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SBJ/October 22-28, 2012/Marketing and SponsorshipPrint All
The Sacramento Kings’ new naming-rights deal with Sleep Train Mattress Centers comes as the team looks to drive revenue, including ticket sales, in the face of an uncertain future in Northern California.
Locally based Sleep Train is replacing Power Balance as the team’s arena naming-rights partner. The new, multiyear deal, which calls for the venue to be named the Sleep Train Arena, was announced last week.
The Kings did not disclose financial terms of the new deal. The prior deal, with Power Balance, reportedly called for the Kings to be paid $975,000 last year.
The Sleep Train agreement is one of some 70 sponsorships the team has signed for this season, Kings officials said.
“In the midst of the uncertainty and the perception that the team is going to leave, on the business front we have been successful,” said Jeff David, chief sales and marketing officer for the Kings.
Among other local business, the franchise is expected to sign a sponsorship deal with Blue Diamond Almonds, and David said he is negotiating to retain Thunder Valley Casino as a partner. A casino spokesperson was quoted last week as saying the company has decided not to return as a sponsor.
The team’s cloudy future is tied to the lack of a new arena financing deal between the city and the Maloof family, which owns the franchise. In April, the team rejected a proposed $391 million arena deal from the city, throwing the future of the team in Sacramento in doubt. Last year, while talks for that arena deal in Sacramento were ongoing, the Maloofs had discussions about moving the team to Anaheim.
The turmoil has taken a toll at the gate, where the Kings averaged 14,508 fans per game last season, fourth-worst in the 30-team NBA. It was the sixth consecutive season in which the club missed the playoffs and comes for a franchise that used to be one of the best draws in the NBA. The Kings had a home sellout streak that stretched from 1999 to 2007.
David would not disclose full-season-ticket sales numbers, but he said the team has a season-ticket renewal rate of around 80 percent. Leaguewide, teams are averaging about 88 percent this year.
“We have a history of renewing in the mid-80th percentile, and we will be consistent with that,” he said.
Team officials are emphasizing partial-season-ticket plans to offer more flexibility to ticket buyers wondering about the team’s future.
PepsiCo is finalizing a new, three-year agreement with Hendrick Motorsports that will reduce its spend in NASCAR by as much as $20 million and open the door for a new sponsor to land a multi-race deal with the sport’s most popular driver, Dale Earnhardt Jr.
The move opens the door for another brand to associate with Dale Earnhardt Jr.
Current plans call for PepsiCo’s Diet Mountain Dew and Amp brands to top the No. 88 car driven by Earnhardt in five races, its Pepsi brands to cover the No. 24 car driven by Gordon in two races, and one of its Pepsi brands to be a single-race primary sponsor on the No. 5 car driven by Kasey Kahne, a driver the company believes could succeed Gordon, 41, as the face of its Pepsi brands in the future.
Industry sources valued Pepsi’s new deal at $10 million a year, a significant decrease from the $25 million to $30 million a year it spent on the No. 88 car alone between 2007 and 2012. The reduction is consistent with moves made by other large companies such as Anheuser-Busch and UPS, which cut back on the number of primary races they sponsored in recent years.
“The main takeaway for us is that we’re continuing the relationship and partnership because we really value it,” said Heidi Sandreuter, PepsiCo senior director, sports marketing, who declined to confirm how many races Pepsi would sponsor. “Moving forward, it’s still about driving Diet Dew for Dale (Earnhardt). Dale anchored Diet Dew this year for us and that is huge. Sports and racing is what the brand is leveraging to increase awareness and trial.”
Pepsi’s decision to reduce its support of the No. 88 car opens up an opportunity for a new brand to associate with NASCAR’s most popular driver. Sources said Hendrick is shopping 13 primary races on Earnhardt’s No. 88 car and four races on Kahne’s No. 5 car.
Pat Perkins, Hendrick Motorsports’ vice president of marketing, declined to comment on the number of races available on the No. 88 car but said the team is looking for a single company or brand that would align well with Pepsi and the National Guard, which will sponsor 20 primary races on the No. 88 next year. He added that they are looking at categories such as consumer packaged goods, personal care, speciality retailers and technology.
Earnhardt has been voted NASCAR’s most popular driver nine consecutive years. His licensed-merchandise sales represent approximately 30 percent of the sport’s entire merchandise sales.
“One thing that can’t be denied about Dale is his ability to move a market and his fan base’s loyalty,” Perkins said. “He is a product mover, and whether it’s a consumer packaged goods brand or an organization like the National Guard, he has an ability to make a positive difference for a business.”
Earnhardt showed the type of effect he can have on a brand’s bottom line when PepsiCo signed on to sponsor him in 2007. The company agreed to a five-year deal valued at $25 million to $30 million and used its affiliation with Earnhardt to promote its energy drink brand, Amp. At the time, Amp was the fifth-largest player in a fast-growing category, which then had more than $6 billion in annual sales. Its sponsorship of Earnhardt helped it increase its market share 68 percent, according to Beverage Digest.
But as sales in the energy drink category flattened in recent years, Amp and its parent company found it tougher to justify the cost of its No. 88 sponsorship. PepsiCo this year made Diet Mountain Dew the primary sponsor of the No. 88 for 16 races and reduced Amp to being a primary sponsor for only four races. It developed a full advertisement featuring Earnhardt using the tag line “Yeah, it tastes that good.”
“We still have awareness gaps and trial gaps for (Diet Mountain Dew),” Sandreuter said. “Our awareness among our core target, Gen X and leading millennial males, increased 40 percent. I imagine even the association with Dale would be greater.”
