Rob Mills is the Global CEO of Turnstile, his new Sports and Entertainment measurement company. If his name seems familiar, it is because he is also the Global CEO and Director of Gemba, the Sports and Entertainment Agency. This is not an accident as Rob explains. The challenges of measuring the value of sports and entertainment sponsorship has been a long term challenge based on the flawed approximation of media equivalency. But Turnstile is a comprehensive approach to valuing sponsorships based on years of experience.
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Transcription:
Darren:
Welcome to Managing Marketing, a weekly podcast where we discuss the issues and opportunities facing marketing, media, and advertising with industry thought leaders and practitioners.
Today I’m sitting down with Rob Mills who is the global CEO and director at Turnstile, his new sports and entertainment measurement company. Welcome, Rob.
Rob:
Thank you. Thanks for having me.
Darren:
Well, this is an extension of what you’ve been doing for the past 15 years.
Rob:
Yes, 15 years. From a Gemba perspective (Gemba is the owner of Turnstile) we have been constantly looking at trying to value sponsorships in a more accurate sophisticated way and that was the genesis for Turnstile about 3.5 years ago when we started product development for it.
Darren:
One of the areas that amazes me is how much time and effort people put into their paid media and looking at value, placement, and engagement but when it comes to sponsorships it’s still a bit of the Wild West isn’t it?
Rob:
Yes, that’s exactly what we’re talking about; the amount of scrutiny on media and yet sponsorship you’ve got 3 to 5 year deals worth millions of dollars or pounds yet the level of sophistication around valuing that is relatively low. As an industry I think we’re at a tipping point where we need to resolve that.
The level of scrutiny is going up on all markets and sponsorship is going to be increasingly left behind if we don’t evolve in the industry.
Darren:
But a little of the problem is that sponsorship has aligned itself with the same methodology that public or media relations had: this reliance on media equivalency. It’s true isn’t it that if anyone tried to value sponsorship deals they’d look at how much exposure you get and what’s the equivalent of that in media costs.
Rob:
Yeah and it’s become a massive trap for the industry because sponsorship is so much more than just exposure and it’s really pigeonholed what sponsorship can do. And I think a lot of the thinking around equivalencies is fundamentally flawed as it relates to being able to accurately measure the price of sponsorship.
I would argue that equivalencies don’t give you an ROI. And they don’t give you a price benchmark so it’s questionable what the value of that is. But as it relates to what you should actually pay for a sponsorship there’s no real connection between media equivalency and actual contract prices.
Darren:
I think it’s because media equivalencies in both PR and sponsorship have this mythical multiplier. There is the actual cost of the equivalent media and even that’s flawed. But then it was suddenly multiplied by 3 or 4 or 3.67; some random number. But this supposed value was so much bigger than the contract quotes.
Rob:
And that word value gets thrown around interchangeably between ROIs, equivalencies, and price and I think you’re right. My view is that (with my client hat on), I have a price to buy the media and a price to buy the sponsorship and I have an ROI or value equation which depends on my objectives.
I don’t really need anything in the middle between those two things, what am I paying for and what’s it doing for me. Anything else in the middle is probably a bit of noise. The challenge for the sponsorship industry is when it defines itself just on equivalencies and exposure it actually leaves a lot of value on the table and a lot of brands don’t actually want the logo exposure anymore; they want the rights to engage with these communities.
And as an industry sponsorship hasn’t been able to price and benchmark that.
Darren:
You’ve touched on something there and I want you to go back (I know it’s last century) but you were the brand director for a sporting brand. If you’re going to choose a sponsorship with a property owner what is it about that compared to advertising? Because that’s what media equivalency seems to infer that the two are virtually equal.
Rob:
I think they’re completely different and it’s like comparing a 30 second TV commercial rate to outdoor; we don’t do that so why do we try to compare sponsorship to a TV commercial? They’re completely different verticals with different pricing metrics. If I put on my old marketing director hat, TV or digital had a very different role to what sponsorship does.
That starts to talk to strategic planning and they do work differently and they shouldn’t be compared or you shouldn’t grab one set of metrics from one channel and apply it to the other; it just doesn’t make sense.
