SBJ/November 22 - 28, 2004/SBJ In Depth

2004: The year in sponsorship

During the last year, the sports sponsorship world showed ample signs that it has emerged from the lean times occasioned by the economic downturn and 9/11. As the year draws to a close, SportsBusiness Journal asked sponsorship experts to comment on the most- and least-dynamic categories, and to share their thoughts on the future.

Greg Simon
Senior vice president, IMG Consulting

2004 has been a dynamic year in the sponsorship industry. Anticipation for, and the kickoff of, Nextel’s NASCAR deal alone drove significant attention to the industry and discussion regarding the impact and return on investment of major sponsorship.

When you combine that with continued growth of branded-content entertainment, expanded interest in municipal marketing, revitalized interest in stadium naming opportunities, and the strengthening of sponsor rosters at the major properties, it all suggests our industry is rapidly evolving and changing to meet the needs of clients who need to connect with an increasingly hard-to-get-to consumer.

In terms of categories, financial services has been the most interesting category this year. It’s hard to think of a player in either banking, insurance, mortgage or securities that did not embrace a new, major property.

The other industry that has been increasingly active in 2004 has been the satellite radio industry. XM and Sirius are placing bets that sports content will attract new fans to their services. However, they need to cultivate relationships with their league and team partners and activate using integrated marketing platforms that go beyond traditional marketing efforts of electronic media outlets to attract viewers and listeners.

The category that lagged the industry this year in terms of interest and innovation was the auto industry. There doesn’t seem to have been any great eye-opening story out of the industry this year.

The single most intriguing deal of the year was the Monster Cable Park deal. While there is certainly a strong affinity between sports lovers and the need for high-end audiovisual toys (and the stuff that connects them), you have to question whether Monster Cable can realize return on this deal or if they will always be the second Monster most people think of after

Malcolm Turner
Executive management team, OnSport

Much has been made about the “vanishing mass market” thanks to the Internet, satellite TV, DVRs, VOD (video-on-demand) and other technologies that fragment the media landscape. In our “so many choices, so little time” culture, marketers vilify technology as the sure destruction of traditional brand marketing. But is it rightfully so?

It’s true that today’s consumer doesn’t sit by passively as marketers decide what programming to deliver, but can instead preprogram the delivery of specific content to any number of devices “on the run.” As consumers continue to self-select their information, they have permanently transitioned us from a marketing environment of message exposure to one of personal engagement. Marketers need to be able to identify (or create) platforms that engage consumers and entice them onto “their” turf in a meaningful, relevant and genuine manner.

Some recent examples have shown the potential. Note how Apple’s cult iPod brand partnered with U2. Apple didn’t sponsor the music supergroup — didn’t even pay for them to be in their ads. The band sought them out as an example of “an innovative way to redefine the distribution of music” and began a profit-sharing partnership for themed devices and new album downloads. Consumers seek out iPod. So U2 did, too. Who’s the savviest marketer there? Apple or the band?

Phone manufacturer Nokia recently launched the innovative “Nokia Sports Application” for select video phones. The application provides access to MLB and NBA sports data –— scores, stats, photos, news, standings, video clips and real-time audio of games. Instead of pushing consumers to go to the games, Nokia brings the games to the consumers … on their terms, their timing.

The power of consumer affinities such as sports, entertainment, arts and music (among others such as fashion and causes) represent important “keys” to creating a personal relationship with your target audience. These are the bona fide consumer passions that (when leveraged effectively) provide an active and engaging conduit.

Bill Carter
Partner, Fuse

The busiest categories in action sports were “media properties” like the (NBC/Clear Channel-owned) new Dew Tour. Its sponsorship deals were negotiated in 2004 and from our perspective, this property had the fastest sellout of its sponsorship inventory of any action sports property we have seen.

Another busy and growing category in action sports was athlete sponsorships: Many new brands signed athletes and/or expanded their use of athletes. Demand for high-profile athletes has increased sponsorship prices and created clutter on some athletes, but some interesting developments included: 1) Napster becoming the first digital music download service to sign athlete sponsorship programs, 2) Mountain Dew’s national retail programs featuring action sports athletes including national programs with Wendy’s, 7-Eleven, Taco Bell and more, and 3) Ford Motor Co.’s first-time use of action sports athletes in their dealer catalog.

