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May 1st, 2020
April Sports Industry News 2020
The postponement of the Tokyo 2020 Games until Summer 2021 will require the extension or modification (or even termination) of literally thousands of agreements – from venue agreements to transportation agreements to hotel agreements to agreements for the provision of basic services.
Sponsorship agreement renegotiation will be an event in itself, as moving the games to 2021 impacts all of the relevant Olympic “players” – the International Olympic Committee (“IOC”), US Olympic and Paralympic Committee (“USOPC”), the Tokyo Organizing Committee, individual national teams, and individual athletes. Consider the following:
- In almost all cases, sponsorship agreements with the IOC are signed in quadrennial periods – covering a Summer and Winter Games. Several of those deals will expire at the end of 2020, causing the IOC to extend those sponsors’ rights through the Tokyo Games.
- All sponsorship agreements with the USOPC expire at the end of 2020. The USOPC has offered to extend its agreements with almost all of its sponsors through the rescheduled Tokyo Games at no additional cost.
- Extending these sponsorship agreements, however, will cause conflict in certain exclusive categories, namely airlines, insurance, and milk, as prior sponsors such as United Airlines and Liberty Mutual will now overlap with Delta Airlines (a new USOPC sponsor) and Allianz (a global IOC sponsor). Because of such exclusivity issues, the USOPC noted that additional consideration would be necessary before a decision could be made as to the extension of the prior sponsors’ rights.
- Sponsors that had prepared to organize events or otherwise activate on the ground during the Tokyo Games this Summer will have to address the “downstream” agreements – those for venue rentals, services providers, and musical performers or other talent – either by postponement to 2021 or termination.
- Endorsement agreements with potential 2020 Olympic athletes were almost certainly tied to the Tokyo 2020 Games only. Much like the organizing bodies’ extension of the sponsorship agreements, the sponsors and their endorsing athletes may have to show similar flexibility. Additionally, marketing content featuring these athletes has likely already been produced (given that the distribution of Olympic-related marketing would normally have begun soon). Will 2020 executions work in 2021? Or will new production work be necessary?
- Promotions for goods or services specific to 2020 may no longer make sense in 2021, requiring promotional materials to be recreated.
Foresight with a Forehand
Wimbledon’s organizer, the All England Lawn Tennis Club, cancelled the tennis tournament for the first time since World War II. The organizer maintained an insurance policy that included pandemic coverage, which was put in place following the SARS outbreak in 2002. The insurance will reportedly pay out over $140 million to the organization, which should help offset revenue losses from ticket refunds and sponsorship terminations. While attorneys are scouring the force majeure provisions of agreements, it is worth noting that the practical step of obtaining relevant insurance may be the most valuable move by a sports organization, as the All England Lawn Tennis Club has shown.
Virtual Racing, Real World Problems
Of all the U.S. sports organizations exploring virtual, NASCAR has arguably had the most successful transition: the racing organization has replaced its real racing with virtual racing via the iRacing simulator. Being broadcast on Fox and FS1, NASCAR’s virtual racing series set a record as the highest-rated televised Esports event ever, with over 1.3 million total views. However, even virtual sports can create “real world” problems.
After wrecking his virtual car during an official NASCAR virtual race, NASCAR driver Bubba Wallace decided to “rage quit” mid-race (stating on his Twitch stream: "Y'all have a good one. That's it. This is why I don't take this [expletive] serious. Peace out."). That move cost him a primary sponsor, Blu Emu (“Bye bye Bubba. We’re interested in drivers, not quitters.”).
Another unfortunate incident occurred during a similar, but not NASCAR-sanctioned, virtual racing event. NASCAR driver Kyle Larson, competing in the Monza Madness iRacing exhibition race, used a racial slur over an open microphone that was picked up on the feed of the other drivers. Larson’s real-world NASCAR team terminated him, and he lost major sponsors: McDonald’s, Credit One Bank, and Clover.
Lesson: actions in the virtual world have real-world consequences.
Taking His Talents to Tompa Bay
With yet another sign that he takes branding seriously, Tom Brady (through his loan-out company TEB Capital Management) filed trademark applications for TOMPA BAY and TAMPA BRADY for clothing and footwear within two weeks of his signing with the Tampa Bay Buccaneers in free agency. While the applications could be meant to expand his brand, Brady may have also filed them to prevent unaffiliated third parties from taking advantage of his move south, as several third parties filed trademark applications for TOMPA BAY just before and just after Brady filed his.
And Now, a Word From Our Bloggers
Christopher Chase address the applicability of force majeure to the postponement and cancellation of events.
Kim Maynard analyzes the trademark implications of the IOC’s decision to retain the TOKYO 2020 trademark. Christopher Chase discusses the commercial aspects of that decision – and the UEFA’s analogous decision to retain the EURO 2020 trademark. Both events will now be held in 2021.
Jeff Greenbaum covers Attorney General enforcement against Town Sports International Holdings (the owner of New York Sports Club, Philadelphia Sports Club, and Washington Sports Club). The AG’s of two states and the District of Columbia demanded that the company stop charging customers for membership fees while its gyms are closed due to the pandemic.
Ned Rosenthal writes about the dismissal of a case brought by DraftKings fantasy baseball players alleging harm from the electronic sign-stealing scandal. The plaintiffs had sued Major League Baseball, Major League Baseball Advanced Media, the Houston Astros, and the Boston Red Sox.
Noted and Quoted
Risks of Olympics Cancellation
Christopher Chase spoke with the Associated Press about the risks of the International Olympic Committee postponing or cancelling the 2020 Tokyo Olympics.
Olympics Delay Could Scramble Sponsorship Deals
Law360 quotes Christopher Chase on issues sponsors face due to the postponement of the 2020 Olympics.
Pandemic Pastime: Playing Esports Against Strangers, With Cash at Stake
The Wall Street Journal quotes Sean Kane on the legality of betting on one’s ability to win at competitive videogames.
If you have questions about sports industry legal matters, please contact Christopher Chase or any other member of the Sports Group at Frankfurt Kurnit.
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