Darren:
There are different strategic needs. There’s a film out Ford Versus Ferrari. The whole idea that Ford wanted to compete with Ferrari by wanting to be on the track to prove their credentials at Le Mans it’s a really interesting concept because in marketing it’s the association isn’t it with that product that is part of why you sponsor it.
Media equivalency doesn’t work. What are the things you should be thinking about when you are valuing a sponsorship deal?
Rob:
The way we think about it in a broader Gemba context is purpose, planning and pricing. First of all why you’re in it. That’s not necessarily a sexy process but it’s important being really clear about why you’re sponsoring something. That then leads to planning about what you should buy and then pricing; what do I want to pay for that.
Depending on your brand objective and sometimes we see that, with my old Adidas hat on, sometimes we’re in it because we need to build credibility in a particular sport or address a particular technology issue that informed us of this specific athlete we had to sign.
Other times we’re just signing things because we wanted the licensing income and we didn’t really care whether it was team X or Y.
Darren:
It was part of the deal.
Rob:
It feels like a lifetime ago now but at the Sydney Olympics we had an issue around the technology credibility and we found a young swimmer called Ian Thorpe and we had this body suit technology and that became the whole focus. But the money was really invested in media to tell that story.
And again it leans on one of the other great myths of the industry about leveraging ratios. There is no such thing as a leveraging ratio. That leveraging ratio might have been 100 to 1 because that’s the strategic solution to it.
Darren:
It’s funny you say that because I’ve heard all sorts of numbers; that 1 to 1 is the industry standard leveraging ration—that for every dollar spent on sponsorship I have to spend another dollar leveraging it. I’ve heard up to 3 but you’ve just told me it could be 80 to 1 or 100 to 1 and that’s dependent on what you’re trying to achieve isn’t it?
Rob:
It is what it is. If it’s going to take $10 million to tell the story of an athlete (the media buy); that’s the ratio. You could argue it’s the inverse that if we were helping a client structure a deal and maybe the objective was awareness of a new product or brand so therefore we wanted to load more signage into the deal you could argue that they could spend less on paid media because the deal does a bit of that for them so actually the ratio could drop.
Yet the conventional wisdom would be the more you spend on the deal the more you spend on leveraging. It just doesn’t make sense. To me it’s a lazy metric that the industry has fallen into.
Darren:
A rule of thumb.
Rob:
Yes.
Darren:
Two thumbs up for that one.
Rob:
Exactly.
Darren:
You’ve had decades working in and with brands, looking at how they leverage and select sponsorships. What was the process that got you thinking that what the industry needs right now is a more robust way of measuring value? And how do you define value in sponsorships? Take us on that process.
Rob:
From the Gemba perspective we were consistently getting brands saying to us we’re going to be making a pretty big decision here (and compared to most media buys these are big decisions) and maybe outside of investments and capital planned, investment in sponsorship is probably one of the biggest cheques they’ve signed. It’s a 3 to 5 year deal.
So we were getting brands asking us to help them check whether they were paying an appropriate amount. Again if I put my old client hat on I didn’t know what media rates were. That’s what we used a media agency for because they had an aggregated knowledge around cost per 1,000 on a digital buy. We started thinking that through; how would we help a client understand fair market value for a pretty large investment?
Initially that was for brands and after a while we found that rights holders started coming to us saying they need to understand that as well because we’ve got to forecast revenue going forward and they need to understand how we’re generating value.
So we ended up in this interesting position through some intellectual capital we’d developed in our consulting business that we were getting brands and rights holders talking the same language. We thought there’s a really interesting opportunity to productise that and make it global because increasingly these deals are becoming global.
Media is permeating all these markets globally so sponsorship is not just working at a market level.
Darren:
In fact, all of the big properties are global. All the world cup, world events, FIFA, ICC, Rugby are all playing to multiple markets.
Rob:
Absolutely. You look at how many fans for Manchester United there are in China. That’s a big audience.
Darren:
You go to any market and there is so much knock-off stuff there for Manchester United.
