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The thirty-year marriage of Budweiser and Major League Baseball (MLB) turned sour late last week when Anheuser-Busch (A-B) filed suit against the league. A-B alleges that the league’s licensing arm, MLB Properties, reneged on an agreed sponsorship renewal for the upcoming season. The brewer, whose sponsorship rights were set to expire later this year, claims the two organizations reached an agreement in April on a multi-year renewal. A-B reports that they traded congratulatory emails with MLBP executives, who stated that they were “excited about the extension of this amazing partnership.” According to A-B, the only remaining step was to draft a long-form contract.
The league came back several weeks later and demanded exponentially higher fees, citing a “change in market dynamics.” What are these market dynamics? Though not explicitly stated, there’s little doubt that the league was referring to A-B’s announcement in May that its Bud Light brand would become the official sponsor of the NFL, replacing rival Coors Light, owned by MillerCoors. The deal was reportedly worth $1.2 billion over six years, dwarfing A-B’s $40-50 million annual MLB sponsorship rights.
After the announcement, MLB must have recognized that MillerCoors, needing to fill the advertising hole left by the loss of NFL sponsorship, would have a greater interest in negotiating for MLB sponsorship rights. MLB therefore stood to gain millions of dollars if it could force A-B to renegotiate the terms of the sponsorship in the face of greater competition from MillerCoors.
A-B has asked the court to validate the terms of the April agreement. MLB Properties hasn’t yet responded publicly, but its spokesperson has asserted that they have a different view of the facts alleged. The case raises obvious issues of contract formation. Did the emails from MLBP executives evidence an enforceable contract, despite no formal, written long-form contract?
Both sides clearly have a desire to resolve the dispute quickly. The World Series ended a few weeks ago, but the beginning of next season is just five months away. It therefore seems likely that the parties will attempt to reach a settlement to prevent the dispute from spilling over into next season.
Regardless, there’s little doubt that A-B’s relationship with MLB will be significantly damaged in the long term. Even if the court validates the terms of the April agreement, that renewal agreement will expire again in a few years. At that point, facing greater competition from MillerCoors, A-B will have to cough up significantly more money to retain the MLB sponsorship rights.
– Henson Millsap
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