Gatorade has agreed in principle to an eight-year, $384 million sponsorship renewal with the NFL. If, as expected, the sports-drink maker supports a marketing initiative around the new deal, the financial commitment could be far higher.
The sponsorship ranks as the second-largest in U.S. sports, trailing only Nextel's $750 million naming-rights pact for NASCAR's top racing circuit.
With traditional advertising on the run from ad-zapping technologies and product placement, Gatorade ensures it will retain the ultimate in television visibility: an NFL sideline. Victorious coaches getting doused with Gatorade and thirsty players gulping the drink will remain a staple of the NFL theater, even if fans skip through ads.
Gatorade will continue to enjoy sports-drink exclusivity on football sidelines, along with the use of NFL league and team logos. Reebok's and Motorola's NFL agreements also allow them a sideline presence.
"The NFL sideline is one of the most valuable pieces of sports inventory out there: It's got reach, it's clutter free and available to a select few," said Dave Greeley, the Chicago Bears' chief marketing officer.
"To have the Chicago Bears, or [Bears Pro Bowl linebacker] Brian Urlacher, using their product during competition, during a mass-reach vehicle like an NFL broadcast, that has great appeal for Gatorade," Greeley added. "Having the world's best investment banker sipping Gatorade out in front of his Wall Street brokerage house doesn't bring them much."
The sponsorship renewal, which is set to be signed Thursday but was approved by team owners on Feb. 12, is the latest in a run of impressive corporate deals further casting the NFL as the envy of sports (see chart). The combination of healthy television ratings and aggressive marketing has stamped the league as the place to be for corporate America, notwithstanding the Super Bowl halftime stumble.
Under terms of the agreement, Gatorade will pay the NFL on average $48 million annually, with 80 percent of the money directed to the league's 32 teams and the remainder to the league office, sources said.
Gatorade was paying $20 million on average annually. The new accord is worth between 1½ and three times the old contract, depending on the season, said Tom Lewand, the Detroit Lions' chief operating officer. The cash payments escalate annually, with the final annual fee hitting $60 million in 2011.
For the first time, Gatorade will supply its product free to clubs, which spent $30,000 annually on the beverage. So, another $960,000 is spilled into the new deal annually, or $7.7 million over the entire term.
There also could be a marketing commitment from Gatorade, though sources differed on this point. Team sources who were present at the owners' vote said Gatorade would spend between $12 million and $15 million annually on marketing initiatives to promote the NFL and its teams.
Others, however, said there was no such formal guarantee, so those figures may be at Gatorade's discretion. The company, which dominates the sports-drink market with more than 80 percent market share, traditionally does not advertise heavily during cold-weather months.
Gatorade declined to comment.
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| The new deal keeps Gatorade on NFL teams’ sidelines for eight more years. |
An NFL executive involved in negotiating the renewal, referring to debate over the league's commercial structure, said: "In the midst of all the discussions ... this is a validation of the league model on a case-by-case basis. Ownership has shown by approving deals like this and MBNA that there can be real value in packaging team and league rights."
Dallas Cowboys owner Jerry Jones did not vote on the Gatorade renewal, according to sources who were in the meeting room at the Hyatt Regency Orlando International Airport when the tally occurred. Jones, these sources said, praised the Gatorade alliance, but proclaimed he would abstain because of "principle."
The aggressive Jones wants the league to include an "opt-out" provision in all leaguewide deals, so owners who vote no are not compelled to participate if the sponsorship wins approval (see "Divide on revenue sharing persists in NFL Trust debate"). Jones, through a spokesman, declined to comment.
It is unclear if any other teams abstained or voted against the deal, or if Jones could sign a different sports drink to be featured on his team's sideline because he abstained. Given his warm words for the new contract, however, that issue is likely moot.
Gatorade now takes its place among the pantheon of sports sponsorships. Global rights to the Olympic rings cost $60 million annually, the top fee in sports. How NASCAR's Nextel money breaks down between cash and advertising commitments is unclear.
Overseas, in addition to the Olympics, Formula One racing and top European soccer leagues charge princely sums to allow corporations to latch onto their brands.
Gatorade's coolers, cups and towels have been fixtures on NFL sidelines since 1983, making the brand one of the prime beneficiaries of football's dominance in televised sport. The Chicago-based outfit also sponsors the NBA, MLB, numerous colleges and has several NASCAR-related sponsorships.
One expert warned corporations that the bar is now higher for prospective football sponsors.
"When you do this kind of deal, it sets the hurdle for everything you are doing," said Randy Vataha, a former NFL wide receiver and today a sports investment banker with Game Plan LLC. "Now it's clear when you deal with other sponsors there is a threshold which you are going to need to be prepared to pay with the NFL on these things. That [in and of itself] is a huge value."
Staff writer Terry Lefton contributed to this story.
As an enthusiast with extensive knowledge in sports marketing and sponsorship, particularly in the realm of the NFL, I can confidently break down the key concepts and elements in the provided article about Gatorade's sponsorship renewal with the NFL.
1. Gatorade's Sponsorship Renewal:
- Gatorade has agreed in principle to an eight-year, $384 million sponsorship renewal with the NFL.
- This renewal positions Gatorade's sponsorship as the second-largest in U.S. sports, following Nextel's $750 million naming-rights pact for NASCAR's top racing circuit.
2. Significance of NFL Sideline Presence:
- Gatorade secures the ultimate television visibility through its sponsorship, particularly on the NFL sidelines.
- The article emphasizes the value of the NFL sideline as a piece of sports inventory due to its reach, clutter-free nature, and exclusivity.
3. Financial Commitment:
- The financial commitment could be even higher if Gatorade supports a marketing initiative around the new deal.
- Gatorade will pay the NFL an average of $48 million annually, with 80 percent directed to the league's 32 teams and the remainder to the league office.
4. Exclusive Benefits for Gatorade:
- Gatorade retains sports-drink exclusivity on football sidelines.
- Gatorade can use NFL league and team logos as part of the sponsorship agreement.
5. Comparison with Previous Deal:
- The new agreement is worth between 1½ and three times the value of the old contract, depending on the season.
6. Marketing Commitment and Product Supply:
- Gatorade will supply its product free to NFL clubs, adding an additional $960,000 annually to the deal.
- There might be a marketing commitment from Gatorade, with estimates ranging from $12 million to $15 million annually, though this is not confirmed.
7. Dallas Cowboys Owner's Stand:
- Dallas Cowboys owner Jerry Jones abstained from voting on the Gatorade renewal, expressing a desire for an "opt-out" provision in leaguewide deals.
8. NFL as a Lucrative Platform:
- The article highlights the NFL's impressive corporate deals, positioning the league as the envy of sports due to healthy television ratings and aggressive marketing.
9. Gatorade's Long-Standing Presence:
- Gatorade's coolers, cups, and towels have been fixtures on NFL sidelines since 1983.
- The brand sponsors other major sports entities, including the NBA, MLB, and NASCAR.
10. Impact on Future Sponsorship Deals:
- The article concludes by noting that Gatorade's deal sets a higher standard for prospective football sponsors, emphasizing the significant value associated with such partnerships.
In summary, Gatorade's substantial sponsorship renewal with the NFL reflects the evolving landscape of sports marketing, where visibility and exclusivity, particularly on platforms like the NFL sidelines, play a crucial role in corporate partnerships.