Rob:
It’s an interesting problem. The opportunity we saw was thinking about what does a global pricing system look like? And recognising the fact that things aren’t as local anymore. As it relates to value or in this case pricing, we isolated three components of value which weren’t independent of each other but one is the exposure value.
Even though we’ve talked about the challenges of media equivalency, exposure is still a core part of sponsorship. We price it more accurately to reflect actual sponsorship prices through using benchmarks around global signage rates and the like. There are things like ticketing and hospitality and digital rights which we classify as benefits.
Then the big point of difference for Turnstile is really trying to understand what the intellectual property value of those assets are because that’s the piece that somebody quite often wants to buy; the rights to associate with Olympic rings or an NFL logo. Yes, there’s an exposure component to it often but it’s really the rights to associate with these global mega brands that people are looking for.
We did a lot of work around trying to understand those 3 areas and particularly intellectual property value. And that’s given us highly accurate pricing benchmarks. And that’s a test for us. We didn’t want to come up with another media equivalency that had no connection; we wanted to be close to the actual prices.
Darren:
Value, as it’s defined by the Turnstile platform, is not just about exposure; it’s also the IP and putting a number on that. IP is one of those interesting areas people struggle with. We call it intellectual property which infers it has a defined existence but then people don’t know how to value it.
I know almost every creative industry struggles with valuing intellectual property. It must have been a fascinating challenge to overcome.
Rob:
Yes, there were a lot of late night conversations and we went the full-circle with this in the product development phase and we came back to this core principle, the touchstone we kept on going back to through the product development phase which is why is Liverpool’s intellectual property worth more than Fulham’s?
Because there are more fans globally that care about Liverpool than Fulham. Because we understand that so that was one touchstone we looked at. The 2nd one was we looked at some of these global deals where no exposure is delivered. Olympics deals are a really good example. A lot of NFL deals come with no exposure in stadiums; purely the right to associate with the rings or NFL logo.
We can strip out the ticketing and hospitality and very quickly we could see a very clear tangible part that was IP. People talk about intellectual property being intangible. We’re very hot on saying ‘no, it’s not intangible; there’s a very clear part of contracts that is IP value.
And then if we divide that back into fan bases we can see that a formula1 deal has X amount of IP in the deal and they’re delivering 550 million fans to a sponsor; we can get a cost per fan metric.
Darren:
There would also be a variation on the passion of the fans, which for a marketer would relate to engagement. There are some sports and teams that drive an even more passionate following than others.
Rob:
Absolutely. That’s been a fascinating thing as we’ve gone through the product development exercise. We have assets and asset classes. An asset class is a team versus a league. With a team the cost per fan is a lot higher because when you sponsor a team you’re at the point of passion. That’s where the tribalism and the emotion are and brands will pay more for that.
Similarly, a league may not have the passion; they may not barrack for the league but I get the benefit of being across all the teams in the league. So, I get higher reach but perhaps with slightly less engagement. So we’ve got events, leagues and we’re just launching our athletes now, which will be fascinating to understand what that looks like.
We have to recognise that there are different price benchmarks in all those different asset classes.
Darren:
When you get down to individual athletes they’re already getting product endorsement deals that will vary based on someone’s perceived value of that endorsement from that particular athlete.
Rob:
Roger Federer’s deal is probably 4.5 times Djokovic’s deal. Djokovic is number 1 in the world at the moment but Roger’s built a global consumer equity that means his deal might be bigger than Djokovic’s.
Darren:
The way you’re talking about value in IP reminds me of the conversation around value in brands. Someone said they don’t know why there are so many companies making it all so complex. As an investor they look at the value of the brand as the total capital value of the company from the share market, they extract all of the value of the assets it owns and everything else is the brand (brand-reputation; same thing). I’m banking on getting a valuation of future value which is what a brand should do.
It’s an interesting approach isn’t it?
Rob:
It’s really important for the industry, for both buyers and sellers. From a buyer perspective a lot of the more mature brands don’t necessarily want those exposure assets anymore. But they’re looking for guidance and comfort around what they’re paying for a deal that doesn’t deliver exposure anymore but delivers the rights to associate.
