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Sports and the Great Recession - What Recovery Is That Again?

The Great Recession has battered almost every aspect of the American economy with the exception of bankruptcy lawyers and repo men.  Sports has been no exception.  Auto companies, long a major advertiser with all professional sports TV broadcasts and sponsors of several PGA Tour events have severly cut back if not eliminated those sponsorships completely in the wake of the government bailout - even Ford has cut back.  Television ratings have been dropping and with them advertising dollars.  More troubling, however, may be the thought that this is not just the result of the Great Recession but a dramatic rethinking of the value proposition presented by sports as a sponsorship and marketing medium.

When Buick announced the termination of its relationship with Tiger Woods a year before its contract was up, and before the whole Tiger and his pussies thing, the reason given by Buick was the economy and the GM bailout.  However, it's just as likely that the reason was the diminishing value of a sponsorship seen by the public as unrealistic since few believe Tiger actually drove a Buick.  Tiger is also the poster child for the danger posed to sponsors by having athlete or celebrity endorsers: your CEO is going to wake up to see his prized endorsers splashed across the front page making the kind of news that does not endear him to your shareholders.

Another example of the changed economics of sports sponsorships can be found in the names of the latest two NFL stadiums.  Jerry Jones opened his much talked about palace this season known as Cowboys Stadium.  Why does it not carry a corporate name?  Because Jones couldn't find anyone willing to pay $20 million a year and he was willing to wait it out.  Similarly, the Jets/Giants stadium slated to open next fall is currently referred to as New Meadowlands Stadium because nobody has ponied up the $25 million per year those two teams are asking.  The Nets agreed with Barclays to cut its naming rights obligation in half from $400 million to $200 million for the new arena in Brooklyn now scheduled for a 2011 opening.  The naming rights market has essentially been in freefall since the onset of the credit crisis and has shown no signs of abating.

Advertising on sports broadcasts has also been hurt and nothing is more illustrative of that than the Super Bowl.  For only the second time in Super Bowl history ad rates have dropped from last year, although still the highest rates on TV.  Early returns suggest that 30 second commercials are selling for $2.6 to $2.7 million down from $3 million last year.  Pepsi however decided it was still too expensive and is passing on the game for the first time in 23 years, shifting the dollars to its online ad budget.

Finally, Churchill Downs announced that it is paying NBC $2 million to broadcast a series of Kentucky Derby prep races in an effort to promote horse racing and the Derby.  The series will include at least three one hour "Road to the Kentucky Derby" broadcasts, two on NBC and one on USA.  It says something that the owner of the "Greatest Two Minutes in Sports" feels compelled to purchase network time to build interest in a race that almost always draws the highest ratings, crowd, and handle in the sport and I don't think it is a reflection on just the declining interest in horse racing alone.

It is a new era in sports and sports executives are going to have to adjust quickly to the new reality.  It will require ever more creative thinking to engage sponsors and advertisers in ever newer and more diffuse ways of connecting with their fans.  Simply slapping a logo on the wall or a sign and moving on is not going to cut it anymore, if it ever really did.  Integrating sponsors into digital platforms employed by teams and leagues is an immediate necessity and to the extent that teams don't have active digital platforms that not only employ one way delivery, i.e. podcasts or internet radio or TV, but social media, then they need to put that as a high agenda priority.  The prize should be the careful integration of sponsorships and social media in a way that fans find sponsors not to be intrusive but complementary. 

Full post as published by Sports Biz on January 13, 2010 (boomark / email).