Major sporting events: IP challenges and opportunities for Web 3.0

 This article was written by Lorenzo Litta and was first published in the World Trademark Review (WTR) website on the 27th of October 2022. 

 

  • Major sporting events have long been used by developing nations to enhance their national identity and improve their credibility on the world stage
  • Ambush marketing where unaffiliated companies piggyback off event publicity threatens official sponsors, yet tackling it remains far from straightforward
  • Web 3.0-related companies are pouring huge amounts of capital into sports sponsorships and IP lawyers need to develop strategies to protect these investments

This year is a FIFA World Cup year, and for the first time ever the competition will be hosted in the Middle East and take place in November. It is also the first World Cup where the Qatar team have qualified and the second in a row where my beloved Italy have not.

The IP community is also getting ready for the World Cup in many ways. Some practitioners are working hard to have their clients’ trademarks duly registered and enforceable in Qatar and nearby countries, and preparing to make raids against counterfeiters if necessary or to block websites broadcasting matches without authorisation. A few lucky practitioners are planning to get together in Doha to network and enjoy the World Cup together. Others (including myself) will be enjoying the hot November Qatari breezes from the couch.

Despite many firsts, it could also be one of the last FIFA World Cups to be hosted by one country only. Major sporting events have become so huge that it is a significant and complicated task for countries to hold them. The general wisdom has been that running events such as the Olympic Games and the FIFA World Cup carry significant prestige to the host city or country, shaping their legacy and potentially providing an opportunity to build new infrastructure, catalyse economic transformation, and, in the process, give a boost to national identity. Yet apparently this has not been recognised by governing officials over the last few years, as many advanced economies declined to bid for such events or even withdrew their proposals. While hosting does bring many theoretical advantages, it is also an immense financial commitment and a great risk for the host.

 

Costs and opportunities of major sporting events

 

The huge costs associated with organising such events is becoming increasingly difficult for governments to justify, for instance, Brazil faced a significant recession after organising both the FIFA World Cup in 2014 and the Olympic Games in Rio de Janeiro in 2016. All of the last three World Cups (South Africa 2010, Brazil 2014 and Russia 2018) and the next in Qatar in 2022 have been (or will be) held in a developing country. However, the last and the next two summer Olympics will take place in major cities from developed economies – Tokyo 2020, Paris 2024 and Los Angeles 2028.

In the past, the solution to compensate hosts for the growing costs of such events was to raise the cost of tickets, broadcasting rights and sponsorship. Sports sponsorship is and has always been a crucial part of any large competition – without this revenue, the events would struggle to take place. However, the contribution of the host is even more fundamental, such that the 2026 FIFA World Cup will be jointly hosted by Canada, Mexico and United States, while for the 2030 FIFA World Cup there are joint candidates such as Portugal and Spain, Argentina and Uruguay (100 years from the first World Cup hosted by Uruguay), and the exotic combination of Greece with Egypt and Saudi Arabia. The IP community, should get ready to travel a lot during the next World Cups,

The significant growth in terms of the size and cost of major sporting events started with the Olympic Games of Barcelona 1992. There are several reasons for this and not all of them are relevant from an IP perspective. The cost of Barcelona became huge, estimated up to almost €10 billion. Despite the fact that it was a success (giving rise to the so-called ‘dream team’ in US basketball) and helped to forever changing the shape and feel of the city, it also exposed the financial fault lines.

The reduced enthusiasm for hosting major sporting events has several driving factors. Crucial among them is the fragility of economies after the global financial crisis and growing inequality in the global distribution of wealth and income. This is creating cynicism around events that need vast amounts of funding but have no guarantee of substantial discernible benefits for taxpayers.

It used to be that everyone was playing the same game: countries would compete for the bragging rights and pay little attention to economic rationality or infrastructure improvements. However, now that sustainability is a key driver for every company and organisation, the countries that can most easily justify the risk are those with the most to gain on the world stage, rather than those with the deepest pockets. For instance, Russia and Qatar do not need to turn a profit- a win for them is a stronger voice in global affairs.

For developing and fast-growing economies, globalisation and soft power can be powerful motivators. China with the Olympic Games and South Africa with the FIFA World Cup have shown what an exceptional opportunity hosting can be to create a new brand identity for both local citizens and global audience. However, this is not always successful and can hit some hard obstacles. Both Russia and Qatar are hoping that they will end up projecting an image of a modern and advancing nation-state, but for now they are still saddled with the negative impression created by corruption and bribery accusations, and now by the war (Russia) and the deaths of numerous construction workers building stadiums (Qatar).

