SBD/Issue 111/Sponsorships, Advertising & Marketing

U.S. Rep. Barney Frank Says Naming-Rights Deals Are "Ego Boosts"

Frank Believes Marketing Expenses Should Not
Be Used For Stadium Naming-Rights
U.S. Rep. Barney Frank (D-MA) yesterday called naming-rights deals for events and facilities "ego boosts" for company execs, according to Richard Sandomir of the N.Y. TIMES. Frank, who Chairs the U.S. House Financial Services Committee, said, "Marketing expenses should be for real marketing. ... Important men, in particular, like to hang out and ingratiate themselves with sports figures, and after the fact try to figure out how to make sense of the sponsorships as marketing or economic development." Frank Tuesday co-signed a letter with 17 fellow Democratic committee members demanding that Northern Trust, which received $1.58B in TARP bailout funds, "reimburse the government for the lavish entertainment and hospitality it treated clients and employees to" during last weekend's PGA Tour Northern Trust Open in L.A. Frank yesterday also argued that Citigroup's 20-year, $400M entitlement of the Mets' new ballpark "was a mistake." Frank: "I don’t think anybody has ever opened a bank account or decided to buy a CD because a bank’s name is on the stadium." However, Frank insisted that he is "not demanding that the bank break a valid contract that the Mets have said has no escape clause." Frank: "If there’s some cancellation fee, fine, but if it’s binding, it’s binding. ... We can't force them to break an existing contract." But Frank added, "We can put in some pretty strict conditions going forward." Meanwhile, Sandomir notes Bank of America last month decided "not to proceed with a multimillion-dollar sponsorship" at the new Yankee Stadium. Both Citi and Bank of America have received $45B in bailout funds (N.Y. TIMES, 2/26). ESPN's Tony Kornheiser said, "You can’t go to the (U.S. Congress) and asked to be bailed out and then say, 'By the way, we’re going to take some of the money (and) sponsor a golf tournament'” (“PTI,” ESPN, 2/25).

CUT YOUR LOSSES: BLOOMBERG NEWS' Fineman & Levinson reported Morgan Stanley, which received $10B in TARP funds, "won't entertain clients or attend" the PGA Tour's The Memorial, scheduled for June 4-7. Morgan Stanley spokesperson Mary Claire Delaney said the bank, which is the presenting sponsor of the tournament, is "not participating this year due to the environment." PGA Tour Exec VP/Communications & Int'l Relations Ty Votaw indicated that Morgan Stanley will "'honor their commitments' to the tournament and 'may very well' scale back hospitality and entertainment connected to the event." Votaw: "That is certainly a reflection of the scrutiny that Congress seems to be having on all corporate entertainment expenses. This is the world in which we live" (BLOOMBERG NEWS, 2/25). CNBC.com's Darren Rovell confirmed that Morgan Stanley "will continue to sponsor the event," but will not participate. Rovell noted participating "means sending any employees or clients to the golf tournament on the bank's budget." There also will not be "any employee or client activities planned" (CNBC.com, 2/25). In San Jose, John Ryan writes with Morgan Stanley scaling back, it would "be great to say we're finally seeing an attack of corporate conscience." However, the bank "simply saw a no-win situation after the heavy criticism encountered by Northern Trust" (SAN JOSE MERCURY NEWS, 2/26).

CHECK PLEASE? BLOOMBERG NEWS' Ari Levy reported Wells Fargo, which received $25B in TARP funds, is "cutting spending" on the PGA Tour Wachovia Championship from April 30-May 3. Wells Fargo in December acquired Wachovia, which has a sponsorship contract with the PGA Tour through '14, and Wells Fargo Senior VP & Corporate Communications Manager Mary Beth Navarro said that the company is "reducing costs, including some related to client entertainment, and hasn't determined the specifics." Navarro: "We plan to reduce expenses as much as possible, while meeting our contract obligations." Meanwhile, U.S. Bancorp Senior VP/Media Relations Steve Dale yesterday said that the company will "reduce 'hospitality and entertainment aspects'" for the U.S. Bank Championship from July 16-19 (BLOOMBERG NEWS, 2/25).

PGA TOUR LOBBYING CONGRESS: The PGA Tour is lobbying members of Congress to fight legislative criticism of companies that receive federal assistance and continue to spend money on sponsoring professional golf tournaments, said sources. Votaw would neither confirm nor deny that any lobbying was taking place. “We have a great relationship with members of Congress and we talk to them about a number of issues on a regular basis,” he said repeatedly. According to public filings, the tour worked with three lobbyists in 2008: Holland & Knight, Piper Rudnick and Dan Tate. Votaw would not disclose which of the three, if any, are leading the efforts. Votaw also suggested a joint lobbying effort between leagues was unlikely (Jon Show, SportsBusiness Journal).

CRITICISM NOT OVER: CNBC’s Rovell said despite financial services companies reducing their sports sponsorships, scrutiny on the companies “is not over.” While the companies are being criticized by the government, CNBC’s Larry Kudlow asked, "How many jobs will be lost by groundskeepers, construction people and all kinds of ushers if these golf tournaments go down? ... Why aren’t one of these executives standing up and pounding back and fighting back?” Rovell: “The PGA Tour doesn’t think this is any kind of stimulus, believe me.” Kudlow added, “Congress is a bunch of hypocrites (because) they go to the best resorts and they play golf at the finest golf courses. It is disgusting what’s going on here” (“The Kudlow Report,” CNBC, 2/25).

PARTNERS NEEDED NOW MORE THAN EVER: Texas Motor Speedway President Eddie Gossage said, "Don't we need good business practices now more than ever? Don't we need companies advertising now more than ever, whether that’s on a stadium or a race? What has happened is grandstanding by Congress and grandstanding by the media has held up various companies for ridicule. Look at them living in the lap of luxury." Gossage: "Let’s talk about [U.S. House Speaker] Nancy Pelosi flying in a corporate jet home. What you hear about is a corporate exec flying in a jet. I don’t want to get political, but I’m just saying we can’t get the economy on track until that grandstanding stops" (FT. WORTH STAR-TELEGRAM, 2/26).

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