The recently announced multimillion-dollar deal in which Herbalife Nutrition Ltd. renewed its long-term partnership with the LA Galaxy highlights the rising value of sports sponsorships for companies and their brands.
Under the sponsorship, announced in August, the downtown Los Angeles-based Herbalife will continue to put its name on the front of Galaxy players’ jerseys for five more years. Such deals have gained in value because “sport has a power that few other industries have,” according to several experts, and fans tend to become customers of sponsors at a high rate.
AEG Global Partnerships, a subsidiary of Anschutz Entertainment Group, or AEG, which owns the LA Galaxy, brokered the new partnership between Herbalife and the team, which represents the longest partnership to date in Major League Soccer history. It has been ongoing for 15 years.
The value of the deal was not revealed, but the Sports Business Journal reported it is worth more than $7 million a year, up from the $4.4 million annual value of the previous 10-year deal that expires at the end of this season.
“This partnership with Herbalife is such a central partnership in our entire global portfolio. It is a wonderful example of longevity, global reach, grass root initiatives and activations,” said Nick Baker, the chief operating officer of AEG Global Partnerships. “From an investment perspective in ROI (return on investment), this is one of the more impactful and meaningful relationships in our entire company at AEG.”
With the extension of the partnership, Herbalife, the marketer of nutritional supplements, will fill multiple roles as sponsor of the team’s official jersey, presenting sponsor and official, exclusive nutrition partner. The company will also sponsor the teams’ international and exhibition games.
Although Herbalife sponsors numerous teams and top athletes globally, the Galaxy represents the company’s largest investment in sports sponsorship.
Adidas has been the official kit – uniform and equipment – manufacturer for MLS teams since 2007 and will continue to manufacture the LA Galaxy’s team kits, which include uniforms and jerseys featuring the Adidas logo.
In addition, digital marketing brand Honey, based in the United Kingdom, will be featured on LA Galaxy jersey sleeves as a sponsor. As the official jersey sponsor, Herbalife will be featured on the front and center of Galaxy jerseys.
As shown by such deals, sports sponsorships are considered an effective advertisement. Sports sponsorship accounts for an estimated 70% of spending on all sponsorship deals, according to IEG, a Chicago global consulting firm specializing in partnership strategy and evaluation for sponsors and rightsholders.
Brand game plans
Herbalife’s deal with the team means that the company’s logo will be featured prominently on the team’s primary and secondary jerseys, team training gear, LA Galaxy Academy jerseys, replica jerseys and select club merchandise.
Jersey sponsorships provide the greatest visibility for brands and puts them in close association with a team.
“Sport has a power that few other industries have, such as art sponsoring and product placement in TV shows,” according to a study on sports sponsorships by Deloitte titled “Sponsoring Sports in the Digital Age.”
Herbalife’s supplements in the fitness, nutrition and sports realm make a strategic fit with a sports team. The Galaxy, popular not only locally but nationally and internationally, plays at a high level and has won the most championships in its league. As such, it represents an athletic, healthy and active lifestyle.
From Big 4 to Big 5?
The rise in popularity of Major League Soccer in North America and around the world, vinced by Apple’s recent $2.5 billion global streaming broadcast deal with MLS to stream all its games, expands the reach and visibility of all MLS sponsorships.
The value of the Galaxy has grown within the past few years, along with the average value of MLS teams. The value of the Galaxy last year was $835 million, according to Sportico, with the average value of MLS teams estimated to be $550 million. That’s way up from $313 million only two years earlier, according to Forbes.
Another factor making team investments and sponsorships appealing is that the MLS, which was founded in 1993, remains a professional sports league that is still in its early stage, with abundant growth opportunities.
The MLS is frequently compared to the Big Four sports leagues economically. However, the MLB was founded in 1876, the NHL in 1917, the NFL in 1920 and the NBA in 1946. All four leagues reflect patterns of phenomenal growth over time.
MLS has been the fastest-growing league in the world and doubled its size in the past 15 years. “The Big Four is now arguably the Big Five,” said Steve McCaskill, sports reporter with Sports Pro Media, on the expansion of the MLS in the US sports landscape.
Sports sponsorships are evolving as the internet, social media and digital platforms present new possibilities for companies to innovate and leverage their partnerships.
“While sports continue to attract many people to stadiums, digital advancements and the social media expansion have brought new possibilities for brands to increase their visibility and improve their sponsorship message,” according to the Deloitte report.
“Ten years ago, the sponsorship landscape was far simpler than it is today,” said Tuck Burch, the head of brand marketing at Excel Sports Management. “There were major commercial rights of holders, teams and athletes that could be used to market within the sports landscape. Today, there are endless opportunities to connect with consumers through sports and they come in all shapes, sizes and investment levels.”
Ultimately, the adaptation will be the key for brand success, according to Deloitte. “The future of a sporting event and sports sponsoring will always depend on the brands wr to achieve the greatest mutual benefit.”