponsored poll/survey of NFL fans were asked to name a Car company that sponsors the NFL.
  • 67 percent of fans who are aware consider Hyundai for a purchase.
  • 77 percent of consumers who visited a Hyundai NFL activation said they would consider buying a Hyundai as their next vehicle (an activation is usually a live kick-off event for the sponsor with the pro sports league).

Growth

Amazon recorded $178 billion in income in 2017 and is trying to grow their business. They are looking at professional sports leagues to find that growth potential. As Amazon continues to find ways to disrupt different industries, and increase their market share, they paid the NFL $50 million to livestream 10 Thursday night NFL games during the 2017 season. Amazon has renewed their agreement with the NFL for the next two years. Some believe this is an entree into more sports programming in the future. And it is not just a consumer facing arrangement - Amazon has also been the official web service provider of MLB for a number of years and uses their partnership as a case study in their service offering.

Loyalty & Engagement

More companies see Pro Sports as great way to connect with potential consumers. Esurance has focused their sponsorship on “America’s Pastime”. Kristen Gambetta, the company’s manager of brand sponsorships, points to the engaged and dedicated fan base.

“The reach and the amount of fans and the engagement of the fans in MLB is really unparalleled in sports,” she said. “We’re based in the United States and we also have a presence in Canada, so it was the right fit for us in that regard, too.”

Changing Behavior – Cause Marketing Partnerships

Sometimes it is important to look outside of the direct impact sports leagues have with their corporate partners to get a better sense of how a message can reach across communities and the entire country. The NLF PLAY 60 Challenge is an excellent example of a cause marketing partnership where multiple partners work together to take one cause, in this case, childhood obesity.

The NFL works with like-minded corporate and nonprofit partners to design and help implement in-school, after-school and teams-based exercise programs for kids. They’ve even built online and mobile tools to encourage parents and kids to get active at NFLRUSH.com.

As an example, nonprofit partner American Heart Association worked with NFL and Discovery Education to provide interactive lesson plans and resources that inspire teachers and kids to get the recommended 60 minutes of physical activity a day in school and at home. The PLAY 60 Challenge lesson plans include ideas on how to incorporate physical activity breaks in the classroom.

Anheuser-Busch Case Study

A Seahawks partner for over 16 years, Anheuser-Busch brands can be seen and consumed throughout Century Link Field. Known for excellence in fan engagement and creating innovative experiences, Anheuser­ Busch introduced the Fan Can in 2015 and took it one-step further in 2016 with a custom can for "the 12s" (Seahawks fans) along with unique digital content showcasing the cans reenacting iconic moments from Seahawks history through stop-motion animation.

Investment Case

Revenue within Pro Sports has risen in the four major U.S Pro Sports leagues since 2005-2006 and sponsorship is one of the few opportunities that companies have to engage and connect with such a broad customer base. As these leagues continue to create partnership categories, more global companies could look to enhance their brand through partnerships. Using Dannon yogurt as a case study, they wanted to make their Oikos yogurt brand a more fun and engaging product. They partnered with the NFL and company CMO Sergio Fuster stated 9, “Our hope is for Americans to look at yogurt - and our brands - as among the best possible choices to enjoy it. This is a big bet for us because we firmly believe that as a nation we have a huge opportunity to improve our eating habits, and the broad appeal and wide reach of the NFL will have a positive impact on that.”

Source: Statista

Businesses of all size use sports because fans are an engaged audience. How does one participate in the tremendous growth of sports leagues revenues?

ProSports Sponsors Index

SportsETFs’ ProSports Sponsors ETF (BATS:FANZ) tracks the ProSports Sponsors Index, an equally-weighted index designed to measure the performance of companies which are official partners of US Pro Sports Leagues: Football– Baseball– Hockey– Basketball; or a national sports broadcaster with rights agreements with the aforementioned leagues.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in KO, BUD, PEP, NKE, UA, F, GM, TAP, V, MC, MCD, MA, AXP, DFS, BAC, BCS, AMZN,MSFT,CSCO over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.