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SBJ/Sept. 20-26, 2010/In-Depth
Endorsements remain buyers' market
Some brands wonder aloud whether deals are worth the risk
Published September 20, 2010, Page 1
So when you ask people across the marketing industry about the state of the individual athlete endorsement market, the best thing they can say is that while those at the top, like Nike’s renewal with Maria Sharapova and Puma’s renewal with sprinter Usain Bolt, are still getting their deals, it remains a buyers’ market.
Since marketing can always be done without a celebrity endorser, some brands have always considered endorsements as a luxury. In the worst of times, that’s even truer; so the endorsement market has always been erratic.
“The endorsement market has always been tied to the economy, so it took a gigantic and unprecedented nosedive over the past two years that’s now flattened out, but I haven’t necessarily seen the market go back yet,” said John Slusher, vice president of sports marketing at Nike, which has thousands of athletes under contract.
“You still see premium deals for premium assets, like top draft picks, but most NFL and MLB players, we are getting at a fraction of the cost they were before. Most basketball players, we are getting at a fraction of the cost they were two or three years ago. Our strategy hasn’t changed. We are buying as many athletes, if not more, but at a better price.”
Nike’s recent SEC filings show more athletes under contract, but fewer dollars committed (see related chart).
“It’s a pretty simple equation,” observed Gary Stevenson, the former principal for Wasserman Media Group’s corporate consulting practice. “Activation budgets are a lot less, so the endorsement budgets followed suit. You also see a lot of endemic business across sports tanking, and when their business is down it brings marketing around sports down. There used to be 50 guys on the PGA Tour with pretty good equipment deals. Now it’s maybe 20 guys.”
Mike Wiese, director of branded content and entertainment at JWT, said he hadn’t detected a slowdown among advertisers using celebrities, but such deals inevitably now take longer to complete. “Especially with procurement departments [at clients] having more influence, there’s just more and more people looking at every deal,” he said.
Still, the top-tier athlete seems to be getting his or her money.
“We’ve seen a lot of companies consolidate at the top,” said Sandy Montag, IMG senior corporate vice president. “So that middle tier is having a tough time.”
Apparently that is even true for Woods, who once set the standard for endorsers. IMG Golf head Mark Steinberg, Woods’ longtime agent, said he is still getting calls inquiring about endorsements, even after all the humiliation the golfer has experienced.
“There is still demand, for sure,” Steinberg said. “I’m not sure we’ve had the right offers yet. But I’d say the time is right where I’d start to look at expanding his portfolio. … There were 18 months when it was really rough sledding. Now what we are seeing is some of the staple industries in golf, like auto and financial, have started to come back strong.”
There are others who say Woods’ follies will harm the golf market for the foreseeable future. Others said they see golf marketing coming back, but believe it will take at least another year to recover.
“Tiger’s presence in golf over the past decade or more probably prevented a downturn in that market,” said Phil de Picciotto, president of athletes and personalities at Octagon, which represents Apolo Anton Ohno, Michael Phelps and Emmitt Smith, among others.
“Tiger and the economy together were a double whammy on golf, and it’s going to take a considerable amount of time for that market to return — if it ever does,” de Picciotto said.
Even if there isn’t unanimity of opinion on what effect the fall from grace of golf’s top attraction had on the sport, everyone agrees that across marketing a “Tiger effect” chilled — and to some degree is still affecting — brands’ willingness to employ athletes as endorsers.
The extent to which marketers across sports believe Woods’ scandal affected marketing is so varied, it likely depends on how close they were, or indeed, whether they or an associated brand or agency client was tied to Woods.
“As much good as Tiger originally did for golf endorsements and golf TV ratings, he may also have done that much harm,” said Matt Delzell, group account director at Omnicom’s Davie Brown Entertainment marketing agency, which helped pass muster on Woods’ endorsements with Gillette and AT&T.
“If you asked me whether the recession or Tiger had more of an impact on endorsements and sports marketing in general, I’d tell you the recession, but not by much. Tiger has that much clout.”
