SBJ/January 24 - 30, 2005/Marketingsponsorship

If sponsors foot the bill, they should have a say in managing properties

No top-tier sports property in North America could operate without sponsorship and its attendant rights fees, advertising and promotional revenue.

So why are sponsors willing to watch while sports properties drive sponsors’ expensive investments into the dust?

The division of labor between properties and sponsors used to be clear-cut: Properties presented and managed events. They ran their businesses and spared sponsors the operational details.

Sponsors paid the rights fees and integrated their sponsorship investments into brand and product promotional and advertising planning that stretched out years in advance. They trusted properties to run events successfully.

Each party mostly minded its own business. Things have changed now.

Sponsorship rights fees among top-tier sports have skyrocketed. The costs of activating those sponsorships through TV advertising, print and radio collateral have risen.

New media platforms such as the Internet, satellite radio and text messaging have chewed into promotional budgets. Most national sponsors spend many times the rights fees on promotional expenses to extract full value from sponsorships.

Because sponsorships are more expensive than ever, better management supervision is required and return-on-investment demands are higher. But can we say that the management acumen and accountability of sports properties have also risen?

The NHL lockout is an ugly story that’s getting worse. The collective-bargaining agreement that tied the league to the NHL Players’ Association expired last fall.

The NHL, which claims its teams lost $1.8 billion in the last 10 years, wants to link player salaries to team revenue. The NHLPA is demanding that its members receive fair-market value.

There have been no meaningful discussions toward resolving the issue. The 2004-05 season is ruined for the NHL, its sponsors, players and fans. If the stalemate is not concluded in a positive manner soon, the NHL may never return to prominence.

Major League Baseball has adopted a new testing policy designed to stem rampant steroid-abuse rumors and allegations involving some of its biggest stars — such as record-pace home-run slugger Barry Bonds of the San Francisco Giants — that could splatter mud on decades-old traditions and achievements.

Sponsors still see value in the return of the NHL, of course. But now they’re sitting in the penalty box.

Major League Baseball maintains support from its sponsor lineup, although steroid-bulked storm clouds are on the horizon. Even the San Francisco Giants are doing well, recently extending their relationship with Bank of America.

But should sponsors, the sports industry’s biggest stakeholders, twiddle their thumbs while properties work to heal themselves?

Haven’t sponsors finally earned a right to be treated as integral business partners with the properties they support? Sponsors should have the opportunity to dig in and help direct the business of the properties they sponsor.

If a sponsor is willing to make a significant long-term financial contribution to a property, that sponsor should have a seat on the property’s executive committee or board of directors.

Many properties dislike this idea because they are insecure about the value they deliver. Some don’t want sponsors knowing how much other sponsors pay in rights fees. They’re worried that proprietary information will leak to rivals.

Some property owners wish to mask from sponsors the wealth they take through their ownership. Others simply don’t want supervision.

But the plus side is that if they open the books for big sponsors, they’ll get long-term financial support and business expertise they don’t have in-house. Sponsors will have a voice in the operations of properties.

Sponsors no longer will be surprised by bad news that can be swept under the rug by properties. And sponsors will have a firm hand in helping properties fight crises.

This is a good time for sponsors to leverage their property investments into meaningful authority. Sponsorship industry think tank International Events Group recently projected that sponsorship rights-fee spending in North America will leap 8.8 percent this year, to $12.09 billion.

This is the highest annual jump in spending since 2000. Sports sponsorship rights fees are expected again to account for the lion’s share, with $8.3 billion projected to be spent.

Sponsorship also will outpace the growth of other consumer communication and sales channels, such as advertising (projected to grow 6.4 percent in 2005 by McCann-Erickson Worldwide Advertising) and promotional spending (predicted to increase 5.1 percent this year by Veronis Suhler Stevenson).

The bottom line is that sponsors are eager to write checks, and properties are happy to cash those checks. But it is time for the industry to formally recognize the support of its biggest stakeholders and give sponsors a seat at the table.

Contact Mel Poole, president of consulting and marketing firm Sponsor Logic, at mpoole@sportsbusinessjournal.com.

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