On the sell side, the reality is exposure, signage, ticketing, and hospitality, they’re finite; you can only sell them once. Whereas IP, when it’s properly structured you can actually get incremental growth and there’s no cost of servicing against that either and it’s all margin.
So, for both sides of the industry it’s important that we decode this and get better at benchmarking IP.
Darren:
Now, Rob, I just want to change track. We’ve seen in the last few years a fantastic focus on women’s sport. There’s a lot of passion, enthusiasm, the media are starting to cover women’s sport with the same level of exposure and passion but perhaps the numbers don’t add up.
How does it stack up? Have you had a chance to look at women versus men in particular sports?
Rob:
Yeah. It’s been one of the interesting learnings we’ve had in the first 18 months around more accurately pricing women’s sport. And also other cause-related issues like sustainability. The two interesting ones for us are women’s sport and Formula E at the moment.
But back to women’s sport. We know there is huge consumer sentiment for women’s sport. People are really engaged and excited that there are women’s leagues and teams and we are seeing the corporate community move and invest quite heavily in that.
But when you look at the reach of those leagues and teams at the moment it’s still relatively small compared to men’s but what we haven’t been able to identify before is this IP. There is huge following for these leagues and teams and even though they’re not necessarily getting that in broadcast at the moment there is great sentiment behind it.
When we talk to rights holders that have got men’s and women’s assets and we present our results a lot of our time is spent on the women’s side because they’re really excited about the upside for it. Similarly, brands get it. They’re paying for the ability to tell the story of women’s sport not necessarily just the eyeballs.
Darren:
What you’re saying is because of the passion and engagement of the audience for women’s sport it’s actually in real value more valuable even though it has smaller exposure.
Rob:
In a typical deal mix we might see a men’s league might have 50 to 60% of the value in exposure and maybe 30 to 40% in IP. And that’s a big number in absolute numbers but the mix in the deal in the women’s league will be more IP because there’s this great sentiment and engagement with women’s sport at the moment.
Darren:
Hopefully this type of assessment of value will start to drive that to the point where they do get the same level of exposure.
Rob:
A similar example is Formula E; the numbers from an exposure perspective are still relatively low but because it sits on this global sustainability platform of renewable energy there is great sentiment towards Formula E. If it was being defined purely by the eyeballs it wouldn’t be getting anywhere near the deals it’s getting.
But look at the rush of manufacturers into that sport; Jaguar, Mercedes, they’re all in because they know they’ve got to be in the platform.
Darren:
It’s the future of their business isn’t it?
Rob:
Yeah, so they are paying a premium for it and that’s in intellectual property value not exposure.
Darren:
You’ve mentioned Turnstile is for both sports property owners and it’s also for brands. Let’s focus on brands because that’s where most of my time is spent. What are the sorts of ways they could work with Turnstile or use the platform?
Rob:
A couple of ways. Quite often we get a brand that may be in a renewal phase or an acquisition phase and we’ll get a brief saying we’re thinking of buying a particular package, we’d like you to come and give us some benchmarks about what we should pay for that.
That’s quite often on a one-off project basis. Brands are starting to ask us to look at an entire portfolio. Once we’ve done one job what tends to happen is they want to know how does that compare to other things in our portfolio? There’s a logical flow-on.
Darren:
And it is true; most brands when they go into sports and entertainment will end up with a portfolio. I don’t know many brands that will sponsor just one product.
Rob:
Typically.
Darren:
They usually have a range of properties don’t they?
Rob:
The 3rd way we work with brand clients is in two parts; a valuation but then have a software component to that so all that data we’ve collected is given to the client in a software solution and they can then model and track that themselves. That one-off piece of work stays live and is relevant to the business for the natural duration of the deal.
Darren:
It would be incredibly valuable for marketers to report a value of those deals back up into the C-Suite and even the Board because a lot of sponsorships (in my experience) have come from Board level. I know a couple of sponsorship managers who go ‘it’s always difficult when a property owner phones up and says ‘I’ve been talking to so and so on the Board and they said you should be sponsoring us’.
