SBJ/June 3-9, 2013/Marketing and Sponsorship

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  • Nissan, VW ride on in cycling sans Armstrong

    Lance Armstrong’s recent doping admission did not chase automakers and former Armstrong team sponsors Volkswagen and Nissan away from the sport. The brands, however, have both repositioned their cycling sponsorships around events instead of activating around teams or individuals.

    Nissan partnered with Armstrong’s RadioShack pro team in 2010. In 2012, it took on co-title sponsorship of the team. After Armstrong’s doping revelation, Nissan abruptly ended its partnership, yanking its logos from the team jersey and trailer this past December. The automaker agreed to honor its financial commitment — valued by industry experts in the low seven figures annually — through the end of 2013.

    Nissan saw opportunities sponsoring cycling events such as the Amgen Tour of California.
    Photo by: MICHAELCROE.COM
    J Schaffer, senior marketing manager at Nissan North America, said Nissan decided not to pull out of cycling altogether because of the opportunities he saw at the Amgen Tour of California and the USA Pro Cycling Challenge, which Nissan has sponsored since 2009 and 2011, respectively. Those deals are valued in the mid- to high six figures.

    “There are too many people standing on the side of the road at these races to just walk away,” Schaffer said. “There was no serious talk of us ending the event sponsorship after everything went down last fall.”

    At the May 12-19 Amgen Tour of California, the first major American race after Armstrong’s admission, Nissan became presenting sponsor of the King of the Mountain award, which goes to the race’s top climber. It also replaced its on-site trailer — which previously had showcased pro rider bios and videos of the team — with a consumer activation around the Versa Note, Pathfinder and Leaf car models. It purchased presenting sponsor rights for the first and seventh stages, which featured climbs up iconic California mountains. And 47 Nissan cars were driven by race officials, teams and VIP drivers throughout the event.

    Schaffer said the automaker would bring similar infrastructure to three mass-participant amateur events as well: Oregon’s Cascade Gran Fondo, California’s Levi’s GranFondo and the Harpeth River Ride in Nashville. All three events attract more than 2,000 participants each year.

    “It’s frustrating the sport has these issues it can’t get resolved,” Schaffer said. “It’s still a way to connect with people who don’t just watch the sport but they live it, too.”

    Volkswagen’s relationships in cycling date to 1995, when it partnered with the Trek bicycle company. When Trek became the bicycle sponsor of Armstrong’s U.S. Postal Service team, Volkswagen also came on board, and its logo was displayed on Armstrong’s jersey in 1999, the year of his first Tour de France victory. It also sponsored Trek’s mountain bike racing team.

    Clark Campbell, Volkswagen’s general manager of experiential marketing, said the company began shifting away from team and individual sponsorships in the late 2000s. It ended the mountain bike team in 2009. In 2012, it partnered with USA Cycling to title sponsor the U.S. national road and time trial championships. It also took on the participant-driven Sea Otter Classic event in California and the Copper Triangle ride in Colorado.

    Campbell said the Armstrong controversy reinforced the brand’s strategy in cycling.

    “It’s not like Volkswagen had to drop Lance Armstrong,” he said. “We endorse like-minded people who participate in cycling. They are not doping.”

    At the 2013 USA Cycling National Championships, which ran May 25-27, Volkswagen promoted its “Think Blue” environmental campaign with a cycling game in which participants pedaled on stationary bikes to race electric cars along a track. It showcased the Passat, Jetta and Beetle models as pace cars during the race and as fan transportation vehicles throughout the weekend.

    “It’s a more generic position in cycling,” Campbell said. “We want to be known for being innovative and responsible. Those are values our customers connect with.”

    Fred Dreier is a writer in Colorado.

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  • Pantech ends Dew Tour event title sponsorship

    Pantech plans to discontinue its sponsorship of the Dew Tour, leaving the series without an event title sponsor for its first competition of the year in Ocean City, Md.

    The phone manufacturer signed on with the tour in 2011 in a deal valued at $2 million to $3 million annually. The deal was done to promote new phones aimed at teens and young adults, and Pantech was pleased with the deal, but it decided to discontinue the sponsorship this year because it doesn’t have a phone aimed at that demographic.

