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SBD/October 18, 2012/Marketing and SponsorshipPrint All
Anheuser-Busch, Trek BicycleCorp., energy drink maker FRS Co., energy foods maker Honey Stinger and Easton-Bell Sports Inc., which manufactures Giro helmets, yesterday joined the “stampede of marketers" cutting ties with cyclist Lance Armstrong, according to Albergotti, O’Connell & Vranica of the WALL STREET JOURNAL. Trek, which made every bike Armstrong "rode during his seven Tour de France wins,” said it was “disappointed” by the findings in the report the USADA issued last week outlining doping allegations against Armstrong. A company spokesperson said that Armstrong was “given a small stake in the company as a gesture of goodwill during his career, and will get to keep that stake.” Trek, like “most of the others,” said that it “will continue to support Livestrong.” A-B said that it “wouldn't renew Armstrong's contract, which expires at the end of the year.” FRS indicated that Armstrong “resigned from its board.” Meanwhile, Oakley said it is reviewing the USADA report, "as well as our relationship with Lance." The company said that it will “await final decision-making" by the Int'l Cycling Union, with a "response to USADA's file,” before determining the future of its sponsorship with Armstrong. Albergotti, O’Connell & Vranica note Armstrong was “once an endorsement darling on Madison Avenue,” but Davie-Brown Entertainment consumer research shows that Armstrong “has seen his appeal in the eyes of consumers begin to wane as the scandal intensified.” The research showed that “consumers trust in Mr. Armstrong and his worthiness to be a pitchman has fallen significantly” (WALL STREET JOURNAL, 10/18). In N.Y., Thompson & O’Keeffe report Honey Stinger “issued a statement saying it is removing Armstrong’s image and endorsement from its product packaging” (N.Y. DAILY NEWS, 10/18). The moves by the various companies come a day after both Nike and RadioShack announced they were dropping Armstrong as an endorser (THE DAILY).
TOTAL FALL FROM GRACE: PMG Sports President & CEO Evan Morganstein said Armstrong's fall is the "greatest collapse by an American icon, sports or otherwise, in history" (VELONEWS.com, 10/17). The WALL STREET JOURNAL’s Jason Gay writes, “The ascension and validation of today's athletes is not only about the titles they can deliver, but also the products they can reliably pitch, and when that goes away, uh-oh” (WALL STREET JOURNAL, 10/18). CNBC’s Becky Quick said there have been "some questions whether his sponsors would go after him and sue him to come back out of it." Quick: "I think if you’re one of his sponsors, at that point you probably don’t want to keep bringing up the idea and dragging out the idea that you’re affiliated with him” ("Squawk Box," CNBC, 10/18).
LIVESTRONG FIGHTS ON: In Austin, Ball & Halliburton report the “doping charges so far haven’t dimmed the foundation’s annual Livestrong Challenge weekend," which starts tomorrow. Livestrong CEO Doug Ulman said that he “still expects to raise more than $2 million this weekend.” Ulman said that he has “talked to several of the charity’s other sponsors and none have indicated they will sever ties.” The weekend “includes a sold-out gala for 1,750 people at the Austin Convention Center.” Sponsors “paid between $5,000 and $100,000 for a table of 10” and individual tickets “sold for $1,000.” Armstrong will "host a dinner Saturday night for 152 people who raised at least $10,000 for Livestrong” and will “ride with more than 3,700 cyclists Sunday morning” (AUSTIN AMERICAN-STATESMAN, 10/18). ESPN’s Tony Kornheiser wondered if money "is going to dry up” for Livestrong. ESPN's Michael Wilbon speculated it might "for awhile, but not forever” ("PTI," ESPN, 10/17). But experts said that Livestrong “may continue to prosper.” Charity Navigator President & CEO Ken Berger said, “Nine times out of 10, the charity suffers when something bad happens to the famous person it’s associated with. But Livestrong has been the exception to the rule.” Indiana Univ. public affairs and philanthropic studies professor Leslie Lenkowsky said, “My hunch is they will take a bit of a hit, but they have so many sources of revenue and such terrific partners that it shouldn’t be a big factor for them” (CHICAGO TRIBUNE, 10/18).
