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Gatorade backs out of NHL partnership as Pepsi pivots to college athletics

Yahoo Finance’s Josh Schafer joins the Live show to discuss Gatorade’s decision to not renew its NHL partnership and what it means for college NIL advertising.

Video Transcript

BRIAN SOZZI: PepsiCo is pulling back further from its sports sponsorships, as Gatorade opts not to renew its partnership with the National Hockey League. Yahoo Finance's Josh Schafer has the details. Josh, I can't say that I'm surprised with this because there is such a focus inside PepsiCo right now to cut costs.

JOSH SCHAFER: Yeah, I mean, we just saw them back out of the Super Bowl halftime show, right? And it seems like they're really evaluating where they're spending money when it comes to sports marketing. And so that was my takeaway. I don't think this says much about the NHL, right? When you see something happen like this, you wonder, hmm, do teams-- or brands maybe not want to do a partnership with the NHL? The NHL viewership, the playoffs are up 40% year over year. So they're doing pretty well, I think. And they have helmet sponsorships coming in. They're going to have jersey sponsors next year. I think that league's doing fine.

It seems like PepsiCo is really trying to change what they do in the sports space because Gatorade is so popular. It's not like you have to just throw Gatorade at us, and we need to understand what Gatorade is. So what we're seeing them do is, they're now coming into these emerging markets. So, actually, the company's head of sports marketing, Jeff Kearney, specifically said on LinkedIn, they're going to use this money and go into women's sports and name, image, and likeness. They're going to be spending more money on college athletes, guys. And they're refocusing there, instead of brands like the NHL and NFL. Isn't that kind of interesting?

BRAD SMITH: I think they just need to focus on the weekend warrior or anybody who's trying to recover from those weekends. A major brand like Gatorade, though, they're also looking to delve further into NIL advertising. So it must mean that market here, at least, is doing pretty well.

JOSH SCHAFER: Yeah, Brad. I mean, NIL, we've been talking about it since last July on this program, but it's getting huge. So I talked to Open Doors recently, who is-- they do some of the deals and they do some studies there. And really, what they said was, I asked them, how big is this market? How big is it going to be in year one? NIL compensation in year one, they're expecting $900 million. They think these athletes in the first full year will have made $900 million total, which, to me, was pretty eye-popping. They said it might even be a billion. And so that market just keeps getting bigger and bigger. And the reason companies are coming in there is, in NIL, you get so much earned media.

So we saw earlier this year, Paige Bueckers, UConn women's basketball player, pretty popular in that space, she did a deal with Gatorade. Well, that went viral on social media, because people are interested in these NIL deals. It's the first player doing X, the first player doing Y. If you can spend less money and maybe even get more engagement than you get by sponsoring a water bottle for a pro sports league, it kind of makes sense.

BRIAN SOZZI: Worth noting here, too, I believe it was former PepsiCo CEO Indra Nooyi that really made that push into sports. You're seeing now current CEO Ramon Laguarta really drill down on costs, unwind some of those deals. But is the halftime show still being bid for?

JOSH SCHAFER: Yeah, the halftime show, I believe the bidding is still up.

BRIAN SOZZI: They're giving it up?

JOSH SCHAFER: Yeah, and we'll have to see who steps up there. And I'm sure-- it feels like everything in the NFL is a record these days-- that might be a record number. And if there's any trends, guys, maybe a crypto sponsorship?

BRAD SMITH: Maybe. Our own Josh Schafer here to break down all of the movie sponsorships that are taking place over the course of these last couple of seasons. Thanks so much, Josh.