    “Pantech Mobile has had a successful partnership with the Alli Sports Dew Tour in 2011 and 2012,” a Pantech spokesperson said in a statement. “While we have made a strategic decision to not be involved in the 2013 Dew Tour as a sponsor, we will consider being involved in future events.”


    Dew Tour general manager Kenny Mitchell said he doesn’t anticipate replacing Pantech with a new title sponsor before the Ocean City event June 20-23.

    Though the Dew Tour lost Pantech, it is close to completing renewals with Toyota, which has sponsored the tour since 2005, and the National Guard.

    Toyota’s renewal was not guaranteed. The tour reduced its total number of stops from seven events to three last year, and Toyota marketers said last year that they planned to evaluate the effect that had on the reach and value of their sponsorship.

    “From a consumer engagement perspective, I would always like to see a higher number of events so more consumers can interact with Toyota and our vehicles on-site, but the decision to do fewer events better was the right decision for the Dew Tour,” said Jim Baudino, engagement marketing manager at Toyota Motor Sales, in an email. “There was strong attendance in each of the three markets, and the new Festival Village provided a more engaging consumer experience.”

    The Dew Tour is changing its approach to sponsorship sales. The property is a part of NBC Sports Ventures and the division recently hired Steven Justman to lead its sales efforts. He is building a sales team that will work with Alli’s sales agency, SJX Partners, to find new sponsors for the tour.

    Alli Sports, which oversees the Dew Tour, also is looking to hire a new, in-house sales executive to replace Charlie Severn, its former vice president of sales and partnerships, who left earlier this year to join the Nashville Predators.

    The 2013 Dew Tour, which will visit Ocean City, San Francisco and Breckenridge, Colo., plans to add a new lifestyle element at each stop this year. It will highlight graphic arts, photography and film tied to action sports at each event, respectively. For example, in Ocean City, it will set up an exhibit of graphic arts at a local art gallery.

    “We’re thinking about the evolution of the mission of the Dew Tour,” Mitchell said. “We want to celebrate the totality of action sports and … make sure what we were doing was standing for something bigger than the events.”

    In addition to the new lifestyle events at each stop, the tour is changing its programming plans on NBC and NBC Sports Network. In 2012, it had 12 hours of programming on NBC and 21 on NBC Sports Network. This year, it will have 16 hours on NBC and 17 on NBC Sports Network.

    The four new hours on NBC will be focused on shoulder programming. It will have one-hour specials on action sports in July, August, September and early December. The specials will focus on athlete features and tour highlights.

    “We decided to shake that up and try and do more to drive consumer viewership and engagement,” Mitchell said.

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  • 7-Eleven joins action sports tour thanks to Mountain Dew pass-through rights

    Mountain Dew is bringing 7-Eleven to the Dew Tour this summer.

    The convenience store chain will be the first retailer to receive pass-through rights to the Dew Tour. Mountain Dew secured that ability when the PepsiCo brand negotiated a new title sponsorship deal with the tour in 2011.

    Under terms of the agreement, 7-Eleven will receive advertising spots on NBC, NBC Sports Network and DewTour.com. It also receives display space for on-site activation at the three Dew Tour events. In Ocean City, Md., which will host the Dew Tour Beach Championships June 20-23, 7-Eleven plans to bring a custom Slurpee truck to the event.

     
    7-Eleven will distribute cans featuring athletes Danny Davis and Paul Rodriguez.
    Mountain Dew last week filmed a co-branded commercial spot with 7-Eleven that features some of the soda brand’s athletes, including skater Paul Rodriguez, snowboarder Danny Davis and skater Keelan Dadd. PepsiCo and 7-Eleven will share the production costs for the spot, which will run during Dew Tour programming in the coming months.

    “As there’s more scrutiny on sports properties, we need to be able to activate at retail,” said Todd Kaplan, Mountain Dew’s director of brand marketing. “We have a number of key retailers, but 7-Eleven is such a great fit because 7 million shoppers walk through 7-Elevens every day.”

