Corporate sponsorships enable organisations to successfully conduct their operations and expand their visibility in key growth markets. Obtaining sponsorship to pay for operating expenses offsets costs and represents a definite upside to having a sponsor, but sponsorship also comes with some disadvantages. Sponsorship contracts today can be very complex, covering granular details such as sponsor logo placement. Before you take on a sponsor, you may want to consider what the downside is.
Loss of Control
In return for their compensation, sponsors may ask for things that result in the sponsored organisation relinquishing some degree of control. Trade-offs could be as innocuous as a branding agreement to place the sponsor's logo on a team's uniform or as extreme as exclusivity rights that would lock out the team from obtaining additional sponsors or sponsors that could be seen as competitive by the initial sponsor.
Because an individual or team is sponsored by a particular company doesn't necessarily mean that the person or team endorses the sponsor's products, ideals or brand. While this may not be of much concern to teams, as a group, it can become a concern for athletes who rise in prominence and involuntarily and implicitly become associated with their sponsor's brand. For some people, this involuntary endorsement can become a moral conflict, and can especially become a problem if the sponsoring party is involved in a scandal or receives negative publicity.
Increased Pressure to Succeed
When a team or person obtains a high-profile sponsorship, there may be increased pressure to succeed, especially if the sponsorship carries significant benefits. Many companies are quick to sponsor teams and athletes that are known for winning, but quickly pull their sponsorship if the team or athlete begins to perform poorly or is embroiled in an event that leads to bad publicity. Just as the sponsored party may want to avoid involuntary endorsements, sponsors want to avoid an involuntary endorsement of bad public conduct.
Loss of Credibility
While some sports and competitive fields are rife with sponsorships, emerging sports or athletes can be chastised for obtaining corporate sponsors as it can be perceived as "selling out" among their peer groups or fans. The sponsorship agreement may call for the team or athlete to wear and do certain things that are incongruous with the perception they built up with fans and peers before taking on the sponsorship.