Another trend in action sports is brands’ development of proprietary events. More brands have developed their own events to maximize exposure and meet specific needs that “purchased” sponsorships cannot offer. Examples include Mountain Dew’s FreeFlow Tour, and the Boost Mobile Pro and T-Mobile Ramps and Amps tours.

Another trend is the incredible increase of action sports content in feature films: “Step Into Liquid,” “Grind,” “Riding Giants,” “Charlie’s Angels,” etc. The brands that are in any way partnering with these films are in a sense sponsoring action sports or at least utilizing the platform to some degree.

A contrary trend: We saw a slowdown in the sponsorship of some grassroots properties. Some of these smaller properties have lost sponsors to budget cuts or to the creation of proprietary events.

Nova Lanktree
Executive vice president, marketing, Lanktree/CSMG Sports

Visa has created some of the most memorable and effective advertising using sports celebrities and sporting events. Everything rings true. The copywriting is brilliant. The new spot with Joe Torre and George Steinbrenner is just perfect. The ability to create spots that one remembers and that do not get tired is a tribute to the creative team.

I was very impressed with Visa’s Michael Phelps Olympic spot because, while it was powerful in its message, it did not have a tone of hype. Hard work and hope seemed to be the [core] of the message, and it did not set Michael up to fail.

Gatorade continues to be the premier marketer of sports celebrities. The creative executions are always superior and the athletes and the campaigns highlight star power plus their staying power.

Red Bull and its grassroots program seem to be creating very powerful branding. They bring their refrigerators and product to the teams, athletes and representation offices, and their silly tournaments are fun, irreverent and very entertaining. They are purposely not signing athletes to big endorsement deals and are showing that the presence of the brand where the prospective consumer is can be very effective.

Nike surely knows how to produce great commercials, but I have not been impressed with how it is using LeBron James. The spots seem overproduced and yet the brand of LeBron James is not coming through. When MJ was the main Nike man, there was a true convergence of a great personality and great creative. With the James spots, I am only aware that Nike knows how to produce a commercial, but I don’t “know” LeBron yet.

Where trends are concerned, I am sure in the next decade we will continue to see hip-hop culture and extreme sports grow from trend to fixture in sports. Electronic games continue to rise as a powerful presence in the marketplace and the use of celebrities is making it an important category.

It’s my impression that the fast-food category is losing ground in its use of celebrity endorsers. It may be that the awareness of obesity in kids as a very topical issue and that fast food really flies in the face of fitness are variables in the weakening of what once was an almost never-ending presence of fast-food giants.

Tony Schiller
Executive vice president, Paragon Marketing Group LLC

A trend that we expect to develop in 2005 is companies attempting to reduce sponsorship fees while maintaining those sponsorships. Our agency has already been approached by clients and outside companies seeking our help in realizing cost reductions on existing contracts and contract renewals.

One factor in particular is probably driving this activity: properties have steadily applied the infamous “cost of living” increase on a per annum basis for the past 20 years or so. In addition, whenever “the team” has a good year on the field, properties escalate the fee another 10 to 15 percent. Over the course of 10 years, a $300,000 sponsorship with an escalator of 5 percent would increase to approximately $465,000. In that 10-year span, add one year with an increase of 12 percent because of on-the-field success and you are now at $480,000.

So the reality is that properties are realizing consistent and significant growth. The question is whether sponsors are seeing commensurate growth in value and their ability to leverage the sponsor assets at the same rate that the price has increased. Furthermore, do sponsorship budgets support the growth in fees and activation costs necessary to maintain these relationships?

Without a doubt we still believe in sponsorship marketing. That said, we expect to see more and more companies challenging properties to reduce fees, demonstrate value and structure a portion of compensation based on the sponsors’ capacity to achieve established levels of performance in their arena, not the teams’.

Last, as a measure to counter rising sponsorship fees and a dilution in the value of traditional media, look for the convergence of traditional sponsorship and advertising to be augmented under the umbrella of branded/owned programming. With companies looking to control costs, be a part of the content, and protect against the “TiVo factor,” entitling and/or creating content will become more attractive, prove more efficient and be more meaningful to target audiences.

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