 

The role of sponsors

 

Despite the financial risks, since 1992 there has always been great interest in sponsorship, even with a 2014 study from McKinsey showing that few sponsors have a clear answer about their direct return on investment and that some do not even have a system to measure this. The reason for this interest is very broad but it could be down to the special hype that sports – and major sporting events in particular – can bring to a brand.

I have always liked to say that brands in sports are super brands because they have much more than a distinctive character. Sports give to a brand the passion, emotion and legacy of the athletes, the teams and the game. Therefore, it is unsurprising to see why it is tempting for brands to piggyback on the global attention of sporting events. This is known as ambush marketing – where brands create a commercial connection or association with an event despite having no official link or sponsorship deal. Naturally, this can be incredibly frustrating for the event organisers but even more for the official sponsors who have usually paid huge sums of money to formally associate their brand with the event and benefit from its goodwill.

It is no surprise that ambush marketing became so relevant in the early 90s. I remember the 1994 Winter Olympics in Lillehammer, Norway – the first major sporting event after the Olympic Games in Barcelona. I was fascinated to watch the big IP war between VISA and MasterCard play out. Since then, I have always loved to see what brands come up with next. Sometimes, the creativity is inspiring and often quite amusing.

Naturally, this prompts the question: is ambush marketing unethical? Well, if a brand is seeking to gain an association with an event when they have not paid for the sponsorship rights, then legally, yes, it is wrong. However, it is not possible to give a simple yes or no answer. There are a lot of grey areas and each case must be judged on its own merits, as well as whether it is worth taking action. In many cases the ambush campaign gains more financial return than the legitimate sponsor. Think, for instance, of the huge exposure obtained by Bavaria at the expense of the legitimate sponsor after it had a group of women dressed in orange attend the World Cup.

However, sponsorship deals can become less attractive as a direct consequence of ambush marketing. Would you pay millions for exclusive rights when your biggest competitor could run a campaign that goes viral and then costs you additional millions (and huge amounts of people hours) to take down, by which time the event has finished and the damage is done? In addition, the landscape of sponsorship is evolving. Take the Euro 2020 competition, where four of the main sponsors were Chinese. On the one hand this was quite impressive considering that it was a European football competition – on the other hand it highlights that European brands were unable to afford the necessary investment.

Event organisers have tried to provide a more regulated arena to protect their (and their sponsors’) intellectual property with legislation against ambush marketing. The International Olympic Committee also included the need to adopt special measures in their guidelines for hosting countries. Italy for instance came out for the first time with a specific regulation with Law 167 /2005, issued in view of the 2006 Turin Winter Olympic Games, which was recently updated with the new Law 31/2020 in view of the 2026 Milano Cortina Winter Olympic Games.

However, do we want these events to be so regulated that even the initiative of creators is limited? Of course this is not the spirit behind the various anti-ambush legal provisions but this also means that – going back to the issue of whether ambush marketing is good or bad – it could be extremely interesting and fun for IP attorneys to deal with this phenomenon and try to understand, case by case, the line whereby marketing creativity could be considered infringement.

In my opinion, things could be approached in a different way starting with the initial sponsorship agreement conversations. From establishing what specific local legislation will be in place in the host country, to how big a so-called ‘clean zone’ will be implemented, it is vital to cover every tiny detail. As usual, communication is key. One should run a kind of PR campaign with organisers before the event, and communicate to non-sponsors that host organisations are on the lookout for ambush activity and that it will bedealt with strongly.

The best defence is often an aggressive offence. Have a proactive strategy and communicate what to expect to athletes, create style guides, hold social media boot camps, create conduct and ticket rules as well as media language guidelines and a pre­ event punch list to inform the key organisational players. The more information that is shared, the less likely it is that an ambusher will successfully infiltrate an event.

 

The impact of Web… 1.0, 2.0, 3.0!

 

Social media and online spaces in general are difficult to control. They are fast paced, unpredictable and it is hard to track and monitor what is happening in advance. It is therefore crucial to use a dedicated team to monitor, track and react immediately to infringement. Sponsors could further capitalise on their exclusivity, for instance by using non-fungible tokens (NFTs) to create unique and engaging digital content via official channels, leaving the ambusher content buried.