The company’s new deal with Hendrick is the latest in a series of reductions in NASCAR sponsorship. It ended a 49-year sponsorship at Daytona International Speedway in 2008 when Coca-Cola supplanted it as the title sponsor of the track’s summer race. It later eliminated sponsorships at Darlington, Watkins Glen, Talladega and Phoenix. Pepsi’s only remaining track deals are with Martinsville, an International Speedway Corp. track, and Bristol, a Speedway Motorsports Inc. facility. Pepsi-owned Gatorade sponsors victory lane at ISC’s 12 racetracks.
Pepsi increasingly has concentrated its sports marketing efforts on the NFL. It cut a deal this year to sponsor the next four Super Bowl halftime shows and has concentrated its marketing on bringing music and sports together, as seen in its current ad featuring New Orleans Saints quarterback Drew Brees and British boy band One Direction. It continues to use action sports as a platform for Mountain Dew, and it renewed its sponsorship of the Dew Tour earlier this year.
“The NFL is a huge part of our investment, but our deal with Hendrick is more significant than anything after the NFL,” Sandreuter said. “(NASCAR) is a huge priority for us. We’re still bringing a lot to the table with Hendrick and we’re always trying to put our money where it has the greatest effect. We don’t doubt that by tying into racing and the best team in the business we’re reaching our consumers in a relevant way and driving passion for our brands.”
It was January 2011 when Ryder Cup officials announced plans for a unified global sponsorship that would offer brands the rights to both the U.S. and European teams, something that traditionally has not been available. But 20 months later, both sides are still trying to figure out exactly how to take a global Ryder Cup partnership to the marketplace.
In the past, sponsors have put their money behind one team or the other, buying U.S. Ryder Cup rights from the PGA of America or Team Europe rights from the European Tour — the two primary governing bodies for golf’s most unique event. That had a tendency to create an interesting marketing mix. The U.S. team has Mercedes-Benz; the Europeans have BMW. The U.S. has Omega; the Europeans have Rolex.
The U.S. and European teams have been seeking a platform for brands to sponsor both teams and the event itself.
Photo by:GETTY IMAGES
“If it were 1927 and we were all starting fresh with the first Ryder Cup, we’d be trying to find a global solution,” said Tim Shaw, the sales director for the London-based European Tour. “But what we’ve got is a most complex space for sponsorship. It’s going to take time, but both parties are committed to finding a solution.”
Because the Ryder Cup has been around for more than 80 years and both sides have conducted their business separately throughout that time, their sponsorship models differ vastly. When the event is on U.S. soil, as it was last month at Medinah, the PGA of America controls the competition and the business of the Ryder Cup. When in Europe, it’s the European Tour’s event. Each has its own idea of how it should be run.
The PGA keeps the course clean from most commercial signage when the event is in the U.S. — the exception is Omega, which places its branded clocks on the course as the official timekeeper. Team U.S. deals, which range from $3 million to $6 million a year, are heavily loaded with media on NBC and Golf Channel.
“They just have different structures that inherently will create problems with them working together,” said Scott Seymour, who runs Octagon’s golf division and represents brands such as MasterCard and BMW. “They just have two totally different approaches and they’ve got their own interests that they have to look out for.”
When Shaw was asked if it’s taken longer to build a global platform than he expected, he said, “We always recognized that the challenge to a genuine global partnership was the different commercial models we apply to each Ryder Cup. Both the PGA and the European Tour have broad commercial relationships that extend well beyond the Ryder Cup.”
Because of the Ryder Cup’s immense popularity in Europe, the event is a huge driver of business for the tour. For example, Team Europe sponsor BMW also title sponsors four events on the European Tour.
Team U.S. sponsors are also PGA of America sponsors, which includes rights to the PGA Championship, Senior PGA and other PGA of America events, as well as access to the organization’s 27,000 PGA pros.
“It’s a challenge to break down and strip out the Ryder Cup as a separate asset,” Shaw said of the ongoing efforts between the European Tour and the PGA to create the global partnerships.
“There are just different approaches that we have to work through,” said Kevin Carter, the PGA of America’s senior director of business development. Carter and Shaw have taken the lead for each organization in constructing a global Ryder Cup partnership.
Creating a singular logo for the Ryder Cup was a small step toward a unified approach to the event.
Both sides remain optimistic that one or two global partners will be in place for the 2014 Ryder Cup in Scotland. Commonly mentioned categories for a global partnership are insurance, like an Allianz or Zurich, and telecom companies like Samsung, industry insiders say, while the categories that already are occupied, such as timekeeper and auto, will remain as they are and will not be sold as a global deal.
At the same time, the European Tour is seeking three more Ryder Cup sponsors for Team Europe in 2014, including a replacement for MasterCard, unless the credit card company decides to come back. The European Tour’s efforts to sell both Team Europe deals and Ryder Cup global partnerships speaks to the complexity of the arrangement.
American Express could be a candidate for a global Ryder Cup partnership with MasterCard out, but neither side would comment on specific conversations they’re having.
If a global partner is found, the brand likely will have a different set of rights when the event is in the U.S. than when it’s in Europe.
“In the short term, you’re probably going to be looking at independent programs,” Shaw said of any global deals sold for 2014. “In the U.S., the deal will be more like the PGA deals. Over here, it will look more like our deals. That’s just a reality-based approach for right now.”
But in the long run, the tour and the PGA still hold out hope that they’ll be able to sell global rights that will look the same, no matter where the Ryder Cup is being held.