    In addition to the commercial, 7-Eleven will be the exclusive distributor of Mountain Dew cans that feature Rodriguez and Davis. It is the first time that Mountain Dew has featured athletes on its cans in more than six years. The last time it did was when it put Shaun White on cans, and he was last endorsed by the brand in 2007.

    Kaplan said that Mountain Dew remains pleased with the new format of the Dew Tour. The brand pushed the tour to contract from seven events in 2011 to three events last year, and Kaplan said they were pleased with the new sport disciplines they were able to add and the improved TV production.

    “We’re coming off a great first year with this new model,” Kaplan said. “We’re looking to evolve it and take it to the next level with [the addition of] a key business partner in 7-Eleven.”

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  • Knapple takes Van Wagner helm

    A shake-up at Van Wagner Sports & Entertainment has resulted in the departure of Cliff Kaplan and the promotion of Jeff Knapple to president and CEO of the New York-based rotational sign, sales representation, venue services and corporate consulting company.

    In a written statement last week, Van Wagner said Kaplan was “leaving as a result of differences in strategic direction.” Kaplan, a former NBA senior vice president, joined Van Wagner in 2005, when his Premiere Sports and Entertainment was acquired by Van Wagner. He was named president of Van Wagner Sports in 2007.

    “I am enormously proud to have helped develop and lead the growth and evolution of the sports business group and work with a tremendous, spirited group of colleagues,” Kaplan said via email. “The rapid growth and evolution of the Property Representation and Corporate Consulting businesses as well as the more recent expansion through the birth of the Team & Venue Services division and Van Wagner’s recent foray into digital media (via CineSport) have resulted in Van Wagner Sports becoming a truly diversified sports marketing company.”

    Knapple, a 25-year industry veteran, has been at Van Wagner since February 2012, heading the team and venue services group. Knapple will relocate from Los Angeles to New York City for the new job. Chris Allphin will now head team and venue services.

    “This is a profitable company with terrific fundamentals and capabilities and still lots of room for growth, including consulting and the digital world,” Knapple said.

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  • Racket brand regroups and looks to rebound

    Prince took its eye off the ball.

    The racket sports company acknowledges it didn’t pay close enough attention to its core tennis customers.

    “Prince kind of lost its way, focusing too much on its technology,” said Mike Ballardie, who took over as CEO of Prince Global Sports this year. “It’s a great technology, but it isn’t for everybody.”

    Prince Global Sports CEO Mike Ballardie: “Prince kind of lost its way” with its tech focus.
    Photo by: JOHN GEORGE
    The 43-year-old company, which declared bankruptcy last year and emerged with a new owner, says it has learned from its mistakes and has a strategy to rebuild its brand. It’s a saga that has played out many times before in business: an iconic brand loses its way and has to struggle to regain its position in the market. For Prince, at stake is the future of a company that once had more than 130 employees and now is looking to add to its current staff of 50.

    Its strategy includes expanding its product line and bringing back some old favorites, being more active in social media, and continuing to help develop the next batch of top tennis players.

    Ballardie cited a number of factors that pushed Prince­ into bankruptcy last May, when the company had $55.2 million in assets and more than $77 million in liabilities.

    “It really was the perfect storm,” said Ballardie, a 10-year Prince executive who previously led Eastern Hemisphere operations. “A number of things collided. One thing was we were too insular with our technology.”

    In the mid-2000s, Prince introduced its O3 technology, which features oversized string holes, known as “O-Ports,” on the side of rackets. The O-Ports improve aerodynamics and, in turn, racket speed. By the end of the decade, Prince sold only O-Port rackets. Ballardie said tennis players who preferred more traditional rackets were forced to turn to other manufacturers.

    The downturn in the economy also slammed Prince. “Prince is, and has always been, a premium brand,” Ballardie said. “Our products are in the upper echelons of the market. Our performance-line rackets, which is what we sell in pro specialty shops, were priced at $250 to more than $300 over the last four or five years. We saw a decrease in the number of rackets being sold across the whole market but an increase in the number of re-strings. People were reconditioning their rackets rather than buying new ones.”

