TP System for Sport Marketing Rights

Our client required a pricing strategy for the joint value creation of marketing and media rights commercialization, where one party acquired the rights and the other party sold the rights to sponsors or broadcasters.

The client is an agency for international sport marketing rights where they bring together sport right holders (e.g., sport clubs or international associations) and potential sponsors who would like to promote their brand. The client has international teams to identify and win sport rights and facilitate the sale to sponsors. The client receives a commission determined by the sponsoring fee earned by the sports rights’ owner.

The client encountered difficulty in establishing transfer prices between sales and origination activities due to the multi-year revenue generation resulting from business relationships and the inability to link operating expenses to individual deals.

Transfer pricing for sport rights is unique and requires an in-depth understanding of the market and each individual deal. NERA was responsible for setting up a global transfer pricing system for the group that would be broad enough to apply to all deals and easy enough to be utilized consistently by the client.

We implemented the profit split method, based on gross margins for each deal, and defined both the profit to be split (i.e., which external and sometimes internal expenditures should be attributed to a deal) and how the joint profit is split between the sales and acquisition teams.

NERA provided a comprehensive range of services for the client, writing the transfer pricing policy and supporting its implementation. Moreover, the transfer pricing system has undergone several audits and has consistently been accepted by tax authorities without any adjustments.