A sponsorship that fits like a glove

What sport sponsorships do well?  The ones that make sense.  The ones where there is congruity between the sponsor/product (think Pirelli tires and F1 racing), and where the ad fits with its delivery so that it sticks in the mind of the consumer.

Background

• For non-soccer fans:
  • Soccer is a game played to 90 minutes, but usually a few minutes are added on (due to injuries, etc).  To announce the amount of "Extra Time" added, an official holds up a lightboard with the number of additional minutes (aka "stoppage time").
• For non-followers of the prophylactic market:
  
  • The Durex Performa is a condom that desensitizes to help the man last longer.

With that in mind, gaze upon a perfect example of sponsorship fit:

HT: Deadspin via The Spoiler via Sport Wereld

Should the government ever spend money on sponsorship?

Congresswoman Betty McCollum (D-Minn.) has introduced a bill designed to ban the military from spending money to sponsor NASCAR (HT: From the Marbles).  Her chief of staff states,

"The question is, why are taxpayer dollars being used to sponsor NASCAR race cars? We’ve got two wars going on. Can we afford it? This is not an attack on NASCAR. There are a lot of private sector businesses that support NASCAR. The Pentagon is in the war-fighting business and not the race business."

I believe this comes down to one's fundamental belief in the efficacy of sponsorship. If you think sponsorship is effective, then spending money in this way is fine. If you think sponsorship is just a waste of money and a way for decision-makers to get good seats at sporting events, you're not going to like sponsorship no matter how little money is spent. The Congresswoman hasn't released a comment as yet, but her chief of staff's statement above makes me think they're in the latter camp; further, it appears to be a very myopic view.

He states that "The Pentagon is in the war-fighting business and not the race business." However, if the sponsorship is effective at strengthening the military brand in the eyes of the military's target market (1-in-3 servicepeople is a NASCAR fan, and 1-in-5 NASCAR fans either serves now or has served in the military, says NASCAR PR man @RamseyPoston), it may be a worthwhile recruiting tool. Further, it is a form of after-marketing: it may make military people feel better about their time in the service and their connection with other veterans.

We don't know what the military's objectives are in the sponsorship, and we haven't seen the market research data, so there is no way for us to know whether this is an effective sponsorship (I'm guessing Congresswoman McCollum hasn't delved into the research either).  But if it is effective, why cut the money? Acquiring and supporting your human capital [troops] is part of the "war business," and if the NASCAR sponsorship is the right method through which that can be accomplished, keep it up. If it's not, however, the money shouldn't have been spent that way in the first place, even when times are good.

This situation is exactly what financial institutions faced when they received TARP funding. Suddenly sport sponsorships sports were a waste of taxpayer money. If the sponsorships were effective at getting customers before (Bank of America reports a 3:1 return on sport marketing spending), forcing banks to stop this sponsorships at a time when they most need customers is a terrible decision. Likewise, if sponsoring NASCAR benefits our military, in the middle of fighting two wars is the worst time to cut marketing.

Leading to a lockout? NFL vs NFLPA collective bargaining negotiation

Guest post. This post is part of series of posts written by my sport management students and is cross-posted on the UMass Center for Spectator Sport Research blog. The authors of this post are Lilah Brown, Dan Hatman, Oleg Kamenetsky, Miha Kline, Ariel Weisman.

To put the current negotiations in perspective you need to look at the last 20 years.  The Reggie White vs NFL antitrust case led to NFL players gaining free agency, while the owners gained a salary cap and floor.  The salary floor was based on the players having access to 58% of broadcasting and attendance revenue.  Subsequent renegotiations of the CBA led to increases in minimum salaries and increased contributions to pensions and 401K’s.  In 2006, the owners’ in-fighting over revenue sharing allowed the NFLPA to gain tremendous leverage in the negotiation.  This led to the players gaining access to 59.5% of ALL football revenues.  In 2008, the owners opted out of the CBA saying that the 2006 agreement increased salaries to the point that the owners felt they were not making the same profits.

The owners said after opting out that they wanted to renegotiate the CBA with an 18% revenue exemption that the players would not have access to. The NFLPA expressed concerns over justifying this cut, when NFL teams average $31 million in profit.

The NFLPA has said publicly that they have no intention of accepting an 18% pay cut and are preparing for a lockout in 2011. To protect the players, the NFLPA has saved $200 million as a lockout fund by increasing dues by $5,000 per player and the players signing over their royalties from group licensing rights to the NFLPA.  From this fund, the NFLPA hopes to pay each player $60,000 in 2011 if a lockout occurs.  The NFLPA has made their perspectives public, hoping fans and lawmakers put pressure on the owners to lower their demands.  One such strategy is to remind the public that the NFL is a non-profit and does not pay taxes on its $8 billion of revenue.  Another move has been to highlight the NFL’s reluctance to open its books to the NFLPA or the public in order to prove that they are actually hurting financially.

The NFL owners have countered many of these points.  The NFL argued that their non-profit status should remain as they do not collect the $8 billion in revenues, but rather pass those profits on to the 32 teams, who in turn, pay taxes on that money.  Furthermore, several NFL owners have made multi-million dollar investments into new stadiums to grow revenues for both owners and players.  The owners want players to contribute to these projects and share in their risk.  The NFL also clarified the 18% cut.  This would not be a straight 18% reduction in player salaries, but rather the NFL would take 18% of the total pie, before revenue sharing, to cover operating expenses. The remaining 82% would be shared with 60% going to the players and 40% going to the owners. The players would end up only seeing around 5% less than they currently do and the owners argue that this 18% ($1.4 billion) would be used to grow league revenues, allowing for higher player salaries in the future.

As fans, we see this as an argument between millionaires and billionaires but this potential lockout also impacts local government (less tax revenue), corporate sponsors (less funding), stadium development (suspended), NFL employees in both the league and team offices, coaches, transportation groups, and stadium & media employees (unemployment).

Scheduled sponsorship revenue for the 2011-2012 season

Revenue Source	Value (in millions)
Visa	$30
AB InBev	$50
Verizon	$187.5
EA Sports	$30
Reebok	$30
Other sponsorship discounts	$125
Preseason	$500
Potential league-wide losses	$952.5

Rovell: NFL's Beer Deal Doesn't Add Up

I like a lot of Darren Rovell's work, but I really enjoyed this particular article (NFL's Beer Deal Doesn't Add Up - CNBC). In it, he questions how AB Inbev's recent sponsorship deal with the NFL pays off financially. He is candid in his assessment, and I agree wholeheartedly with his view. I had similar thoughts when I read about the deal, but figured that there was something that I must be missing. Well, at least Rovell is missing it too.

I also appreciated his hat tip to Pabst Blue Ribbon, one of my favorite brands to follow.

Update: Rovell spoke with AB President Dave Peacock today (4/1/2011), the first day of the agreement. Peacock defends the deal, noting that the NFL-wide deal allows AB to market beyond the 75-mile radius around each team with whom AB has an team deal.