Brand endorsements under pressure

With Sainsburys pulling out of its association with ITV1 prime time drama premieres (MW last week), Dominos ending its endorsement of Sky Ones The Simpsons after almost ten years and sports superstar Tiger Woods being dropped by a cash-strapped General Motors, it could appear as though the bottom is dropping out of the sponsorship market.

With Sainsbury’s pulling out of its association with ITV1 prime time drama premieres (MW last week), Domino’s ending its endorsement of Sky One’s The Simpsons after almost ten years and sports superstar Tiger Woods being dropped by a cash-strapped General Motors, it could appear as though the bottom is dropping out of the sponsorship market.

Add to that football shirt sponsorship in the Premier League slipping down year on year for the first time in the league’s history and the blue-chips, such as financial companies, cutting ad budgets, and now critics are beginning to ask if sponsorship might be hit hard by the credit crisis as the fate of sponsors hangs in the balance.

Sponsorship, critics add, has enjoyed a rise in prominence and cost akin to the housing boom of the past decade, and now is perhaps similarly due a bust as cost-conscious marketers are less concerned with the allure of “owning” a property than the bottom line. Furthermore, it is a medium that, being in its infancy during the recession of the Nineties, has never had to prove its worth as it does now.

Others, though, point to a natural “balancing” in the market, something that can survive the scrutiny of procurement people and even sustain a brand through hard times. Carat head of sponsorship David Peters says: “The sponsorship industry is, relatively speaking, in its infancy.” He says that the first broadcast sponsorship deal was in 1989, just years before the last “proper” recession of the early 1990s, at a time when the football Premier League was just beginning and the highly commercial Champions League had not yet begun.

Rupert Pratt, managing partner of specialist consultancy Generate Sponsorship, admits: “It’s true that there is going to be a downturn in the market, there is no doubt that there will be a downturn in spend.” He suggests that those funded by the financial services market could be hit the hardest, but adds that sponsorship is a maturing market which has proved its worth.

“The top end of the market, the prestige rights, will remain relatively unaffected, but there might be a correction in the market in terms of pricing,” he says. “Look at what the housing market has done.”

The shift has been particularly apparent in the shirt sponsorship market. Figures released last month from Sport&Markt’s tenth annual European Jersey report show that the overall level of shirt sponsorship across the six main European leagues has dropped for the first time from €405.3m (£344m) in the 2007 to 2008 season to €393.2m (£328.3m) this season.

The German Bundesliga has overtaken the Barclays Premier League with the largest total income from shirt sponsorship, due partly to West Ham United sponsor XL airlines going bankrupt, West Bromwich Albion being without a deal and Aston Villa bearing the logo of a charity on its shirt.

Meanwhile, questions have been raised over the sustainability of AIG’s £50m sponsorship of Manchester United after it received a US Government bail-out, while Newcastle United shirt sponsor Northern Rock has been nationalised and is unlikely to re-sign when its deal runs out.

In broadcast, lengths of deals are getting shorter, with Sainsbury’s tenure of the ITV1 drama premieres lasting four years, against the previous sponsor HSBC’s eight, and a number of properties switching sponsors yearly. Yet ITV sponsorship, content partnerships and interactive sales director Gary Knight says this is indicative of a shift in advertisers’ priorities. The Coronation Street tie-up with confectioner Cadbury, which spanned ten years and four marketing directors was “unusual”, he says.

“Anything with a three-year term now is a long-term deal. That’s a hell of a long time with any brand. In the old days it was very much the ‘chairman’s fund’, but they were not deals with any econometric modeling work. Every main sponsorship nowadays has that robustness before sign off. Brands change track a lot. Even when something works really well they will want a shift to try a different emphasis,” he adds.

Some suggest that Sainsbury’s wants to shift its spend into value-driven communications and the limitations of broadcast sponsorship does not allow it to pursue this strategy as effectively as other media. They also add that Domino’s departure from The Simpsons (MW October 16) was fuelled by the introduction of measures around the promotion of foods high in fat, salt or sugar rather than its effectiveness. “Had it not been for the partial banning of junk food ads on TV, Domino’s would still be with The Simpsons,” says one media buyer. However, the pizza company still sponsors properties including ITV show Britain’s Got Talent.

“Our sponsorship of The Simpsons has been instrumental in our growth, especially in the early days when The Simpsons was our principle branding platform,” said Robin Auld, the sales and marketing director at Domino’s in October.

Another deal that has led to a huge uplift for sponsorship is a two-year deal on Turner Broadcasting’s pre-school channel Cartoonito with Glaxo­SmithKline’s Aquafresh toothpaste. The 90-second spot every evening before the channel closes at 7pm aims to highlight the importance of youngsters brushing their teeth before bedtime.

John Ferguson, Ebiquity head of international operations, says such deals underline that on-air sponsorship is seen more and more as an alternative to the traditional spot.

Jim McDonald, head of broadcast at media agency MPG, concurs: “As long as you have a property that really goes above and beyond, media owners will always be able to sell.”

Yet McDonald fears that because the metrics and measurements are not as ingrained as those of other media, sponsorship may miss out. “Because sponsorship is nebulous in terms of results and what it delivers, it means that if there are to be challenges to the budgets, you could very easily leave [sponsorship] off the schedule. But that means there are bargains to have.”

Anecdotally, some advertisers are understood to be setting aside monies to sweep up a number of properties should others drop them due to budgeting constraints. One reason for worry is that sponsorship deals are usually longer-term deals, although Peters says there will have to be flexibility in the market. Rights owners would far rather strike a year-long deal rather than broadcast or host an event with no sponsor (or money) in place.

Yet warning signs remain. Channel 4, usually the choosiest of media owners when tying a deal to match its properties, is understood to be talking to “anyone” about its forthcoming Celebrity Big Brother series. The last time the show hit

the airwaves in 2007, the controversy when Shilpa Shetty was bullied by other contestants led to Carphone Warehouse axing its deal. And Guinness owner Diageo is understood to be negotiating with the Rugby League over an extension of its title sponsorship. While rugby bosses are apparently angling for another three- to four-year term, Diageo is keener on a shorter term.

Adds Peters: “A lot has happened in 15 years. We can only speculate [what will happen in this recession], but the nature of sponsorships tend to be long-term commitments which has advantage in a recession – which have lasted an average eight months in the UK since the war.”

For brands that are keeping their heads down or cutting budgets but need to maintain some semblance of public presence, being tied into long-term brand-building initiatives may be a blessing. For others, the need to cut costs and prove accountability, the economic crisis may force them to re-evaluate deals that have been struck in the good times.


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