During the recent Olympic Games in Tokyo – where there were no fans in the stadiums due to the pandemic – it was interesting to see how companies were pushed to find other ways to jump on the Olympics bandwagon. Brands have gravitated towards social media to push their campaigns, an area where it is harder to manage ambush marketing as infringers can remove infringing content just as fast as they put it up.

In the early days of the Internet in the 1990s (Web 1.0), the medium allowed fans to receive live results from games. As a consequence, the main sponsors were online versions of popular newspapers or media channels. The online world has been key to the globalisation of major sporting events (as well as their sponsors).

As soon as technology advanced and Web 2.0 came to life, the Internet was used to create communities so that events and sponsors could promote themselves using entirely new channels (eg, influencers). The role of the online world evolved into a different way to expand the opportunity to sell new (often virtual) spaces to sponsors. This was very much the case at Euro 2020, where the social media platform TikTok became an official sponsor. The fact that the video-hosting service became a global sponsor of a major sporting event is not in itself a cause for surprise, even though we are talking about the first digital media player to enter into a partnership of this type. More intriguing are the choices that TikTok made, which went far beyond simply appearing in advertising banners or producing merchandise.

Setting aside the old logic that sponsorship is a simple relationship of an economic nature, in this case the protagonists are the fans, who are the heart and soul of any sporting competition. The intent of TikTok was to remember that without the fans and their participation, there would be no event. In this case, the vehicle for fan participation was TikTok itself, through which fans had already produced and continued to produce an immense amount of content. This type of sponsorship is highly innovative and is worth considering for several reasons. At the heart of the campaign was user-generated content, with TikTok becoming a vehicle for participation. It follows that, in a field such as sports, which touches culture and provides a sense of belonging, social media platforms are a perfect vehicle for community and to demonstrate the warmth of the fans, especially after the storm we have weathered coming through two years of pandemic.

In March 2022 a new sponsorship agreement between the FIFA World Cup and Crypto.com was announced, the latter being the Singapore-based giant of Web 3.0 and one of the biggest exchanges in the world. This is just one of the big deals signed in the last few years by Crypto.com – others include Formula One, several national football tournaments, an attempt to become the sponsor of the UEFA Champions League, and the Los Angeles arena known since 1999 as the Staples Center, but which was renamed the Crypto.com Arena at the beginning of 2022 (and for the next 20 years).

Another big spender in sports sponsorship is FTX – another crypto currency exchange – which last year paid $210 million to become a partner of the TSM Esports Team and another $135 million to secure the partnership with Miami Heat for the stadium renamed FTX Arena. Again, FTX also became a sponsor of Major League Baseball as well as the Mercedes-AMG Formula One Team. Stayings in Formula One, Bybit sponsors the Formula 1 Red Bull Racing team, Tezos of the McLaren Racing team and Manchester United Football Club, while Velas (a blockchain company) sponsors Ferrari Formula One team and Ferrari’s esports team.

These recent sponsorship agreements from Web 3.O-related companies show a clear interest in using traditional sports to obtain credibility, but more importantly using the large audiences of sports and major sporting events to raise brand awareness.

At the same time, brands coming from traditional industries such as Louis Vuitton, Gucci and BMW, have decided to invest in sponsorship agreements in e-sports competitions (Louis Vuitton with League of Legends), or in e-sports teams (Gucci and BMW with Fnatic esports team) to reach a new generations of consumers.

 

Looking ahead

 

It is a fascinating topic and it is playing out right before our eyes. Large competitions and major sporting events will always be here – and as an avid sports fan, I would never want to see a world without them. However, we do need to assess how we approach them from all points of view – organisers, sponsors, host country, IP lawyers and, most importantly, the fans. We should take advantage of the opportunities provided by new technologies, in particular utilising NFTs (for secure tickets) and the metaverse. Sports organisers need to continuously review and adapt their systems to maintain their appeal for younger generations and for the next generation of sponsors.

If you would like to talk to Lorenzo on this topic, please contact him directly.

You can also read this article on the WTR website here.

 

Q

Bio

IP business is fun and challenging and after many years I sail in it with the curiosity and passion of a child and with the knowledge and awareness of an adult.

Whatever is dynamic and in evolution takes my full attention, that’s probably why I love sports and speed.

Lorenzo speaks: English, Italian, Spanish, and Portuguese

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