    A new competitor, French racket-maker Babolat, also played a role in Prince’s struggles, with its push into the United States.

    Prince bankruptcy timeline

    May 2012: Prince Sports Inc. files under Chapter 11, listing assets of $55.2 million and more than $77 million in liabilities.

    June 2012: Waitt Co. agrees to a 40-year licensing deal with Authentic Brands Group (Prince’s majority owner) to operate the Prince brand across North America.

    July 2012: Prince bankruptcy reorganization is approved.

    September 2012: Waitt Co. extends its operating agreement to include Europe, Middle East, Africa, Australia, New Zealand and India.

    February 2013: Athletic Brands Holding Co. is established to own a newly created subsidiary, called Prince Global Sports, and a sister company called Active Brands. Mike Ballardie is appointed CEO of Prince Global Sports; Chris Circo is appointed CEO of Active Brands.

    Prince was forced into filing for bankruptcy court protection, Ballardie said, after the company’s former majority owners — affiliates of the private equity firm Nautic Partners of Providence, R.I. — withdrew support. Authentic Brands Group, a New York brand development and licensing company, became the majority owner of Prince prior to the May 1 bankruptcy filing after it acquired a majority of Prince’s debt. ABG swapped its $65 million in debt obligations for equity in the reorganized company.

    Last summer, Waitt Co. of Omaha, Neb., signed a 40-year license deal to operate the Prince brand.

    Under a complex organization chart, Prince Global Sports is now part of a new entity established by Waitt called Athletic Brands Holding Co. Prince is responsible for tennis and squash product lines, which include rackets, string and the company’s growing tennis shoes business. Prince’s tennis unit generated $59 million in sales in 2011, accounting for 83 percent of the company’s $71 million in revenue, according to bankruptcy court records. Another business unit, Active Brands Co., is handling the Ektelon racquetball and Viking paddle tennis brands previously part of Prince.

    Scott Piergrossi, vice president of creative at the Brand Institute in Miami, said a bankruptcy filing by a company doesn’t have to tarnish a brand.

    “Customers typically don’t care about the financial health of a company, as long as those issues don’t negatively affect the product quality, brand message or experience,” Piergrossi said. “When Hostess Brands emerges from bankruptcy this summer, I bet the market welcomes back the iconic Twinkies brand with open arms.”

    Piergrossi said companies looking to rebuild a brand after a bankruptcy should consider a series of questions: what marketplace need your product fulfills, why your customers were once passionate about your brand, and where you may have misstepped. “Once you’ve answered these tough questions,” he said, “you will likely find that your brand doesn’t need a massive overhaul.”

    Once second in racket share behind Wilson, Prince has dropped to fourth place, losing 10 market share points in the last few years, Ballardie said. Prince declined to provide specific figures, but according to sporting goods industry sources, Babolat is the market leader with a percentage market share in the mid-30s. Wilson is next at about 30 percent, while Head has about 17 percent and Prince about 15 percent.

    Ballardie said Prince’s comeback plan includes a revamped product line that includes a mix of O-Port and traditional rackets. The company has started meeting with distributors and retailers to show off the new line. It plans to introduce the line to consumers in the fall to coincide with the U.S. Open. “The goal is to bring back the consumers we’ve alienated,” Ballardie said.

    The line will feature models in the $150-to-$200 price range. Also making a return are the popular Prince Graphite rackets used by players Andre Agassi and Michael Chang and the Prince Precision Response, which Patrick Rafter used to win U.S. Open titles in 1997 and 1998.

    David Ferrer, No. 5 in the ATP world rankings, is among Prince’s current endorsers.

    Increased social media activity is part of Prince’s plan, using social media to share information about Prince players and company news. The company also recently provided its teaching pros with vouchers to hand out to clients for $50 off a new racket as another way to reconnect with consumers. To date, Ballardie said, 25 percent of the vouchers have been redeemed.

