It’s an increasingly common scenario chain of events that usually goes something like this:
-Company struggles due to the economy.
-Company receives government bailout money.
-Company sponsors an event
-Company spends money to activate the sponsorship
-Lawmakers get angry and says company is wasting taxpayer money.
The most recent example came with Northern Trust, a bank that accepted TARP funds but ran into trouble from Rep. Barney Frank, chair of the house finance committee, after it spent money on a concert and expensive lodging for guests as part of its sponsorship of a golf tournament.(To be fair, Northern Trust claims it only received TARP funds because the government insisted on it, not because they were struggling.)
The controversy over Northern Trust comes as lawmkers in New York have called for Citibank to drop its $400 million naming rights deal for the Mets new ballpark.
CNBC last week aired a segment last week with top marketing exec Casey Wasserman exploring whether sports sponsorships make any sense, particularly in this economy. (It’s a good segment, if you can get past the fact that they set a record for the most talking heads on screen at one time.)
There’s some debate about whether sports sponsorships are worth the investment, there is also a debate now about the issue of sponsorship activation. Any sports marketer will tell you that simply paying for a sports sponsorship isn’t usually enough. It helps to spend additional money on promoting the partnership and on things like corporate hospitality and general schmoozing of VIP’s. In the view of companies, that’s just sensible business regardless of whether you’ve received government bailout money or not. Futhermore, sports leagues and events generally get annoyed when a company spends money on a sponsorship but then doesn’t make any additional efforts to promote it.
I recently received a note from John Rowady, President of rEvolution, a sports marketing and media agency in Chicago. On this issue, he writes:
“Our honorable elected officials have told us time and again how the federal government’s goal for TARP funds and stimulus spending is designed to encourage growth at all levels of the economy. Why would they then, propose to restrict the use of some of the more effective ways to build revenue: sponsorship and event marketing? I am sure that most of our members of Congress appreciate how effective a well-planned event—designed to engage and influence its target audience—can be! These are legitimate business practices that, when planned and executed responsibly, deliver huge returns for the sponsoring companies. Why restrict their use? On top of that, restrictions on sponsorship and event marketing will decimate an industry that not only provides jobs for millions of Americans, but one that gives us all a reason to stand up and cheer passionately.”
UPDATE: Just a friendly FYI…I have changed my twitter feed. My new screename is SportsBizWT. I will post links to all my blog entries plus any other news that comes up.