Facing financial crisis
Sponsors flee scandal-plagued USA Gymnastics
Staring at an uncertain future after the departure of several sponsors, USA Gymnastics faces a steep climb as it tries to regroup in the wake of the sexual abuse scandal that has rocked the national governing body of the sport.
The loss of corporate partners is a financial blow to the organization, which had total revenues of $34.4 million and net assets of just over $3 million in 2016, according to Internal Revenue Service documents. USA Gymnastics received nearly $3 million from the USOC last year, a figure that fluctuates annually between Olympic cycles.
Adding to the woes are pending legal matters. Scores of gymnasts who were abused by former sports doctor Larry assar are suing USA Gymnastics, Nassar and Michigan State University, where he also worked.
“USA Gymnastics is facing a crisis, one that will influence sponsor decision-making for years,” said Professor T. Bettina Cornwell, academic director of Warsaw Sports Marketing Center at the University of Oregon. “Partnerships in sport are all about sharing valued associations. Brands want to associate with things like ruggedness, grace, passion, joy, success and even trying hard in the face of failure. They are fearful to associate with an organization tied to the horrific Larry Nassar.”
The 54-year-old Nassar was sentenced Wednesday to 40 to 175 years in prison, capping a seven-day hearing in a Michigan courtroom that featured several of his victims.
The list of companies that have dropped sponsorship includes Under Armour, AT&T, Kellogg, Proctor & Gamble, and Hershey.
A statement from AT&T on Tuesday said the company was suspending its ties “until it (USA Gymnastics) is re-built and we know that the athletes are in a safe environment.” The company said it remained committed to helping the athletes and hoped to find other ways to accomplish that, adding that it was ready to return as a sponsor once USA Gymnastics has fully addressed the crisis.
Under Armour issued a similar statement when it ended its partnership with USA Gymnastics
in December. “We stand with these athletes and hope our decision to end this partnership resounds with USAG leadership and helps to facilitate necessary change,” the statement said.
In an open letter to Team USA on Wednesday, U.S. Olympic Committee CEO Scott Blackmun called for all current USA Gymnastics directors to resign and threatened decertification if changes aren’t made.
USA Gymnastics issued a statement in response, supporting an investigation and accepting “the absolute need of the Olympic family to promote a safe environment for all of our athletes.” It did not respond to
Blackmun’s call for more resignations.
Paul Parilla, who led USA Gymnastics during the sex abuse scandal, board vice chairman Jay Binder, and treasurer Bitsy Kelley already have resigned.
Ronald Goodstein, associate professor of marketing at Georgetown University’s Mcdonough School of Business, said USA Gymnastics can rebuild, but more change is needed and recovering won’t happen quickly.
“There is a way to recover, but they can’t be in a rush to find sponsors,” Goodstein said. “The first thing they have to do is identify the root cause, why it fell through the cracks, and fix it.”
Installing some of the victims as leaders of the board “would go a long way” toward restoring confidence, and whatever measures are taken have to convince the public that there is no more threat of abuse, Goodstein said.
“There has to be tangible action the public can see,” Goodstein said. “This all has to happen before they seek sponsors.”
Goodstein said USAG also needs to support the affected athletes and their families and seek organizations to help with therapy.
“What’s being done to help these young women? It is not providing them with money,” he said.