BRACING FOR TROUBLE? USA TODAY’s Brent Schrotenboer notes Livestrong “long has shown signs of being able to stand on its own.” But by Monday, Ulman said that Armstrong “was hinting the negative attention was taking away from the foundation’s goal to help cancer survivors.” Nike, Trek and A-B yesterday said that they “would continue to work with Livestrong, even as they carefully distinguished the charity from its founder.” Nike helped develop Livestrong’s yellow wristbands, and Ulman said that “there are no plans to end production of the bracelets” (USA TODAY, 10/18). USA TODAY’s Christine Brennan writes under the header, “Lance Needs To Fade Away.” Armstrong “must sever all ties to his famous ... charity by not only leaving as chairman but also resigning from the foundation's 15-member board.” Brennan: “How can a man who now appears to be one of the most elaborate liars and cheaters of our time ever be associated again with a cause so noble as that of helping cancer survivors and victims and their families?” (USA TODAY, 10/18). In Austin, Cedric Golden writes Armstrong’s "well-intentioned foundation has taken a collateral hit, even as he attempts to shield it from guilt by association” (AUSTIN AMERICAN-STATESMAN, 10/18).
SEPARATING THE GOOD AND THE BAD: In London, Ashling O’Connor writes Nike “hopes to make a distinction between the doper and his good work” by distance itself from Armstrong but continuing to support Livestrong. The question is “whether they are just too entwined” (LONDON TIMES, 10/18). ESPN's Michael Smith said Nike's decision "speaks to the struggle that everybody has” trying to separate his “work for cancer research and his tainted legacy” ("Around The Horn," ESPN, 10/17). NBC's Anne Thompson said of Livestrong, “It changed the way we look at cancer, from a death sentence to a disease you can survive and then thrive. Tonight, that is the very challenge facing the Livestrong charity” (“Nightly News,” NBC, 10/17).
THE BIGGER ISSUE FOR CYCLING: The London TELEGRAPH reports Australia-based Skins CEO Jaimie Fuller, whose company is a sponsor of the Rabobank cycling team and Cycling Australia, has called on UCI President Pat McQuaid to "make clear" the organization's position on the doping allegations around Armstrong "or resign to prevent the collapse of world cycling.” Fuller has written an open letter to McQuiad "warning of catastrophic consequences to the body's 'inertia.'" He also “warned the commercial impact will go beyond the American and could dwarf the damage the sport suffered in the wake of the Festina team doping scandal of 1998." Fuller: “There's no question that there was a commercial hit that happened to the sport of cycling. I genuinely believe that what we're seeing now is way worse.” Fuller said that Skins, which produces “therapeutic compression clothing for athletes, would have to reconsider its association with cycling if the UCI failed to act” (TELEGRAPH.co.uk, 10/18). However, CBS' Armen Keteyian noted if the UCI does strip Armstrong of his Tour de France titles, it "will likely trigger an avalanche of lawsuits from sponsors and business partners” (“Evening News,” CBS, 10/17).
TV MONITOR: Last night’s editions of ABC’s “World News,” CBS’ “Evening News” and NBC’s “Nightly News” all aired reports on Armstrong losing Nike as a sponsor and him stepping down as Livestrong Chair. This morning’s editions of ABC’s “GMA,” CBS’ “CBS This Morning” and NBC’s “Today” all reported on Armstrong in the first 30 minutes of the broadcasts. ABC’s Neal Karlinsky, CBS’ Armen Keteyian and NBC’s Anne Thompson all appeared live in-studio before airing their taped reports on Armstrong (THE DAILY).