    Ballardie said despite the company’s financial woes, Prince remains committed to supporting programs to grow the sport and funding its academy programs that develop promising young players.

    “We don’t have the biggest volume [of junior players], but we certainly have a really good group of quality [juniors]. We want a broad base of kids playing with Prince at a young age. Instead of investing million of dollars just buying players at the top, we are trying to grow those players from a young age.”

    John George writes for the Philadelphia Business Journal, an affiliated publication.

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  • Sponsor retreat

    There once was a time when you could watch a NASCAR race and see cars representing the Navy, Marines, Army, National Guard and Air Force. But turn on a race today and odds are the only branch of service that will be visible on the hood of a car is the National Guard.

    The absence of the Army, Navy and Marines, which dropped their team sponsorships in recent years, and the Air Force, which reduced its sponsorship of Richard Petty Motorsports to two races, is indicative of the budget pressures on the U.S. military.

    Over the last five years, military spending on advertising has plummeted, and the sequester, which eliminates nearly $100 billion in military spending over the next two years, is expected to make things worse.

    The National Guard spends $26.5 million to sponsor Dale Earnhardt Jr.'s No. 88 car with Hendrick Motorsports.
    Photo by: GETTY IMAGES
    A category that once contributed nearly $100 million in sports sponsorship rights in 2008 has shriveled to just $50 million over the last five years, according to estimates by the sponsorship-monitoring service IEG. There have been similar reductions in military advertising on sports television.

    Look around sports today and you can see the repercussion of those decreases. Over the last five years, the Marines Corps cut its UFC sponsorship, the Navy has bought less advertising during NFL games, and the U.S. Army discontinued its sponsorship of the NHL, PBR and NASCAR’s Stewart-Haas Racing.

    It’s a reflection of diminishing budgets. Since 2008, the Navy’s ad budget has fallen 37 percent, the Army’s 50 percent, the National Guard’s by 43 percent and the Marines’ by 32 percent. Only the Air Force has seen an increase in its advertising budget, but it currently devotes only $2 million to sports.

    A reduction in military spending following the wars in Iraq and Afghanistan drove those advertising cuts and triggered the elimination of several sports sponsorships and reductions in TV ad buying.

    And everyone fears that it’s going to get worse after the sequester.

    “The sports investment as a piece of the pie is stable, but the pie has gotten smaller,” said John Myers, U.S. Army director of marketing. “The problem is the pie is shaky. It’s shaky near the crust around the edges [where marketing dollars sit]. You have to develop some ‘what ifs.’”

    Military spending doesn’t make up a large portion of sponsorship or TV advertising dollars in sports. But the armed forces do support several notable properties such as the U.S. Army All-American Bowl, regarded as the premier high school football all-star game, and Dale Earnhardt Jr.’s No. 88 National Guard Chevrolet. While the Army and National Guard say those sponsorships are safe, recent budget reductions and the looming sequester has many anticipating the marketing dollars spent to support those programs could be affected.

    “They’re not going to be able to activate as aggressively,” said Matt Petersen, vice president of client leadership at IEG. “You’ll see them at fewer events and with smaller footprints. They’ll try to do more with less.”



    Ask military marketers what effect the sequester will have on their budget and the answer is unanimous across every division of the military: They don’t know.

    The military put off cutting $41 billion from its budget this year because it anticipated the sequester would be postponed. But now it needs to find a way to make those cuts and reduce next year’s budget by an estimated $52 billion.

    Military marketers anticipate decreases in their advertising budgets as a result. Army marketers have begun developing multiple budgets for next year so they can be prepared when the cuts come. Other branches are waiting to see how severe the cuts will be before finalizing their budgets.

    Military budgets for advertising and recruiting range in size from $130 million at the Air Force to $507 million at the Army (see chart). The amount dedicated to sports varies from 1 percent at the Air Force to 22 percent at the Marine Corps.

    Those percentages haven’t changed as advertising budgets decrease, but the amount available has shrunk, and advertising and recruiting leaders expect it to contract more in the coming years.

