Nick Breen, senior associate at Reed Smith, the international law firm, looks at COVID-19 and what event and festival sponsors need to know about the legal implications…

With the 2020 events calendar looking increasingly bare as the reach of the COVID-19 crisis extends ever further, sponsors and brands are finding themselves faced with knotty legal complications in the wake of postponed or even cancelled events. With schedules unlikely to return to normality for some time to come, what will the continued disruption mean for sponsors?

From the Tokyo Olympics, to Coachella, to the London Marathon, the crisis is pushing events back further and further along the horizon and, unfortunately, in some cases, leading to cancellations.

The legal implications of a cancelled event can be significant for sponsors, particularly where sponsorship funding has already been paid. A sponsor might find itself in a position where it has paid a significant sum for sponsorship rights and have those rights severely diluted in value, or become worthless.

In the lead-up to events, sponsors are also likely to devote a great deal of time and expense developing marketing assets. Depending on the extent of the agreed deal, this could include engaging third party agencies to help run a campaign or running prize competitions for tickets, Preparing for a single event fixture can incur considerable time, cost and resource in the months and even years leading up to the event for the sponsors involved.

If an event is cancelled then the sponsor will have very limited ability to extract the value of the association. Since sponsorship of major events can often contribute to a meaningful proportion of the brand’s overall marketing strategy and budget, event cancellation can have drastic consequences. These are certainly uncertain times, but whilst budgets are for the moment disrupted, there remains hope that the bounce back will allow loyal sponsors to reap the rewards, once events eventually resume.

However, when events are postponed, rather than cancelled outright, the initial impact for sponsors and marketing companies is likely to be less of a shock. The effects are certainly less severe where the event is merely being rescheduled and, where the event is an annual, repeated event, then a sensible solution may be for the sponsor and promoter to simply carry over the sponsorship to next year’s event.

Of course, it won’t always be clean or even possible to reschedule an event or defer a sponsorship to a subsequent event. However, in the majority of cases, sponsors and promoters will need to find a commercial and pragmatic solution, rather than resorting to a legal dispute.

Savvy sponsors will be adapting fast and looking to alternative ways to support events that can continue during these testing circumstances. With live-streamed events on the rise, the commercial opportunities for sponsors are ripe for the picking.

It is hopeful that, in light of these unprecedented circumstances, industry professionals will be able to agree on unique and innovative commercial solutions to rescue sponsorship deals where possible, and help pave the way for a bumper calendar next year. Here’s looking to 2021.

What solutions could promoters turn to as they explore their way out of this crisis? In the next in the series of the legal implications for the events industry of the COVID-19 crisis, Nick Breen will take a look at force majeure as the key contractual provision that all sponsors and brands will be looking out for.