Sponsorship agreements for organisations

Esports organisations/esports clubs are highly dependent on income from sponsorships. But it can be challenging to know how much one’s brand is worth. In other words, organisations often must consider whether sponsorship deals are sold too cheaply or too expensively.

The price will always be negotiable. But as an organisation, you should, to a large extent, focus on the content of the sponsorship agreements and don’t offer the same to all the sponsors.

In the following, we will give seven tips concerning sponsorship agreements,

Seven tips concerning sponsorship agreements

1. Have a detailed and written sponsorship agreement

If an email ticks in from a company that wants to become a sponsor is it tempting to shrug your shoulders and think, “Alright, let’s do this.”

However, such an “agreement” will not address all the potential disagreements, including the parties’ obligations, which can be a dangerous path to take.

In addition, it is important to determine whether it is a sponsorship agreement or a collaboration agreement.

The difference is not enormous, but a sponsorship agreement will typically consist of payment in return for the sponsor’s exposure.

A collaboration agreement typically includes mutual obligations which consider more than just exposure and advertising. For example, associations and the like may be required to provide volunteer staff available at events, arrangements, or provide a specified work effort for the sponsor.

It’s important to clarify the obligations.

2. Be specific and highlight the commitments

The more thoroughly the obligations are described in the agreement, the less risk of misunderstandings and possible breaches. At the same time, the sponsor will experience the contract more professionally.

A description of the obligations and their value is important to write in the contract to match expectations. In case of a negotiation renewal of the agreement is it easier to discuss what was delivered.

It can be challenging to describe all the obligations down to the smallest details. However, the overall commitments and how these are to be performed should preferably be described. For example, there may be commitments related to social media, including participation in physical or digital events and photoshoots.

3. Clarify the scope of the agreement

The scope of the agreement should be clarified and in writing. For example, is it relevant to clarify if the sponsor wishes or expects to be exposed through all esports titles or just some specific titles. It’s an important factor whether the organisation has separate jerseys for the individual esports titles and separate channels. It can, for example, be websites, Twitter, Instagram, YouTube channels, etc.

As an organisation, one should be cautious about assuming that the sponsor expects to be exposed in all esports titles.

For example, some sponsors exclusively want to be visible on sports titles, such as FIFA, while they under no circumstances want to be associated with games including war or violent scenes.

4. Agree on the length of the sponsorship agreement and extension possibilities

The length and scope of the sponsorship agreement are vital to avoid any misunderstandings. If one party believes it’s a one-year deal while the other party believes it’s a two-year deal. The difference is half-price or double the price, dependent on the party. On this behalf, is it important to match expectations with the sponsor and clearly define the contract term.

Some parties are interested in agreeing on extensions terms even before entering the sponsor agreement. It’s essential that the organisation is aware and tries to look into the crystal ball to determine the value of their services if the agreement is possible to extend without any further negotiation.

It’s the fewest of esports organisations that don’t increase its value within a couple of years.

5. Receive the payment in advance

Some companies wish to experience how much value they gain before placing the payment. The organisation should strive to avoid such deals.

Organisations shall prioritize receiving the payment as soon as possible to minimize their risk. COVID-19 was a reminder of how things can change in a matter of few months. Just imagine entering an agreement with a sponsor in January 2020 with an expected payment at the end of 2020. The Organisation would most probably have been told that the sponsor didn’t have the finances to pay the esports organisation due to the pandemic, while payment in January 2020 would have secured the esports organisation.

Collection of debt or declaring a sponsor bankrupt is associated with a lot of costs.

6. Intellectual property rights

Most content on social media is created to promote sponsors. The organisations need to be aware of being able to use all the IP-protected material commercially, such as nick and names of the players, their pictures, and video.

7. Choice of law and choice of venue

As an organisation, it is necessary to minimize the risks. One of the most important clauses is the choice of governing law and choice of venue.

If you sign foreign players, it should be clearly stated that disputes are resolved in accordance with your choice of law and venue.

Choosing arbitration is quite an expensive path to take, which most often is that not the right way.

The above considerations and advice in relation to esports contracts with players will always be determined based on the age, period, salary, risk, game, and level of the Player

Remember that just one foreign lawsuit against a sponsor can lead to bankruptcy of the esports organisation.

Get help with your sponsorship agreement

Our experts from Advokatgruppen will be happy to advise you on the sponsorship agreement. Contact us on 70101330 for a free introductory conversation about your sponsorship agreement.

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