    “We’re entering uncharted waters in terms of impact and how steep the cuts will be due to sequestration,” said Gen. John Horner, the Air Force’s recruiting service commander. “Our marketing funding [dollars] are some of the first that are cut. We are seeing a lot of our goals for outreach potentially cut.”

    The effect the sequester will have on sports remains unclear. Military marketers across all branches believe sports provide a valuable tool for reaching new recruits, but the way they use sports varies.

    The Army and National Guard rely heavily on traditional sports sponsorships, but their spending in sports has changed in recent years.

    The U.S. Army All-American Bowl for top high school players is one of the notable sports properties that draws military marketing dollars.
    Photo by: ICON SMI
    The Army spent as much as $30 million on sponsorship rights alone in 2008, according to IEG, but reduced its sports spending to a third of that over the last few years by eliminating its multirace sponsorship of Stewart-Haas Racing and its NHL, AFL and PBR sponsorships. It continues to sponsor the U.S. Army All-American Bowl and Don Schumacher Racing’s NHRA team, and it complements that with digital media buys across MLB.com.

    The National Guard, which ended its sponsorship of the AFL, sponsors Hendrick Motorsports’ No. 88 car, Panther Racing’s IndyCar team and AMA Pro Road Racing.

    The Navy and Marines have fewer sponsorships and do more advertising in sports. The Navy sponsors the X Games, an advertising-heavy sponsorship with ESPN, and it complements that with TV ad buys during college sports and NFL games. The Marines Corps has no national sponsorships but spends $13.2 million on TV, digital and print ads tied to sports.

    The Air Force spends the least on sports out of any military branch. It is an associate sponsor of Richard Petty Motorsports’ No. 43 car but does no advertising during sports broadcasts because entertainment ad buys are less expensive.

    “We look for where young prospects are spending time, and sports is a passion point,” said Dan Weidensaul, the Marine Corps’ deputy assistant chief of staff for advertising. “We use marquee sports programming to launch key campaigns.”

    The reason many of the branches concentrate on motorsports is because Army research shows that half of motorsports fans have previously expressed interest in joining the military and they are 27 percent more likely to join the military than non-motorsports fans. The Air Force uses motorsports because it has to recruit 9,000 mechanics, and its research shows that it is more likely to find such recruits among motorsports fans.

    NASCAR remains a top choice for the Air Force and National Guard, which spends $26.5 million to sponsor Earnhardt, because it offers a 10-month season with races that go to more than a dozen states.

    “NASCAR has a huge reach,” said Lt. Col. Michael Wegner, the National Guard’s marketing chief. “It allows us to brand and reach down to community activities.”

    The Army, which became the first official military sponsor of NASCAR in 2003, cut its NASCAR team sponsorship last year and narrowed its focus to its sponsorship of the NHRA, which was less expensive and, Myers said, delivered a better return on investment.

    “That was a tough decision,” Myers said. “It was based on … the pie growing smaller.”



    During a recent NHRA race, U.S. Army Sgt. 1st Class John Steele scooped up a brochure for “The Making of a Soldier” and walked over to greet a woman who entered the Army’s activation corral. He escorted her to a padded, pushup station.

    “In the Army, it’s not just about strength,” Steele said, as the woman kneeled down to do a pushup. “It’s being mentally strong. Give me one good pushup and get a T-shirt.”

    The Army has stuck with its sponsorship of Don Schumacher Racing’s NHRA team, citing return-on-investment figures.
    Photo by: AP IMAGES
    It was one of 100 T-shirts Steele and his colleagues gave away the first day of the race. They spoke to more than 20 potential recruits and landed five recruiting appointments, putting them on track over the next two days to exceed the number of contracts they signed in 2012 when they signed eight Army recruits.

    The Army will take its NHRA promotion to more than 20 markets this year. Its activation will be consistent across every one, largely because it opted to eliminate its sponsorship of Stewart-Haas Racing in NASCAR.

    “Our ability to use the NHRA sponsorship for activation was a better ROI for us,” Myers said.