The move by Nike to drop its sponsorship of cyclist Lance Armstrong is a "defining moment in the Armstrong saga, as the corporation has a history of sticking with its athletes," according to William Fotheringham of the GUARDIAN. The company notably stuck with Tiger Woods "during his marital troubles” that began in late '09. It is also “defining because of the extent to which the corporation bought into cycling, establishing a massive presence on the ground during the Tour de France” (GUARDIAN, 10/18). In Chicago, Rick Morrissey writes yesterday’s news was “a few more shovels of dirt on the grave of his reputation.” Nike “doesn’t give up on moneymakers.” But the company “seemed to realize that Armstrong was a lost cause, and, more importantly, that there was a chance of a backlash from a public that buys Nike products as if they’re necessities” (CHICAGO SUN-TIMES, 10/18). SI.com’s Austin Murphy wrote, “This kiss-off from Nike marks a new phase in his fall. This is when he truly starts hemorrhaging money” (SI.com, 10/17). SB Nation's Amy Nelson said Nike's move is a "stronger message than USADA could ever deliver" ("Markets Now," Fox Business, 10/17). In N.Y., Belson & Pilon report Nike called Bill Stapleton, Armstrong's agent, on Tuesday and "told him it was ending its agreement with Armstrong, thought to be worth millions of dollars.” The company “did not leave room for negotiation” (N.Y. TIMES, 10/18).
BAD FOR BUSINESS: optionMONSTER co-Founder and CNBC contributor Pete Najarian said there is "zero upside" for Nike to keep Armstrong among its roster of endorsers. Najarian: "Nike's not going to sell an extra sneaker just because they have Lance Armstrong” (“Fast Money,” CNBC, 10/17). Solomon McCown & Co. President Ashley McCown said Nike had "no choice but to cut ties" with Armstrong. McCown: "Lance Armstrong is a brand, and Nike is a premiere brand. He is now a toxic asset that cannot be associated with. There is too much of a chance for Nike’s fine reputation to be tarnished. Lance is damaged goods” (WASHINGTON POST, 10/18). PMG Sports President & CEO Evan Morgenstein said that Nike brand managers “would have had ‘an absolute nightmare’ dealing with the collapse of the Armstrong brand.” Morgenstein: “Just take it from a business perspective first, how much inventory are they going to have to liquidate now, or how much of it’s coming back to their warehouses from their retailers?” (VELONEWS.com, 10/17). FOXSPORTS.com’s Greg Couch wrote, “I’m not going to believe for one minute that Nike did this because it believes Armstrong is a cheater. No, Nike dumped Armstrong because you think he’s a cheater. Nike made a business decision, and also a Nike-image decision.” The numbers “just don’t add up anymore" (FOXSPORTS.com, 10/17).
ODD TIMING: IEG Senior VP/Content Strategy Jim Andrews said that he was “dumbfounded by Nike's decision to pull away.” Andrews said, "It came so close to their statement last week supporting him. Something happened internally that we are not privy to” (MILWAUKEE JOURNAL SENTINEL, 10/18). SB Nation's Bomani Jones said of Nike, “You have to wonder when they made such a point to say how they were misled and they were fooled just like everybody else. ... If Nike wants to divorce itself now, that’s fine. But this is weird that they’re the first ones off the ship” (“Around The Horn,” ESPN, 10/17). But in Portland, Erik Siemers reported there is "evidence that Nike has long been planning for this eventuality in a way that would limit the impact on the brand.” It is as if Nike has "created two Lance Armstrong personas: The dominant athlete and the cancer survivor." Siemers: "It’s the cancer survivor ... that seems to have come to the fore in recent years.” In losing Armstrong the athlete, Nike "doesn’t give up any signature product lines like it would with Tiger Woods or LeBron James” (BIZJOURNALS.com, 10/17).
WORDS COMING BACK TO BITE THEM: Nike is taking some heat for a commercial it released in '01 supporting Armstrong against doping allegations. As footage shows Armstrong alternating between working out and being drug tested, he says in a voiceover, "Everybody wants to know what I'm on. What am I on? I'm on my bike, busting my ass six hours a day. What are you on?" (THE DAILY). ABC’s Neal Karlinsky said, “Not so long ago Lance Armstrong and his partners at Nike were making fun of those who accused him of doping. Today, Nike is eating its words" (“World News,” ABC, 10/17). CNBC’s Andrew Ross Sorkin said of the ad, “If you’re Nike, you cannot be happy that you paid money for this, right?” ("Squawk Box," CNBC, 10/18). Meanwhile, advertising experts said that the “public manner in which Nike severed its ties with Lance Armstrong is rare.” Northwestern Univ.'s Kellogg School of Management marketing professor Tim Calkins said, “What’s surprising is that Nike came out with a very pointed statement about Lance Armstrong. And behind that statement there seemed to be some bitterness” (AUSTIN AMERICAN-STATESMAN, 10/18).
