Credit unions could lose out as coronavirus puts sports on hold
Opening Day — the annual celebration of the beginning of the Major League Baseball season — was supposed to take place on March 26.
Instead, stadiums across the country will remain dark and empty for the foreseeable future as the league has put its season on hold because of the coronavirus. The same is true for major and minor league basketball, hockey and soccer.
That could have a trickle-down effect on credit unions.
CUs across the country sponsor a variety of professional sports teams, but with four of the nation’s five top leagues currently on hold, those sponsorship dollars aren’t likely to go as far as they normally would.
In January, Philadelphia-based Ardent Credit Union entered into a sponsorship with Major League Soccer’s Philadelphia Union. The timing could have been perfect — the team had momentum going into the new season after finishing 2019 with its best-ever record following a string of disappointing years. But on March 12, just a few days before the team was set to play its home opener for the season, MLS announced the league was going on hold until at least March 30.
[Ed.: MLS officials announced on March 19 the league's season would be delayed indefinitely.]
The sponsorship includes participation in team-related community activities across the area, which may be curtailed or canceled due to social distancing, as well as pre-game activities on the plaza outside Subaru Park, the team’s stadium. The $719 million-asset Ardent is also a presenting sponsor for all Philadelphia Union youth programs, which include clinics across the five-county region. Those are currently on-hold as well.
As is common with credit unions’ sports sponsorships, financial details of the deal have not been disclosed.
While the team’s games are expected to be rescheduled on the assumption that play eventually resumes, Ardent CEO Rob Werner said there may have been some clinics during the suspension period “and I’m not sure if those will be rescheduled or not happen at all, but hopefully this is just a delay to the beginning of the season.”
The real issue for many credit unions, said Jennifer Ko Craft, an attorney at Las Vegas-based Dickinson Wright, is whether their sponsorship deals include a force majeure clause. That clause enables partners in the agreement to either extend the contract for the length of any stoppage — be it due to a boycott, pandemic or other factor — or agree to end the partnership early. Without that language, she said, credit unions and other sponsors can wind up paying for the sponsorship on a monthly or quarterly basis without seeing much real return while the stoppage drags on.
“I’d be surprised if there isn’t a force majeure provision [in most credit unions’ sponsorship contracts] because sports teams and leagues often have boycotts or something where games might be suspended or might not happen,” said Craft. “So either it’s in that provision or there will be a separate provision that talks just about this — either the league or team decide they’re not going to play and because of that all the rights and licenses continue on even if there is a game or not.”
Not all credit union sponsors will be impacted the same way. California's Golden 1, for example, holds naming rights to the Golden 1 Center, home of the NBA's Sacramento Kings. While games, concerts and other events at the arena are currently cancelled, the CU's name is still there.
While Craft deals with sponsorship contracts for athletes and teams, she said she has not worked on any deals linked to credit unions.
A representative for Ardent said the credit union does not disclose contractual information but is “working through this together with the Union during this national crisis.”
First Tech Credit Union, which sponsors the NBA's Portland Trail Blazers, is taking a similar attitude, counting on its good relations with the club as both parties work out the path forward in the coming weeks.
"We're in uncharted territory and right now we're focused on the well-being of our members, employees and the communities we serve," Chylon Pappas, First Tech's VP of marketing, said in an emailed statement.
One of the big questions credit unions will be contemplating until games resume is what damage, if any, they’ve suffered as a result of the stoppage. The answer could be different for each institution, said Craft.
“There’s no template, no one way everyone does it, so it just depends on what their agreement says,” she said. “Over the last few days I’ve seen so many different agreements that don’t have a force majeure previous or it does not relieve the sponsoring company of the payment, and that’s where it becomes a problem because even if there’s no games they’re still required to pay out.”
One long-term effect of coronavirus, she added, could be that companies more closely examine their sponsorship agreements.
“When you have deals on a handshake or between close colleagues, they might gloss over the finer details or bang out just the business points and this stuff is missing when the rubber hits the road,” said Craft.
For now, Ardent CU is keeping a positive attitude and waiting patiently for the season to finally get underway.
“At this point we’re not concerned,” said Alletta Emeno, the credit union’s chief marketing officer. “This is a multi-year play for us. We’re a little delayed in getting kick-started here with the season, but I don’t think we’re concerned. We still feel like we’re going to get the value out of this.”
This story was updated at 5:13 P.M. on March 20, 2020.