Rob:
Yeah. It’s becoming less prevalent.
Darren:
I won’t mention the name but I know a big company that was into the fine arts and I’m not sure that they were serving or consuming a lot of the product at those events. In fact I wouldn’t think that many that attended who support the fine arts were actually into these particular brands of beer.
Rob:
It feels tenuous.
Darren:
It’s not for me to judge how others invest their shareholder’s money.
Rob:
A lot of our thinking is unashamedly mimicking what happens in the media industry. If you’ve made an investment you want to track it. It’s like getting a media evaluation report after you’ve bought a campaign. Our thought is once we’ve bought it and given the client a good sense check that they’re paying an appropriate price but then we should look at the metrics that are underpinning that and make sure it’s actually being delivered.
And one of the other areas the industry is probably going to shift to and we’re starting this with a couple of clients now, is if you think about sponsorship and being locked into a 3 or 4 year commitment, yet we know the need so our clients are often moving, changing within that 3 or 4 years.
We’re working on if we can get a joint commitment between the rights holder and the brand about an investment number over that period and an agreement about what the IP is worth in that deal we should be able to swap and change the rights out a bit.
One year, a soft drink manufacturer, it might be all about recruitment and they want certain assets to drive recruitment and that might be around more exposure assets. The next year it might be about driving incidence rates and it might be more digital rights that do that.
As an industry what we should be trying to do is have the flexibility to change things in and out. And if we have agreed pricing metrics we can do that a lot easier as well.
Darren:
Anytime someone says we’re going to benchmark the value here, there’s usually a group of people who go no. It’s like the devil has just walked in to the room. Yet you’ve said the rights and property owners have embraced this methodology.
Rob:
Some.
Darren:
It’s a bit like media and creative agencies going ‘we’re happy to be benchmarked on what we’re charging’.
Rob:
I think there is a realisation from the more sophisticated rights holders in the industry that the industry has to change. When we get a client with that attitude they very quickly get what we’re trying to do because we’re not trying to commoditise the offer. If anything we’re finding pockets of value for both buyers and sellers but if the industry doesn’t evolve and becomes more rigorous in its metrics it’s going to lose its share to other channels.
A really good example of that was a rights holder for a premier league team in London said to me ‘we are not competing necessarily against the other 5 top premier league teams; probably Google and Facebook are bigger competitors for us because they can profile my football fan base and that brand I’m talking to can go and do a 3 or 4 week digital buy with them and be in and out of it’.
Darren:
That’s an incredibly enlightened person who realises the competition is not the other sponsorships but you’re competing for the marketer’s budget.
Rob:
That’s right. So when we talk about more sophistication and rigour around metrics they go well that’s what we’re competing against. Digital’s got its own measurement challenges at times, however, it’s a long way in front of where sponsorship is at the moment.
If you’re a CMO sitting in front of a whole channel mix, the most risky one at the moment is often sponsorship. We’re trying to bring more comfort around those decisions for buyers and sellers.
Darren:
It’s going to be also helpful for CMOs in organisations where sponsorship sits with corporate affairs. That’s where it becomes bizarre from my perspective that sponsorship is being decided not from any basis of building the brand profile or even driving sales but it’s purely a reputational perspective. This would help bring some measure to that.
Rob:
Absolutely. And increasingly we’re getting procurement departments within brands talking to us as well. Quite often they’re being charged with reviewing media expenditure for instance but at the same time the big ticket items are in the sponsorship deals.
I had a really bizarre meeting in Shanghai, when I was living there, with a major Chinese FMCG business and their procurement department and I thought we were going through the procurement process (which is a reflection of my poor levels of Mandarin).
But half way through the meeting I realised the procurement department had been told they needed to buy all sports and entertainment assets in the business because someone had identified sport and entertainment investments as the biggest risk for fraud because you could easily hide a lot of money in these deals and no one would know.
