Cloudy prospects on sponsorship and white labels

The announcement ahead of the new football season that Leeds United had signed a shirt sponsorship deal with Asia-facing bookie SBOTOP gave off the feel of the end of an era rather than the new start represented by the club’s promotion to the Premier League.

A lot has changed in the 16 years Leeds has been absent from the top division, including the nature of the sponsorship of football shirts. In fact, SBO is a more recent Premier League habitue; in 2009 it somewhat broke the mould for EPL shirt sponsorship when it was emblazoned across the front of West Ham’s claret and blue livery under the brand name SBOBET.

What made that deal stand out was that it was the first deal by an Asia-facing bookie to utilise EPL visibility to advertise to an international audience largely via broadcast TV exposure in the Far East.

The limited UK exposure saw SBO partner with TPG in the Isle of Man, a white-label provider which now stands behind various international brands for which the UK is not their main market including SportPesa, until the end of the season just gone the sponsor at Everton, and Fun88 which remains the shirt sponsor at Newcastle.

Now SBO has teamed up with TPG again, but this time around the very structure under which it operates and advertises in the UK is under attack and on two fronts.

First, the whole idea of gambling sponsorship of sports teams has been called into question by the recent report from the House of Lords select committee report into gambling released in the early part of the summer. Then there is the question of white-label arrangements themselves, a form of arm’s-reach licensing which many believe now have a (potentially very) limited shelf-life.

The tail end of shirt sponsorship

“The recent shirt sponsorships are tactical opportunism – cheap deals for short periods designed to launch brands but with no long-term sponsorship objective,” says Harry Lang, marketing expert and founder at Brand Architects of SBOTOP’s deal and that of Sportsbet.io with Southampton.

Since the first SBOBET sponsorship, the advertising of gambling services on the front of football shirts in English and Scottish football has proliferated. At one point more than half the clubs in the Premier League featured gambling sponsors. That percentage has subsided in subsequent years but not enough to stem the criticism from politicians and campaigners over the increasingly visible links between football and gambling.

According to the findings of the House of Lords select committee report into the social and economic impact of the gambling industry entitled Gambling Harm – Time for Action revenue from sponsorship deals for football clubs doubled between 2014 and 2017 to £60m.

“Asian-facing firms have long held a tradition of exploiting a loophole to feature on Premiership and Championship teams as it’s so hard for them to promote themselves to their home crowd,” says David Clifton, gambling law expert at legal consultancy Clifton Davies. “This will likely continue until such time as the (UK) authorities get their act together and put a blanket ban on gambling promotion in its entirety.”

This proliferation of Asia-facing gambling advertisers and sponsors is an easy target for those who wish to suggest the government and the regulators have somehow taken their eye off the ball. Particular concerns have been voiced over unlicensed operators using English football as a vehicle to advertise to audiences overseas.

It is clearly a sensitive area. Despite this being entirely legitimate, the UK Gambling Commission has warned that any sports body or club should be mindful that it would be complicit if any operators it works with in such circumstances didn’t ensure that UK consumers were blocked from the offering.

In a carefully worded statement, the Commission said: “We’re of the view that the best way for sports’ bodies to protect themselves against this risk is to ensure that they only promote gambling operators licensed by us.”

“Longstanding blame has been dumped on the industry and its regulator for allowing overseas gambling operators to advertise their wares by way of shirt sponsorship, even though it is permitted as long as effective steps are taken to prevent British consumers from using the gambling facilities in question,” says Clifton.

White-than-white

The frustrations of the anti-gambling lobby regarding the proliferation of sponsorships and advertising are wide-ranging and has led some to question the regulatory framework around white-labels which, they suggest, are the enabler.

In an unfocused attack, a Social Market Foundation report written by James Noyes and Jake Shepherd suggested (presumably with unintended irony) that white labels were “one of the main drivers of grey markets”. The report went on to suggest a “total overhaul of the remote licensing system” and recommended the white-label scheme should be scrapped with all existing white-label operators made to apply for licences “in their own right”.

James Noyes, Social Market Foundation

Noyes and Shepherd then make explicit what they see as the link between white-labels and sports sponsorship. “These white-label sponsorship arrangements are designed to enable prominent Premier League shirt branding of popular football clubs to be directed to domestic audiences in Africa and Asia, without companies like SportPesa and Fun88 having many, if any, actual UK-based customers,” says the report. “The white-label scheme is, in effect, a licensing loophole exploited by offshore operators for marketing purposes.”

The report went on to highlight various areas of controversy surrounding white-labels such as allegations of underage betting in Africa which have dogged SportPesa and instances of regulatory failure involving, among others, FSB Technology. But these issues are hardly endemic and there are many examples of non-controversial white-label partnerships; Heart and Virgin Games with Gamesys, for instance, or Sun Bingo with Playtech/Virtue Fusion.

Furthermore, as Tsachi Maimon, chief executive at white-label provider Aspire Global, points out there have been more compliance issues with fully-fledged licence-holders than there have been issues with those operating via white labels. “I think that if the UKGC has an issue with white labels, they need to address and improve it,” he adds. “To close it (would) mean that many small and medium-sized operators will go and operate on the black market.”

Dave McDowell, chief executive of one of the companies criticised by the SMF report, FSB Technology, agrees that there should be more nuance to how the white-label model is viewed. “I think the white-label business model is entirely valid, it just needs to be for the right type of company,” he says. “The regulatory responsibilities are the same for a white-label operator as any other operator, and you cannot shift these responsibilities to your white-label partner.”

It is in effect a form of regulatory double jeopardy and hardly the get-out-of-jail-free situation characterised by the critics. Still, McDowell admits that all the same his company is now moving away from white labels. “We’ve been actively moving away from white-label partnerships and have been advising all our potential new customers to apply for their own licence,” he says.

“While the model works great for operational efficiencies, the compliance risks have shifted to the point where the economics do not stack up properly. Remember that the brand owner is typically putting up the marketing budget and keeping the lion’s share of the revenues – but leaving the risk of fines and divestments with the white-label operator.”

McDowell also suggests the shirt sponsorship issue – something which he says “has become too conspicuous” – means there needs to be a licensing rethink. “It would add some much needed clarity if there was some sort of white-label licence a brand owner could get, showing they have passed due diligence on their ownership structure and transparency of funding, which allowed them access to the UK market via a white-label operating partnership,” he says.

Such moves might make someone looking at English Premier league shirt sponsorship think again and get them looking elsewhere. This is certainly the view of Lang at Brand Architects. “By then the Asian bookmakers will probably have recognised esports is a much lower hanging (and better followed) medium through which they can flog their wares,” he warns.