Added Tony Pace, CMO at Subway, whose endorsers include Philadelphia Phillies first baseman Ryan Howard, Phelps and Fox NFL analyst Michael Strahan: “Because of what happened with Tiger, everyone now gives a third and fourth look at an endorsement prospect, as opposed to just a first and second look before.”
Frank Mahar at Genesco Sports Enterprises said he’s seen no slowdown in demand from clients like Pepsi and Coors, each of which has large league sponsorships they need to complement with player deals. So his version of the Tiger effect is that “we’re all a little more aware now — but we already had pretty strong contract language.”
Still, others insist l’affair d’Tigre has changed endorsement contracts forever.
“Breach language and the morals section of contracts are a lot tighter now and you are starting to see some kind of recourse,” said Mark Zablow, senior director of marketing at Platinum Rye Entertainment, which secures sports talent for sponsors including Dr Pepper and Procter & Gamble.
“In the past, all companies would be able to do is walk away from the deal and stop paying,” Zablow said. “Now, we are seeing them ask for money to be paid back. You’re also seeing spread-out and back-loaded payments to protect themselves. This is all the Tiger Woods effect. The ‘You don’t EVER have to worry about him’ sell doesn’t exist anymore.”
Davie Brown’s Delzell agreed. “Tiger’s the example we all reference now,” he said. “It’s much more difficult to get any program with a celebrity endorser sold in.”
Jordan Bazant of The Agency, which represents Colt McCoy, Reggie Bush and Troy Aikman, said the industry downturn has had some benefits. “Nothing’s being done on pure whim anymore,” he said. “The result is a more thorough strategy and a better platform.”
Steinberg noted that the overall golf market is recovering, and he’s back in the market for Woods. “It’s clear companies are taking a wait-and-see attitude,” he said. “Does that mean there will be bolstered morals clauses? I don’t know.”
Steinberg added that the pinch that Capitol Hill lawmakers put on financial services industry marketing at the height of the recession was equally deleterious as the economy and Woods.
Whatever the impact, the situation with Woods accelerated a shift by many marketers from sports to entertainment.
“We’re all still fighting the Tiger effect, some of which dates back to Kobe,” said Doug Shabelman, president of Burns Entertainment & Sports Marketing, in suburban Chicago, an agency that changed its name a few years ago to reflect a broader approach to talent representation. “Five years ago, maybe 35 percent of our business was sports. Now it’s 15 percent,” said Burns, whose company procures talent for the likes of Unilever and Dannon.
Wanting more for the money
Many of those interviewed said that in addition to price erosion, celebs and athletes are being asked to do more for their fees, whether that’s additional appearances, social media or branded content.
“The one thing fans all want, it’s access, and technology is an accelerant for more access,” said John Osborn, president and CEO at BBDO, New York, whose client list includes big sports spenders like FedEx, Gillette and AT&T. “But technology also means their lives are more exposed, whether they like it or not.”
As an example of effective use of endorsers in new media, Osborn cited campaigns for the launch of Gillette’s Fusion ProGlide razor on YouTube and Twitter around the globe resulting in “billions of media exposure, long before the traditional media kicked in.”
Gillette has been using sports endorsers for 100 years, and has generally been able to pay less than other categories, due to its heavy media spend, and its penchant for massive retail programs.
“Lately that’s been true across P&G brands,”’ said Greg Via, global director of sports marketing at Gillette, citing Ray Lewis’ recent work with Old Spice as an example. “We’re looking for 360 branding opportunities for our athletes and so are they.”
That means you’d better come to brand marketers with more than just a name and a face. “Now you have to package a celebrity with more marketing elements than ever,” said Octagon’s de Picciotto.
So, just as sports properties are becoming media companies, athletes and celebrities are moving in the same direction. Are you ready for the Kobe Network? The Lady Gaga Channel?
“Technology has enabled celebrities to become their own media distributors, and our clients want to tap into that passionate fan base,” said Greg Luckman, CEO of North America at GroupM ESP, whose clients that use sports marketing include Citi, Xerox and Unilever. “Although it remains a buyer’s market, the more forward-thinking and tech-savvy athletes will benefit from this.”