Whereas with media there are pretty clear benchmarks; cost per engagement, click, 1,000, rating points etc. That would stand out reasonably quickly but a sponsorship deal you could easily hide something. Procurement are starting to ask us for assistance in that because although they’re responsible for that they don’t necessarily have the benchmarks and metrics to make assessments around sponsorship.
Darren:
Gemba has been 15 years; you’ve been working on this project for 4 years but really only launched it 2 years ago. It’ll be interesting to have this conversation in 3 years’ time to see whether it has also made those relationships between brands and rights holders more enduring. That’s one of the things people often overlook; adding accountability, and agreed measurability eliminates all the questions like am I getting the right value, are you really delivering on what you promised? Are you seeing it already?
Rob:
We’ve seen it in Gemba using that consultancy approach. A lot of these relationships that we’ve been benchmarking for 5 or 10 years are enduring. There have been times when the rights holder might have wanted more money but my counter is that sponsor is still with you 15 years later without the cost of finding somebody else.
We’re seeing that on the Gemba Consultancy side and we’re already starting to see that on the Turnstile side. We’ve done 2 projects now where both the rights holder and the buyer have engaged us; we’ve been upfront with both parties that we’ve been engaged by both. I caught up with the CEO of one of those clubs recently in London and he said ‘we didn’t agree with everything you said but agreed with 90% of it but it meant when we sat down with the sponsor we were arguing about 10% of the deal and very quickly we were having a bigger partnership conversation rather than haggling over the details’.
We’re seeing this in other parts of the industry and media so I don’t think this is rocket science and that’s one of the nice benefits of the process.
Darren:
The biggest challenge media has and they’re struggling to come to terms with it, is to find a unified measure of value across all the multiple channels. Digital has its own challenges but to be able to measure across the various channels and have a single metric is the Nirvana for media buying. It’s still a long way off.
I know the A&A and WFA have started working to solve that problem. Are you getting the same sort of support here? A lot of the sponsorship rights owners are big sporting associations (or part of).
Rob:
We have the same challenges and one of the things we were very focused on in the product development phase was we needed a media agnostic measurement tool. 15 years ago most value was created by traditional media broadcast; now we have OTT services, a lot of stuff going through social so we’ve been developing an exposure measurement approach and making sure that that is agnostic of channel.
We’ve got a per second, per fan rate that runs across all those channels so it means you can have realistic comparisons between the social media value and the broadcast. What it’s actually doing (and we’ve had fascinating conversations with clients around this) is reinforcing the value of traditional media which isn’t necessarily the sexiest thing to talk about. But if someone is sitting down and watching a big screen for 2 hours they’re getting a lot of content as opposed to someone snacking on a 15 second Instagram post or a Twitter feed.
In some cases it has appropriately positioned where social’s role is. And social is really important; it’s a great engagement tool but the big numbers are still coming out of OTT, traditional broadcast and pay TV.
Darren:
The world has changed because the idea of these being events where people come together to share, now technology allows you to share and participate in the sports and entertainment you’re passionate about when it suits you. And measurement systems like Turnstile have to be able to accommodate that.
Rob:
What we’re now starting to work on in a sports context also extends to gaming. When I play Formula 1 or NBA 2K I see all the same sponsor integration that I see in traditional broadcast. Formula 1 is a great example of where the whole experience from the intro and commentary is exactly like the broadcast and all the signage is exactly the same. So if you think about the dwell time; the amount of time people are gaming, the engagement and they’re things as an industry we haven’t properly quantified.
Again we need to talk to the console providers and try and get more data out of them because there’s a lot of value that brands will start seeing if they can understand that gaming piece. One of sports challenges globally is its aging—it’s a demographic of 15 to 25 or 30 year olds that will over index with gaming that makes the proposition of sponsorship stronger as well.
Darren:
Rob, it’s been terrific catching up and having a chat. We’ve run out of time. Congratulations on Turnstile and looking forward to seeing some great results coming out of this. From all your experience, what’s the worst case scenario that you’ve seen when people have been choosing sponsorships?
Ideal for marketers, advertisers, media and commercial communications professionals, Managing Marketing is a podcast hosted by Darren Woolley and special guests. Find all the episodes here