There is a paradigm shift in sports sponsoring after Major League Baseball (MLB) recently announced it would accept sponsorships from CBD brands. Acceptance of sponsorship will be restricted to brands whose cannabis products are void of active THC levels. THC is a cannabinoid molecule found in cannabis. It is the ingredient that triggers the high feeling in marijuana users. Marijuana is known to contain higher levels of THC compared to hemp, which has higher CBD.
The states of Washington and Colorado were the pioneers in recreational cannabis use legalization. It has been over a decade since then, and many professional sports leagues prohibit sponsorships by CBD brands. Other professional sports bodies that have allowed sponsorships are NASCAR and the UFC.
CBD brands’ sponsorship conditions set by MLB
Before a brand is allowed to sponsor an MLB event, it will have to seek approval from the MLB commission. Each product will have to be tested for THC before being allocated an ad spot. The testing will be done by NSF, and an analysis report will be given by the National Sports Federation, which must confirm that the product meets the THC requirement threshold.
According to Noah Garden, the MLB Chief Revenue Officer, the league has been observing the CBD sector for some time. They’ve been patient until they see the sector mature to a level that the league would feel comfortable with. He noted many baseball fans are CBD product users, and allowing sponsorships is an excellent opportunity for MLB clubs and the league.
What MLB’S CBD sponsorships will include
Currently, MLB has 16 official sponsors, including Amazon, Coca-Cola, Nike, and Bank of America. In 2021, the league received $1.7 billion in revenue from sponsors. Adding sponsorships from CBD brands will boost the league’s revenue base. Sponsors get various advantages depending on the signed sponsorship agreement.
Sponsors are allowed to buy an advertising spot on the team’s jerseys and batting helmets. Some brands go the extra mile and secure exclusive rights to a premier. Some get greater rights to display highly visible ads on TV. The brand that offers the highest sponsorship is usually named the official sponsoring partner. Allowing uniform ads is a highly lucrative opportunity for MLB.
The 2021-2022 season generated about $225 million in additional revenue from uniform ads only. This season, the league expects to generate more than $170 million in extra revenue from helmet decal ads. Airing commercials during MLB sports telecasts is another lucrative revenue earner. Other important spots are ads placed in arenas or stadiums where the MLB events take place. The uniform ads, TV commercials, and venue ads are the main spots CBD brands will be eyeing to take control.
The marijuana sector generated over $13 billion in 2021, and this is one of the reasons many sports governing bodies are softening their hearts to allow sponsorships. It is not yet clear if all stakeholders in MLB, including member teams and fans, will embrace sponsorships from CBD brands. Allowing sponsorships from such brands will open doors for a highly lucrative sponsorship class.
What the MLB’s decision means to other leagues
MLB is not the first league to allow sponsorship from CBD brands. The pioneers were UFC and NASCAR, which allow sale category sponsorship. MLB broke the ranks in the four major leagues in the US to become the first to allow CBD sponsorships. Despite the permissions, none of the four major leagues allow broader marijuana category sponsorships.
MLB’s decision has a significant impact on other leagues within the US. Leagues such as the NBA, NFL, NHL, and MLS are likely to change their stand and allow CBD brands sponsorships. Soon, these leagues might allow their teams and players to sell CBD spots during events. Noah Garden was more than impressed by this move and said certification by the NSF will give MLB a better ground to move forward.
There has been widespread hesitation in the sports industry
Since cannabis use was made legal in many states, many sports teams and leagues have been hesitant to allow sponsorships from CBD brands. Today, at least four major leagues have either embraced sponsorship deals or relaxed their protocols and rules. In the past, some teams and leagues have demanded testing of team members to be allowed to participate in events.
Breakthrough began in 2019 after the NFL signed an agreement with players through their union to study CBD advantages in managing pain. The agreement also eliminated the requirement for suspending players who tested positive for cannabis use. To date, 19 states have legalized recreational cannabis. Pot dispensaries can now be seen near MLB venues.
Psychoactive pot is gaining momentum, and this is a better alternative to sleeping pills and painkillers, which are often addictive. The popularity of CBD products has been on the rise recently. Manufacturers have availed them in different varieties, which include creams, oils, gummies, and sprays. Some stakeholders are hopeful that embracing sponsorships in the sports field will break the ground for CBD product marketing.
It will eliminate barriers that have prevailed for a long time due to a lack of information for consumers. Users should see CBD products more as medicine than intoxicants. If this view changes, US residents will widely accept the use of the products and allow more retailers to open CBD stores.
What the MLB’s decision means to its teams
The CBD market is currently commanding a market share of $4.9 billion. According to Sports Business Journal, this value is destined to increase to $47 billion by 2028. The main sponsorship options by CBD brands are likely to be TV ads and jersey patches. The MLB deal allows its teams to sign sponsorships with CBD brands with the conditions that the products will be tested and certified by the NSF.
This means individual teams will directly benefit from the sponsorships. At the moment, it is not possible to pinpoint the level of benefits the teams will get. However, looking at how much CBD is worth currently and its future growth, it can be agreed that the benefits will be enormous.
Already, MLB has cleared all its teams to sign for jersey sponsorships for the 2023 season. CBD brands that sign jersey deals will also be allowed to place TV ads during MLB events telecasts. The brands, however, must follow the rules to the point.