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Commonwealth Games 2002

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Tuesday, 12 February, 2002, 11:14 GMT
Sports sponsors to weather the gloom?
Opening ceremony at the Winter Olympics
The Winter Olympics raised $860m in sponsorship
by BBC News Online's Emma Clark

When sailor Ellen MacArthur came second in the Vendee Globe race last year, she was not the only one to crack open the champagne.

Ellen MacArthur on Kingfisher
Kingfisher got 'fantastic value' out of its deal
Her sponsor, retail group Kingfisher, found itself right in the middle of the media frenzy that surrounded Ms MacArthur's success.

Such primetime space came cheap for Kingfisher as part of a three-year, 1.8m sponsorship deal.

The company has acknowledged the "fantastic value" of the deal and in January renewed its sponsorship of Ms MacArthur for the next five years.

Increasingly, companies are seeing sports sponsorship as a more effective way of reaching their desired audience than plain advertising.

Inside the industry, people have been saying for years that sponsorship has come of age - often it was more hope than reality

David Cannon
Institute of Sports Sponsorship
"As advertising is queried as value for money, sponsorship has come into its own," says Karen Earl, managing director of her own consultancy, Karen Earl Sponsorship.

"You can do more with sponsorship - you can market products and do direct marketing on the back of it... and there are more ways to build relationships with customers."

Olympic dollars

The current Winter Olympics in Salt Lake City is a graphic illustration of this. It has pulled in $860m worth of sponsorship, more than twice the amount raised by the Atlanta Olympic games in 1996.

"Inside the industry, people have been saying for years that sponsorship has come of age," says Martin Cannon from the Institute of Sports Sponsorship.

UK spend on sponsorship deals
2001: 422m
2000: 401m

1992: 239m
1991: 238m

1981: 50m

Source: Institute of Sports Sponsorship
"Often it was more hope than reality, but now they can claim this in the current climate."

But what of the economic slowdown that has wiped out so many advertising revenues?

"There are two schools of thought," says Mr Cannon.

"Some say, 'Yes, there are problems, things are not happening,' while others say, 'No'."

Sponsorship problems

Observers in the "yes" camp could point to profit warnings issued during the last two weeks by two companies that sell on sponsorship rights - SportsWorld Media Group and Sports Resource Group.

Stadium for Commonwealth Games being built in Manchester
Manchester lost a telecom sponsor
There is also anecdotal evidence that marketers of sports events are finding it more difficult to pull in sponsors.

"If you were starting from scratch now, it would be very difficult," says David Leather, deputy chief executive and finance director for the Commonwealth Games 2002 in Manchester.

The Commonwealth Games, which started approaching companies four years ago, lost one of its official sponsors, Atlantic Telecom, late last year after it called in the administrators.

The organisers are still having "ongoing discussions" with other telecom companies to replace Atlantic, and Mr Leather admits that corporate spending cuts have made it more difficult to secure new sponsors.

End of a peak

And even in charmed world of football, which attracts the lion's share of sponsors in the UK, about six or seven premiership clubs are currently seeking shirt sponsors.

TV bosses are also warning that the high cost of televised football will fall.

The BBC's director general Greg Dyke said at the end of last year that "sports rights costs have hit their peak and that the massive escalation seen in the past decade is coming to an end".

The official statistics, however, seem to show that the market for sports sponsorship is still relatively buoyant.

Last year saw 422m worth of sponsorship deals in the UK, an increase of 5% on the year before.

During the boom, people got carried away

Karen Earl
Certainly, one advantage sponsorship has over its more mature sibling, advertising, is that its contracts have longer life cycles.

Typically, sponsorship deals tend to be between two and three years long, which prevent sponsors from pulling the plug too quickly.

Tech fall-out

But inevitably the demise of tech and telecom companies - often big sponsors of sport - has had an impact.

"After an initial flurry of enthusiasm, the tech companies were a blip rather than the huge boost everyone thought they would be," says Mr Cannon.

The telecom boom and the general over-valuation of companies also helped inflate the value of some sponsorship deals, says Ms Earl.

"During the boom, people got carried away," she adds, pointing to a gaping divide between the extortionate sponsorship deals for football and much cheaper rights for lower-ranked sports such as field hockey and swimming.

Coming of age?

Nevertheless, Ms Earl maintains that sponsorship will begin to press its advantage over advertising, particularly as more research is done into its effectiveness.

And she is not alone. Mr Cannon from the Institute of Sports Sponsorship says sponsorship is no longer an "add-on" to an advertising campaign like it was in the past.

"Sponsorship used to be the last building block, but now it is much more of an alternative to advertising."

Only 2002 will show whether their optimism is borne out in the numbers.

In the meantime, it is worth remembering that the only time sponsorship growth has stuttered in the last few years was during the recession of 1991-92.

David Leather of the Commonwealth Games 2002
"We've been fortunate in that the majority of our deals were already signed up before the economic downturn"
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