HARD-ROCK MINING FOR CORPORATE SPONSORS

Owing to his behavior, Tiger Woods has lost sponsorship agreements with Accenture, Gatorade, Gillette, and Tag Heuer, with more companies likely to follow suit. Preceding Woods’ troubles, Buick had severed their ties with him because of the financial mess at General Motors.

However, sponsorship problems for professional golf were already underway when the Woods’ story broke to exacerbate the situation. The Ladies Professional Golf Association television ratings are very weak, making sponsorship unattractive to potential sponsors. Anytime that TV ratings decrease, it raises the cost-per-thousand of reaching viewers, unless the advertising rates are cut to compensate. The men’s PGA Tour is also beset with waning fan interest, which makes the sport less desirable for potential sponsors.

Two early PGA tournaments in 2010—the SBS and the Sony Open—experienced television ratings declines of 21% and 30%, respectively, from 2009. Torrey Pines in San Diego did not get a title sponsor, Farmers Insurance, until virtually the last moment, and even then cut the normal price in half to $3.5 million. (Previously, the tournament was called the Buick Open, but GM’s bankruptcy scuttled the deal.) Ticket sales and corporate hospitality agreements also declined from 2009.

The PGA has 46 tournaments on its agenda for 2010 and three of them lack a title sponsor. For 2011, 13 tournaments do not have sponsors yet.

Professional golf’s travails predate the Tiger Woods’ scandal. In the final round of Woods’ first win at the Masters in 1997, the TV audience surged to an unfathomable 50 million viewers. In 2009, the TV audience for the final rounds of PGA tournaments averaged 3.5 million viewers. Compounding the downturn is the fact that the number of people playing golf has been eroding: approximately 10.2% of Americans (over the age of six) took to the links for at least one round in 2008, as opposed to 12.1% in 1990.

What is happening in golf regarding corporate sponsorship is not confined to that sport. In fact, corporate expenditures for sports sponsorships in 2009 were off by $100 million compared to 2008, to $11.3 billion. Some of this can be attributed to the recession but other factors are at work, namely that companies are fearful of associating their names with athletes and/or specific sports. A number of incidents of gun-wielding NBA and NFL players, the ongoing steroid revelations in baseball, well-publicized sordid sexual affairs in golf and the NBA, and so on ad infinitum have made company executives wary. (Actually, a tarnished reputation can also work the other way around, as when the stadium for the Houston Astros Major League Baseball team was christened with the name Enron.)

For economic and other reasons, Barclays cut its naming-rights sum for the under-construction New Jersey Nets arena by half; Microsoft and Cub Cadet did not renew their alliances with NBA star LeBron James; Bank of America gave up its sponsorship of the U. S. Olympics; and Pepsi terminated its use of soccer-phenom David Beckham.

Horse racing is undoubtedly being affected by the same winds of change. The putrid television ratings for the Breeders’ Cup World Championships make the event a hard sell, even if one argues that the quality of the audience compensates to a degree for the relatively small number of viewers. Sponsors for the Triple Crown races have access to a much larger audience, but may be skeptical of the sport’s issues with medications and on-camera breakdowns.

The Triple Crown races in particular offer an attractive venue for corporate sponsorships because of the ability of companies to host customers and other constituencies at an event combining a premier sporting competition with a grand social outing. Some of the lifestyle-friendly racing meets—Del Mar, Keeneland, Monmouth, Santa Anita, and Saratoga—are also capable of crafting sponsorship packages that are very salable to companies. The Breeders’ Cup World Championships can be pitched to firms like NetJets, whose target audience is very small and very affluent.

Horse racing, like other sports, can expect increasingly to find a harder row to hoe in closing the deal with corporate sponsors, who are being more frugal in the current economic climate and more cautious about linking their names with sports and athletes that may embarrass them.

Copyright © 2010 Horse Racing Business

References and further reading: “PGA Tour Feels Absence of Tiger Woods from Golf” and “When Big Money Doesn’t Play Ball”

Comments

  1. Graeme Beaton says

    Bill,

    Excellent read, again. One area of sponsorship not mined here, but mined overseas is the fashion industry. In Australia, the big meets often feature hat and fashion contests, mostly for women, but occasionally men are convinced to lose their inhibitions long enough to glide, or stumble, down the catwalk. These contests, and the dress-up crowd it attracts, draws a demographic lost to US racing: the young (and not so young) fashionista, mostly female. And, of course, where there is honey, there are bees, and so these Aussie meets often attract a younger male demographic on the coattails (excuse the pun) of the female fashion set. In fact, these fashion shows attract as much media coverage as the races themselves, making the day a ‘must’ for those who fancy themselves as trendy mavens or just plain gawkers (you know, the kind that line up outside churches where celebrity weddings take place.) I was at the Kalgoorlie Cup in Western Australia a couple of years ago and was amused and heartened by the number of young people there in their finest, including about a dozen young male Xers wearing suits ranging in color from canary yellow to skyblue to purple. Now this demographic does not attend year-round, it is true, but they do bet on the day and there may be some residual benefits as some might become racing fans and others might mark major race meets down as a must attend for the future. But perhaps the greatest benefit is that it gets racing on the evening news (even if the result of the big race is but a postscript) and it attracts sponsors, some from the fashion industry. The sponsor of the fashion contest at the Perth Cup one year, for example, was a hatter (a sane hatter?) whose biggest sales days were those leading up to the racing carnival. Anecdotally, I notice that in this country many young women are interested in horses (oh, and fashion). How hard would it be to marry the two demographics and attract sponsorship, as well as a younger, prettier (and handsomer) demographic?

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