NBA jersey patch sponsorship program expands as league scores new revenue

The future of the NBA’s business in its most lucrative overseas market may be in doubt, but the league’s jersey patch sponsorship program received a vote of confidence from executives heading into the 2019-20 season.

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Launched as a three-year experiment in 2016, the NBA’s board of governors approved an indefinite extension of the jersey patch program in April, league sources confirmed to FOX Business. When the season tipped off Tuesday night, 29 of the NBA’s 30 teams had a jersey sponsor, with Japanese e-commerce giant Rakuten, General Electric and the Walt Disney Company among the active participants.

This year, the program features a new layer after league officials allowed teams to tap up to two of their corporate partners – including jersey patch sponsors – to participate in international marketing campaigns. The expanded international rights provide added value to sponsorship deals and are expected to allow NBA franchises to charge more for jersey patch rights when current deals expire.

The league’s decision to loosen marketing restrictions was an offshoot of the jersey sponsorship pilot’s success, the sources added. Two-thirds of the NBA’s current jersey sponsors have a business presence outside of North America, making international campaigns a natural fit.

The Wall Street Journal was first to report the NBA’s new rules on international marketing campaigns.

As of last February, jersey patch sponsorships had generated more than $150 million in new revenue for the NBA. While the deals vary in size, Rakuten is said to pay the Warriors $20 million annually for the right to display its logo on the perennial championship contender’s jerseys.

The exposure generated by jersey patch sponsorships is well worth the average cost of current deals, according to Navigate Research, which has worked with NBA franchises to establish jersey patch valuations in recent years. The firm told Sports Business Journal last February that sponsors receive an equivalent advertising value from patches that are an average of 25 to 50 percent higher than what they paid for exclusive rights.

The Dallas Mavericks are the only NBA currently lacking a jersey sponsor. The franchise mutually agreed to part ways with last year’s sponsor, the e-commerce company 5miles, during the offseason. At the end of last season, all 30 teams had a jersey sponsor.

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Once limited to player uniforms during NBA games, jersey patches will eventually be added to Nike-made jerseys and made available for sale at retail outlets by next year.

The expanded patch program provides the NBA with a path to international revenue growth at a time when business interests in China, the league’s most lucrative overseas market, are under threat. State-owned CCTV pulled NBA games off the air and several other sponsors suspended ties to the league after it defended Houston Rockets general manager Daryl Morey for speaking out in support of Hong Kong protestors.