Tough times for spon­sored sport

Finweek English Edition - - INSIDE -

De­spite a mod­est in­crease in out­lays on sports spon­sor­ship last year, the slump af­fect­ing this branch of the mar­ket­ing mix is not over. And the alarming fall-off in lev­er­ag­ing (spend­ing on sup­port­ing me­dia to cre­ate aware­ness of the spon­sor­ship deal) has con­tin­ued to worsen.

For while the tra­di­tional rule of thumb is that ev­ery rand spent on buy­ing rights should be lever­aged by a match­ing amount, ac­ti­va­tion bud­gets have dropped to an alarming 34% of the di­rect spend on spon­sor­ship rights, ac­cord­ing to BMI Sport Info’s David Si­den­berg. This means that much of the money spent on spon­sor­ship rights is be­ing wasted.

And as the per­ceived ef­fec­tive­ness of spon­sor­ship de­clines, there’s a dan­ger that dis­il­lu­sioned spon­sors will move their mar­ket­ing rand else­where, caus­ing con­sid­er­able harm to the cause of the sport­ing codes de­pen­dent on this money.

Be­tween 2006 and 2012, spon­sor­ship bud­gets in­creased by 76%, but ac­ti­va­tion lev­els rose only 7%. The re­sult was the lever­age ra­tio fell from 84% of the di­rect spon­sor­ship spend in 2006 to 51% in 2012. Si­den­berg points out, how­ever, that rights fees now in­clude more con­trac­tual ben­e­fits than ever be­fore, thus re­duc­ing the need for lev­er­ag­ing spend.

An­other in­di­ca­tion of con­cern is that while ev­ery sin­gle spon­sor­ship prop­erty in soc­cer has been re­newed for 2012, most of them were signed at fees re­port­edly be­low the ini­tial ask­ing price. “The mar­ket may have f in­ally put a cap on the per­ceived ram­pant hy­per-inf la­tion­ary rights fee in­creases of re­cent years,” says Si­den­berg, who is also man­ag­ing part­ner at Spon­sor Value Re­search Ser­vices.

“Com­mer­cially speak­ing, the last 24 months have been de­scribed by many as a pe­riod of con­sol­i­da­tion rather t han growth,” says Si­den­berg. “Some mar­keters had be­gun to pro­nounce that the elephant in the room is the high cost as­so­ci­ated with ac­quir­ing spon­sor­ship rights, which con­tin­ues to es­ca­late and which are now deemed less de­sir­able for real mar­ket­ing re­turn.

“Ad­di­tion­ally, ram­pant al­le­ga­tions of cor­rup­tion and poor ad­min­is­tra­tion among a grow­ing num­ber of top sport­ing fed­er­a­tions could not have come at a worse time as mar­ket­ing bud­gets con­tinue to re­tract.

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