    Being able to pinpoint the return on investment of a sports sponsorship has taken on increasing importance for all branches of the military. They came under attack last year in Congress when Rep. Betty McCollum, D-Minn., and Rep. Jack Kingston, R-Ga., sponsored an amendment to cut $72 million from this year’s defense spending bill by eliminating professional sports sponsorships. The amendment was defeated by just 14 votes, but its message was clear.

    “The less money we get, the more we have to figure out where we get the most bang for the buck,” Air Force Gen. Horner said. “The price is too dear [for sports] as you get less and less money.”

    Different branches have responded in different ways. The Army cut its Stewart-Haas Racing sponsorship, the Marines Corps cut its UFC sponsorship, and the National Guard moved to prove that its sponsorship of Hendrick Motorsports was a worthwhile investment.

    The Guard hired Alan Newman Research of Richmond, Va., to conduct a study of its investment in motorsports. The agency determined that 90 percent of Army National Guard soldiers who enlisted or re-enlisted since 2007 were exposed to the Guard through recruiting or retention materials featuring NASCAR cars and/or drivers.

    “It absolutely is of value to us,” Wegner said, but he acknowledged that the pressure to prove that has increased. “As for the future of NASCAR, we love what we get for the program. But if Congress makes decisions about budgets, we’re going to have to make hard decisions about how we spend our dollars.”



    Doug Berman has been working closely with the Army ever since his company, All American Games, launched the U.S. Army All-American Bowl in 2001. He’s confident the Army will continue to spend an estimated $2.5 million to be the title sponsor of the game in the future because it gets a strong return on its investment, but he admits he’s uneasy about the sequester cuts.

    “One would be foolhardy if one deals with the federal government to not be cognizant that the federal budget is under pressure,” said Berman, who was the state treasurer of New Jersey in the 1990s when the state had to cut $2 billion out of its budget.

    TV networks are more insulated from the looming sequester cuts than properties and teams because they’re less dependent on military advertising. While it feels like ads for the Navy, Air Force, Army, Marines and National Guard dominate sports broadcasts, the truth is that it’s a very small component of the TV ad marketplace and it’s decreased considerably over the last five years.

    Collectively, the five largest branches of the military spent just $61 million on ads during sports broadcasts in 2012, a 50 percent
    The Navy continues to sponsor the X Games (above), while the Army has ended several deals, including one with Stewart-Haas Racing.
    Photos by: GETTY IMAGES (2)
    reduction from 2008, according to Nielsen (see chart). As a result, sellers of sports advertising inventory aren’t concerned about the sequester and potential cuts to military budgets.

    “It’s not a significant enough category [for the sequester] to affect us one way or the other,” NBC’s Seth Winter said.
    Sports properties like Berman’s All-American Bowl are taking a page from TV broadcasters and diversifying in order to avoid major cuts to their budget after the sequester. No one wants to be in the situation that Stewart-Haas Racing found itself in last year when it lost more than $6 million in sponsorship support from the Army, which had spent as much as $13 million annually with the team in prior years. The team still has six Sprint Cup races to sell this year as a result of the Army’s decision to walk away.

    “We were surprised it happened but prepared,” said Brett Frood, Stewart-Haas Racing’s executive vice president. “When you’re partners with them, you understand there are annual looks at the budget and political undertones to decisions.”

    Part of the reason Frood was surprised by the decision is because of the way the military makes advertising commitments. Military branches can’t sign multiyear deals because of congressional rules about spending commitments, so properties and teams have to wait until the summer or fall to confirm renewals with the Army, Navy or another branch.

    “Is it ideal? Probably not,” said Pat Perkins, Hendrick Motorsports’ vice president of marketing. “But it’s such a worthwhile partnership because there’s a lot of pride in representing the military.”

    It’s that pride that makes driver Tony Schumacher willing to make sacrifices and cut his own drag racing team’s budget in order to preserve its primary sponsorship from the U.S. Army, which spends more than $5 million to sponsor the team and NHRA.

    “We know that we can cut certain things,” Schumacher said. “We’ve found a great partnership that works and we’ll find a way for it to keep working.”

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