Page last updated at 16:21 GMT, Tuesday, 4 November 2008

Sport aims to win during the downturn

By Bill Wilson
Business reporter, BBC News

In the current economic downturn, sport - like any other industry - is having to fight hard to retain not only the consumer pound, euro or dollar, but also a continuous supply of cash from other sources, principally sponsorship.

Lewis Hamilton
Lewis Hamilton could bring more sponsorship revenue into sport

But in a sign of the times, Saracens rugby union club has recently lost one of its sponsors, a financial services firm, and at the other end of the scale Manchester United has seen its shirt sponsor AIG nationalised by the US government.

Yet there is optimism that sport can weather the worst of the downturn because of the escapism it offers to its followers during this bleak period.

"The one thing about sport in a recession is that it touches the heart," says Sir Keith Mills, the driving force behind London's winning bid for the 2012 Olympics.

"Lewis Hamilton did touch the heart and soul of a nation in a way no other marketing can."

Changed world

Sir Keith was the driving force behind London securing the Olympic Games as chief executive of the London 2012 bid company and is deputy chairman of the Games' organising committee Locog.

As a company entering a recession we have got to ask if sponsorship of sport is necessary as part of a consumer proposition
Martin Broughton, Chairman, British Airways

He is also a non-executive director of Tottenham Hotspur, and is now looking to lead a new British Americas Cup yachting team called Team Origin.

Speaking to the BBC at the FT Sport Industry Summit in London he said: "The world has changed - no doubt about it.

"For those of us involved in sport, certainly in the Americas Cup, Olympics and football, we have to recognise we have to reduce our own costs and make our propositions more attractive to companies that want to get involved."

Indeed, with the credit crunch and financial downturn, Martin Broughton, chairman of British Airways and president of the employers' organisation the CBI, admits that if BA - a 2012 Games sponsor - was brought the proposition today then there may have been a different outcome.

Mr Broughton adds: "As a company entering a recession we have got to ask if sponsorship of sport is necessary as part of a consumer proposition. If it is not then companies have to ask why they are doing it.

"For firms it is a lot about emotional can help the connection to the consumer."

Careful planning

However Karen Earl, chair of the European Sponsorship Association, warns that the days of firms rushing willy-nilly into sponsorship deals on a chief executive's whim have long gone.

In sport generally there have been a lot of heads in the sand. In the current climate that has got to change
Sir Keith Mills, 2012 Olympic Games organising committee

"You really need to sit down now with your financial people, and not just hope for the best," she says.

"There will be less-freely available cash from the point of sponsorship spending."

In this regard the 2012 Olympic Games team were fortunate in starting in their quest for sponsors almost as soon as London won the event in 2005.

"In terms of revenues we were fortunate we started the process early," admits Sir Keith Mills.

"Over two-thirds of our sponsorship budgets have been signed - we have fantastic firms signed up."

He says he is confident of filling the remaining tier two and three sponsor slots - pointing out that potential sponsors would be able to spread their payments across their marketing budgets in 2010, 2011, and 2012.

Many of the later sponsors to come will also provide "value in kind" - service industries such as catering and security.

However, as Martin Broughton of BA observes: "The Olympics are going to attract large parts of the funds that are available. That is going to hit sports that might do well in other times."

Meanwhile smaller clubs like Saracens and lower-profile sports are being hit by the credit crunch and are now seeking new income.

'Trophy assets'

Yet one sport which does not look like it will suffer is top-flight football in England, despite growing concerns about the level of debt at many clubs.

And despite these generally cash-strapped times, according to former Football League chairman Keith Harris, there will always be foreign tycoons keen to acquire Premier League - or even Championship - clubs, as "trophy assets".

Newcastle owner Mike Ashley
Newcastle United owner Mike Ashley is eyeing a sale of the Magpies

Keith Harris, chairman of stockbroker and investment bank Seymour Pierce, is employed as a roving Mr Fix-It by football clubs.

He is currently looking to sell Newcastle United on behalf of owner Mike Ashley, and has also been enrolled by Everton FC to help them secure new funding.

And, as a gauge of the continued strength and attraction of the Premier League, he is confident that one of two buyers who have expressed strong interest in buying Newcastle will be in place early in 2009.

"We have had several expressions of interest; two very serious contenders to buy it," Mr Harris says.

And while the Olympics and Premier League football will always be in demand, mid-ranking sports and companies have to figure out how they will weather the current storms.

"In sport generally there have been a lot of heads in the sand," warns Sir Keith Mills. "In the current climate that has got to change."

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