DEVIL’S ADVOCATE: YAHOO SPORTS’ Dan Wetzel wrote under the header, “Nike, Livestrong Abandoning Lance Armstrong At Wrong Time.” Wetzel: “This should've been time to regroup and reload in a different way. This should've been time to stand stronger behind Armstrong because, from here on out, his purpose could be clear and true." It was not “until Armstrong's name became mud and his ability to move merchandise was destroyed that Nike decided it couldn't ethically stand by the cyclist.” As long as “the money was rolling in, they were with him.” The idea that Nike “could be naively duped into believing in Armstrong's innocence is ridiculous.” The company “either knew or would've overwhelmingly believed Lance was doping all these years” (SPORTS.YAHOO.com, 10/17).
INTEGRITY OF THE SPORT: In London, Simon Hart writes a “closer inspection of Nike’s history supports the view that it was only a matter of time before Armstrong was cut adrift.” While the company has been “tolerant of indiscretions away from the sports field, it has been ruthless in its rejection of athletes who have cheated on it.” Former U.S. sprinter Marion Jones was “once the face of Nike until allegations surfaced about her involvement in the BALCO drug conspiracy.” The company “refused to offer her a new endorsement deal in 2005 -- two years before she confessed to drug-taking at her perjury trial.” Nike also dropped other BALCO clients including Rockies 1B Jason Giambi and U.S. sprinter Kelli White. Meanwhile, U.S. sprinter Justin Gatlin in '06 was “shown the door by Nike following his second positive drug test” (London TELEGRAPH, 10/18).
With Reebok's NHL jersey licensing contract set to expire in '16, Bauer Performance Sports said that it “plans to be a contender," which could create “a David and Goliath contest” between the two companies, according to Dana Flavelle of the TORONTO STAR. adidas subsidiary Reebok is “roughly six times Bauer’s size in terms of annual revenues.” The NHL jersey business is "worth an estimated" C$200M a year, "including fitting the players themselves and their fans with replicas.” Bauer President & CEO Kevin Davis on Tuesday said, “We have every intention of bidding.” Davis said that the company’s ability to “bid for the NHL jersey business came with its purchase last week of Inaria International, a small Toronto-based team jersey and sock maker.” Flavelle notes the C$7M purchase of Inaria was a “relatively small deal for the leading ice-hockey and lacrosse equipment maker.” But Bauer said that it has “big plans for the unit, which adds team outfits to its stable of skates, helmets and sticks making it a ‘one-stop’ shop for retailers.” SportsOneSource analyst Matt Powell said that “typically, the successful licensee would pay an upfront fee of [C$50M] to the league and then another 10 per cent a year in royalties.” Meanwhile, Davis said that the four-week-old NHL lockout “has had little impact on the company’s business.” Bauer said that the company currently sponsors “about a dozen NHL players and roughly 85 per cent of league members play with at least one piece of Bauer equipment” (TORONTO STAR, 10/18).
The future of NASCAR driver Danica Patrick as “Go Daddy's go-to girl appears to be in limbo," as Go Daddy's new ad agency of record, Deutsch, N.Y., "will have freedom to drop the sexy racing star from the Web domain company's Super Bowl ad lineup,” according to Bruce Horovitz of USA TODAY. Patrick has starred in “more Super Bowl spots -- 10 -- than any other celebrity.” She also has appeared in 22 Go Daddy commercials since '07 and is "believed to earn upwards" of $1M annually for those spots. But Patrick "has not appeared in a Go Daddy spot for months." The company said that it "has no current plans to feature her in any spots at least through January.” Go Daddy CMO Barb Rechterman said, "The question at hand is: Is she in the Super Bowl or not? What we're trying to do is redefine sexy to be a small-business owner running a successful business. So we want to explore options of how we make our advertising new." Patrick’s contract with Go Daddy “runs through 2013.” Her Q Score has "recently been heading south, falling from 29 in 2010 to 19 in 2012" (USA TODAY, 10/18). Deutsch is working on two 30-second spots for Go Daddy for Super Bowl XLVII on Feb. 3, with multiple teams currently working on creative concepts (Go Daddy).
