SBJ/March 28-April 3, 2011/Opinion

As NFL lockout continues, sponsors near the death zone

Some of you may remember a column we wrote a few months ago discussing the likely growth of sports sponsorship in North America during the next few years. That assumed, of course, that leagues like the NFL and NBA would avoid locking out players and moving their businesses from the sports pages and airwaves into the courtroom.

But that’s the place where jurists’ decisions might soon affect whether we see NFL touchdowns this September. It’s a place of interest to anyone who studies the business of sport but not one where millions of fans want their favorite sports residing.

Now word comes out of Canada suggesting two sponsors are threatening a league with termination of sponsorship contracts if the league doesn’t address a particular issue. That’s right, Air Canada and Via Rail both have reportedly told the NHL they will withdraw their sponsorships (of clubs; neither is a league sponsor) if the league doesn’t immediately get serious about those hits to the head that inevitably leave young men sprawled on the ice awaiting stretcher-bearers. A copy of Air Canada’s letter to the NHL became public knowledge by social media just hours after it was sent.

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How long before NFL sponsors use their influence the way Air Canada did with the NHL?
You can understand NHL Commissioner Gary Bettman’s dilemma. For most leagues, tradition is good, change is bad. For most sponsors, it’s the league’s traditions, entrenched images and valuable reputations that sponsors want linked to their brands. But Bettman now faces two sponsors demanding that hockey break with the most violent of its traditions, and the accompanying danger of appearing to bow to sponsor demands.

Indeed, while fans may like hockey fights, even as they read that “enforcers” like Bob Probert might have died prematurely from taking too many fists to the face, the interest of a sponsor is quite different. Sponsors seek to sell their products and services via an association with a league/sport/team/player that provides idealized images that the sponsor’s customers and potential customers might buy into.

For Bettman, the potential loss of one or two club sponsors can’t be taken lightly. What if that thinking spread? What if some of the big league sponsors considered using their leverage to protect their investments? Consider the recent Molson Coors sponsorship of the NHL. That’s reportedly worth $475 million to a league where every dollar counts.

But let’s set the NHL aside for a moment and ask the NFL about that same sponsor power. This is timely because starting March 11, NFL players decertified their union, the NFL locked out its players, and star players stepped forward to place their names on a lawsuit claiming the NFL had violated federal antitrust statutes. What happens to the corporate partners who invest $1 billion in fees with the NFL to achieve their own objectives via the league and what it represents? How will they respond?

One reality is that while fans hope the NFL won’t miss games this September, time-conscious sponsors must stop production of TV, Internet, radio and print ads plus point-of-sale displays. Even product packaging bearing the NFL logo may need revising for marketing or contractual reasons.

Think about it. It’s almost April and the first game of the 2011 season is slated for the second week of September. That’s five months away. Today, it’s still possible to design, produce and ship those marketing materials. But fast forward to May, when the CEOs of the big NFL sponsors realize their crack marketing teams have been hoping against hope the lockout would end and were only halfheartedly working on the alternative marketing tactics for the all-important last four months of the year.

How long before those CEOs pound their desks, call their marketing vice presidents and demand daily updates of whether the NFL has gotten its act together? Trust us, it’s already happened.

In mountain climbing, there is always a turnaround point that you must honor. It can come from internal reasons (e.g., your health) or external forces (e.g., the weather). It requires that you stop going up and instead start getting down off the mountain immediately. This is particularly true in high-altitude situations where storms blow in unannounced and prolonged exposure in the “death zone” is what its name implies: deadly.

That metaphor is more appropriate than you might imagine for the NFL’s partners as we head into April. Sponsor CEOs are forced to set turnaround dates for the NFL and look for alternate escape routes.

In other words, if the NFL isn’t back to labor peace by May 1, these sponsor CEOs will force their teams to get off the mountain. They will take their hundreds of millions in spending and commit it to something else (if they can find suitable inventory). Perhaps sports but perhaps not. Arts? A cause? A festival?

One other thing may happen in light of the Air Canada and Via Rail announcements: Some NFL sponsor CEOs will likely call NFL Commissioner Roger Goodell and let him know their company does not look kindly on Goodell’s team owners messing up the marketing plans of companies where one share point is worth billions in revenue and stock valuation. They may or may not let such communication go public.

Why? For CEOs at the tail end of a bad economy (and who are getting drilled by nervous chairs and volatile boards of directors), the loss of NFL games might cost them their jobs. NFL sponsorships work and they differentiate key brands from their competition. Losing that edge could make some brands mortal. It could make the CEO look ordinary.
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To that end, maybe Air Canada is on to something. Maybe it’s better to be proactive with your sponsorship dollars than passive. Maybe it’s better to know when to get off the NFL mountain than risk that storm at 25,000 feet when you are exposed and vulnerable. �8;

Rick Burton (rhburton@syr.edu) is the David B. Falk Professor of Sport Management at Syracuse University and former commissioner of the Australian National Basketball League. Norm O’Reilly (norman.oreilly@uottawa.ca) is an associate professor of sport business at the University of Ottawa.

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