CHICAGO (Reuters) - Spending on sports sponsorships in the United States will likely fall this year as companies look to trim costs in a recession that has hurt most sports, a top industry consulting executive said on Wednesday.
“Look, we’d all like to see spending in (sports) sponsorship grow, but that’s not the environment that we’re living in,” said David Abrutyn, a senior vice president with sports, entertainment and media company IMG, whose clients include Coca-Cola Co (KO.N), Kia Motors Corp (000270.KS), Visa Inc (V.N) and Allstate Corp. (ALL.N)
“I would definitely say we’re seeing a belt tightening,” he added. “To say whether it’s 5 or 10 percent, I‘m not sure I’d feel comfortable with a blanket characterization. It’s fair to say that companies are definitely looking at spending as little as they can.”
The recession has hurt leagues like the National Football League, the National Basketball Association, Major League Baseball and NASCAR, as consumers attend fewer games or buy fewer hot dogs, and companies trim marketing budgets.
North American companies are expected to increase their spending on sponsorship, including sports, by just 2.2 percent this year to $16.97 billion, according to IEG, a research firm owned by advertising giant WPP Plc(WPP.L). That would be the smallest increase in the 24 years IEG has been tracking such spending.
Corporations are looking for ways to get their message out to consumers while reducing spending.
“With NASCAR, if you’ve got a car that’s running toward the front of the pack every week, maybe it enables you to spend a little bit less in some other marketing functions,” Abrutyn said.
Coke, for instance, has special packaging designed by a NASCAR artist exclusive to Kroger Co (KR.N) stores in January and February in celebration of the Daytona 500 stock-car race taking place on Sunday in Florida, he said.
Events like the Daytona 500 and the NBA’s all-star game in Phoenix, also on Sunday, will continue to attract sponsors, Abrutyn said.
“You still have to find a way to advertise and market even in a tough economy and sports, particularly marquis events, draw huge numbers of people and huge attention,” he said.
Smaller sports also have felt the pain as teams in pro lacrosse and women’s basketball have folded and the Arena Football League canceled its season. Abrutyn said that pressure may only increase.
“The properties are going to work harder to not only renew existing sponsors, but certainly to find new categories and new sponsors to come on,” he said.
“It’s not an unfair perspective to think that some of the smaller events will struggle to hit their revenue goals during 2009,” Abrutyn added. “Hopefully, there aren’t more events or more teams or more entities that slip away as a result of this environment.”
Not everyone is a fan of sports sponsorships. One U.S. fund advisory firm has tried to establish a direct link between sports sponsorships and corporate underperformance.
Advisor Perspectives said last month that it had studied the stock performance for 69 companies that entered into “naming rights agreements” for North American sports stadiums. The firm said the stocks of companies in such contracts trailed the S&P 500 index by 4.7 percent over the course of the deal.
Companies also take risks in aligning with individual athletes as the recent news of Olympic gold medal swimmer Michael Phelps being photographed with a marijuana bong and baseball all-star Alex Rodriguez admitting to taking performance-enhancing drugs earlier in his career has shown.
Abrutyn said, however, that those deals are not likely to disappear. “People are trying to find ways to cut through an incredibly cluttered advertising world to reach an audience and celebrities are a very powerful tool to do that.”