In a Downturn of Just Pausing for Breath?: An Objective Look at the State of the Sports Marketing Industry. (Industry Analysis)
Fenton, William, International Journal of Sports Marketing & Sponsorship
Abstract: Concerns about a slowdown in the sports marketing business have recently been expressed. A major conference, SportBusiness 2001, included a session asking if the boom was over. Assuming that the level of sponsorship activity is a key indicator of the real state of the industry, we conducted an analysis of the amount spent worldwide on acquiring sponsorship rights in 2000. This confirms that the recent spectacular growth has halved to a still-robust seven per cent. Further analysis undertaken of sponsorship agreements reported in the European press in 2000 provides evidence that the sponsorship medium is still fundamentally valid.
Keywords: sponsorship, rights fees, advertising, sports marketing, television
The spectacular growth of the last decade has been fuelled principally by the expanding worldwide television business. Broadcasters have been prepared to pay huge rights fees to buy attractive demographics. The end of 2000 and beginning of 2001 saw sentiments and comment that sports marketing is a less dynamic medium than during the "boom" years of the 1980s and 1990s (Glendinning, 2001). Apart from the general, and largely valid, observation that the industry was beginning to feel the effects of a general world economic downturn, explanations tended to be partisan or anecdotal. Typical of these would be complaints about rights fees, sponsor clutter or athletes' salaries. The failure of several high-profile on-line sports sites has added to the feeling that the boom is over.
Calculating the amount committed annually to acquiring sponsorship rights to events in 2000 provides hard evidence to confirm some of these fears. Using this measure, which relates sponsorship expenditure to advertising expenditure, growth has slowed by 50 per cent, from 14 per cent in 1999 to seven per cent in 2000. Although the concerns expressed are valid and will need addressing, the slowing of growth has more to do with macro-economic conditions than any other factor.
The level of sponsorship activity is a key fundamental in assessing the state of sports marketing. Our research concludes that worldwide sponsorship acquisition spend represents an average seven per cent of the budgets committed to advertising, a figure which has remained largely stable for some years. This would seem to confirm that sponsorship is still very much regarded as a valid technique by marketing departments. The fundamental rationale for entering into a sponsorship is unchanged. An analysis of sponsorship deals reported in the European press in 2000 confirms that Internet and telecommunications companies were the biggest dealmakers. This suggests that companies and sectors at a stage in their business cycles where they especially need to build awareness will include sponsorship in their overall strategy. The same analysis of the European press also shows that the average duration of a sponsorship is now three years, acknowledging that sponsorship rarely delivers instant success but needs time to ac hieve realistic and defined aims.
The USA continues to be the biggest spender in sport sponsorship rights rising from 39.3 per cent to 42.5 per cent. More is spent on sports sponsorship than on any ether form. In 2000 sports sponsorships represented 69 per cent of all reported deals (68 per cent in 1999), while 86 per cent (86 per cent in 1999) of the total value reported went to sports. In addition, an ever-expanding galaxy of new television platforms, and eventually broadband Internet delivery, should continue to sustain the industry. We conclude that, as in all booms, there has been a slowdown to catch breath to be followed by steady growth as the fundamental drivers behind sponsorship are still in place. For the future, much depends on the state of the world economy.
The sports marketing industry began to show signs of the business it would later become during the 1960s and '70s as television became the world's mass medium. …