ROUGH ROAD: Patrick admitted that her first full season of NASCAR “education hasn’t been easy.” Patrick said, “Oh, yeah. There’s only so much of it you can take before you start to get a little down. I recognize that I’m learning a lot and putting myself in difficult situations on purpose. I’m fortunate that the people around me are patient.” USA TODAY's Dustin Long notes Patrick “hasn’t finished better than 25th in a Cup race but has shown progress on race weekends.” She has “shown progress in the Nationwide series, too, on a streak of four consecutive top-20 finishes for the first time this year” (USA TODAY, 10/18).
ON THE CLOCK: Swiss watchmaker Tissot announced that it will be the primary sponsor on Patrick’s No. 7 Tissot/GoDaddy.com Chevrolet in Saturday's NASCAR Nationwide Series Kansas Lottery 300 at Kansas Speedway. The race will mark the third time in as many years that Patrick will drive the No. 7 Chevrolet for JR Motorsports with Tissot as the primary sponsor (Tissot).
During the MLB postseason there appears to be “a specialized subset of the brand police: the Gatorade SWAT Team,” according to Paul Lukas of BLOOMBERG NEWS. Gatorade has been the "official isotonic beverage" of MLB since '90, and this year the Gatorade-only policy is “spelled out on posters that have been showing up in the dugouts during the playoffs, just in case the players forget.” MLB players and coaches during pre- and postgame press conferences "have been instructed to drink out of Gatorade-labeled cups -- even if they're not drinking Gatorade.” Nationals manager Davey Johnson last week was “instructed to pour his bottle of water into a Gatorade cup.” Yankees LF Raul Ibañez reportedly was to do the same during a postgame press conference. But MLB Business PR Dir Jeff Heckelman in an e-mail wrote, "Nothing is being done differently this year, versus past years, and it's very common practice across all sports in this category. The only difference this week is that a couple of tweets from reporters happened to make note of it." Still, Lukas writes, “It kind of makes you wonder what's in those orange-and-white jugs in the dugout. Are they really filled with Gatorade?” Gatorade spokesperson Karen May said, "Some teams may have water in one of the coolers as an option for players not taking an active role in the game. But MLB and the teams endorse our products, so the coolers are typically filled with Gatorade products" (BLOOMBERG NEWS, 10/17).
MARKETING WEEK’s Sebastian Joseph noted EPL club Newcastle fans are “calling on kit maker Puma to drop Wonga's logo from replica shirts.” The Newcastle United Supporters Trust (NUST) "wants the kit supplier and the controversial payday loans company to offer fans the option to buy a replica shirt without the Wonga logo on it.” The move follows a NUST online survey of “over 1,000 participants which found the majority of fans were unhappy with the sponsorship deal” (MARKETINGWEEK.co.uk, 10/17).
MAKING A LINK ON THE LINKS: Accounting firm McGladrey Managing Partner & CEO Joe Adams said that the company's sponsorship of this week's PGA Tour Fall Series McGladrey Classic at Sea Island Resort in southeast Georgia is its “largest single marketing expense of the year.” Adams said, "We're trying to become the first-choice adviser for middle-market companies. ... We decided to pull the trigger (on the tournament sponsorship), and we've been extremely happy with the results." Adams "points to the value of controlling the client entertainment experience that comes with being a title sponsor, as opposed to being one of many official sponsors for a larger event” (CHICAGOBUSINESS.com, 10/17).
ROUNDUP: The Hartford and the USOC yesterday announced that insurance and investment company has renewed its sponsorship of U.S. Paralympics through the '16 Rio de Janeiro games. The Hartford has been a founding partner since ’03 and will continue as the official disability insurance sponsor of the Paralympics (The Hartford)….EPL club Manchester United yesterday announced a three-year deal with Kagome, which becomes the club's official soft drink partner in Japan through the '15-16 season (ManU).