I originally sat down with Teresa Stas, CEO of Green Cactus, in early March to discuss the Coronavirus threat to live event sponsorship. As crazy as it sounds Covid-19 seemed like something that could still blow over quickly at that time. In just the past couple of weeks a tidal wave of canceled events because of coronavirus has hit the live events industry. No one can predict when festivals will again be permitted nationwide — the industry has never before faced such uncertainty. As such, are eager to update our previous conversation and frame the current climate for sponsorship sales. We also want to convey some critical information on force majeure clauses in partnership agreements. Finally, many events are getting caught off guard by their insurance not covering coronavirus related event cancellations. We discuss exactly why that is proving to be the case more often than not.
Listen to the full podcast below. Learn more about Event Hub here.
How organizers are handling partnership agreements for canceled events because of coronavirus
As the owner of a leading sponsorship agency, Teresa sees a higher volume of large sponsorship deals than most organizers see individually. She outlines that in normal circumstances, event cancellation resolution terms are very clear cut with the sponsorship agreement. We are not in a normal situation — events are cancelling because they are being forced to. Teresa talks about how Covid-19 event cancellations most often fall under the “Force Majeure” clause of a contract. The most common framing of this clause is: Because it is neither parties’ fault the event can’t go on as planned, it is up to both parties to agree on an acceptable outcome.
We are seeing most postponed or cancelled events roll the sponsorship benefits into the next occurrence of the event. In some cases, events are converting to a virtual format or small pop up versions in the fall until the next full year. In these cases we are seeing negotiated outcomes of partial refunds or carryover plus extra perks this year. Typically if a sponsor pulls out before the event is officially cancelled, they are not owed a refund. Given the current climate it is best to handle these on a case-by-case basis.
Vendor and exhibitor considerations
From the vendor/exhibitor perspective, many of these partners are small businesses or mobile tours. Many small business partners, such as local retailers, are currently in survival mode right alongside event organizations. They may need every penny to get through the next few months. Mobile tours are frequently short term programs and do not activate in the same market in consecutive years. However, mobile experiential tours often have more ability to absorb a cancelled event fee than a small business.
In most cases, we are seeing cancelled events offer a full refund to their vendors. Postponed events are often strongly encouraging carrying into the new date, while still offering refunds to those in need. This doesn’t mean an organizer shouldn’t offer to carry over the vendor partnership to the following year. Events who offer this, along with extra incentive to vendors for doing are, are getting some takers.
With so many canceled events because of coronavirus, what is the sponsorship sales climate right now?
Four responses Teresa is currently seeing from sponsors:
- Halting all signing and reassessing in four to six week.
- Cancelling from a brand image standpoint. For example: brands servicing senior populations, not wanting to encourage large gatherings.
- Signing but requiring a special clause guaranteeing full refund in the event of a cancellation due to coronavirus.
- Already signed sponsors for events still on the calendar are taking a wait and see approach. Strong communication and establishing a policy ahead of a potential cancellation are key. This will help building long-term sponsor confidence in your organization.
Insurance Policy 411: Why You Probably Aren’t Covered For Coronavirus-Related Event Cancellation
If you think your event is insured against a cancellation due to coronavirus, think again. General liability insurance for events does not cover cancellation. As David Olivares of Kaliff Insurance explains: “Communicable disease coverage (under which Covid-19 would fall) is an option that most people opt out of when purchasing an event cancellation policy (they primarily purchase for Adverse Weather,) which is an entirely separate policy to an event’s General Liability.” It is important to note that all communicable disease options currently exclude Covid-19 due to the current pandemic. As such, purchasing this option now will not cover you from a canceled event due to coronavirus.
While we are all in some degree of a wait-and-see mode right now, there is reason for optimism. Organizers are already showing resilience by focusing on future planning. Many are offering virtual and surprise and delight experiences to keep fans engaged while large gatherings are banned. For guidance on stakeholder messaging and crisis management, check out last week’s article: Covid-19 Event Cancellations: Crisis Management from RUSA.
In the podcast, we expand more on these topics and provide additional context and helpful examples. Hope you take a listen!