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Andrew Condon, managing director of sports and entertainment agency Gemba, has spoken out about what he describes as a “significant” portion of “double-dipping” when it comes to sponsorship deals in the Australian marketing industry, or where agencies make a sponsorship deal while working for both the brand and the rights-holder.
Last week, Condon took to LinkedIn to call out a practice he feels damages the reputation of sponsorship as a marketing channel.
This same issue was raised previously in an opinion piece by Rob Mills, then director and CEO at Gemba and now director and CEO at Gemba’s owner Tenka Group, back in 2016.
Speaking to Mumbrella, Condon said these allegations undervalue the industry.
“It cuts to the heart of integrity of the sponsorship industry and the credibility of sponsorship as a channel,” said Condon. “It compromises an agency’s ability to provide objective advice and because reward drives behaviour they are going to make decisions based on remuneration.. A commission-based model is not incentivising them to do the best deal for the brand. It’s incentivising them to do a deal that delivers them the greatest financial gain.”
Condon continued: “[It’s] taking a lot of money out of the industry that that could best be used elsewhere. And at a time like we are now, where a lot of rights holders that are posting losses for the past year due to COVID disruption and things like that, it’s a time where the industry can ill afford to be wasting valuable sponsorship revenue that might better be spent on fan engagement, participation and women’s sport.”
Clemenger Group’s activation agency Traffik head of sponsorship Mark Edney agreed that this is an issue in the sponsorship industry, having said via email: “Sponsorship is an effective channel for brands to leverage, but it’s not the only channel. As an industry, if we continue to demonstrate this type of behaviour, brand’s may lose trust with this part of the marketing mix.
“I am convinced most brand’s probably don’t know this type of behaviour exists, and brand’s need to ask: Are we receiving objective and unbiased advice that best fits our brand, or are we being funnelled into an opportunity that best remunerates the consultant?”
Edney also commented his support on the above LinkedIn post.
The scenario Condon is speaking about is one where a brand approaches an agency to sponsor something, then that agency approaches a rights-holder. The agency makes recommendations and as part of negotiations with the rights holder requests a commission be paid to the agency for successful transaction. The agency essentially represents both sides of the deal, meaning they are not incentivised to find the best price for the brand or rights-holder.
Condon admitted that there is a chance that brands could be aware the agency they’re working with has this conflict of interest: “If a brand wants to pay the agency a fee and allow them to take your commission as well, then I think that’s a poor commercial decision, but at least it’s transparent. If a brand wants to allow an agency to be remunerated for acquiring the sponsorship purely on a commission from the rights holder, which I know does happen in some occasions, again, I think that’s some more ridiculous way of paying an agency to acquire a sponsorship, but at least it’s transparent.”
He further suspects that the level this most often happens with is with smaller organisations that don’t have the resources to back themselves up: “I’m not saying it doesn’t happen [at a large sports organisation level]. But it tends to happen more often with the next level down of sports. They’re very keen and, in some cases, desperate for that commercial revenue.”
In order to fix this issue, Condon is recommending that brands ask for agencies to declare conflict of interests.
In an email to Mumbrella, Condon said: ” Here’s a suggestion for any brand marketer who engages an agency to lead or support sponsorship acquisition on their behalf; ask your agency to clearly declare any commissions or fees they will generate from the transaction. And, for rights holders who sense something is amiss, call the sponsor in question and confirm that they are happy for their appointed agency to receive a commission on this deal. If there is any pushback or hesitation from your agency, then get suspicious.
“Apart from the fact that hidden commissions represent a massive conflict of interest and mean the strategic advice being provided is far from objective, these undisclosed fees are costing brands and the industry millions of dollars. It is time for agency fees on sponsorship transactions to be completely transparent. And it’s up to the brands and rights holders to do something about it. To keep calling it out.”
Condon declined to comment on the record who were the agencies allegedly engaging in this activity.
This article has been updated to clarify a quote.
Anna Macdonald (she/her) is a reporter at Mumbrella. She started in October 2019 as the researcher for Mumbrella Pro and was promoted to editorial assistant in March 2021. Anna graduated from the Australian National University in 2018 with a Bachelor of Arts and a Bachelor of Law (Hons).
Just testing if comments are back. I really miss these.
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Hi ‘Testing’,
Comments are indeed back on but do need to adhere to Mumbrella’s comment guidelines, which you can find here: https://mumbrella.com.au/about/community-guidelines
Thanks,
Anna
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