Tag Archives: sponsorship

Why We Said NO to Sochi

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As many of you may know, Performance Research founders Jed Pearsall and Bill Doyle have been consistently attending & analyzing the on-site activities at Olympic Games for over 30 years.  In fact, Jed’s first Olympic event was “Miracle on Ice”- the legendary USA vs. USSR hockey game held during the 1980 Lake Placid Olympic Winter Games, where Jed’s Mom bought the tickets from a sidewalk scalper for just $25 each. 

Since Lake Placid, Jed has attended 13 out of the last 15 Olympic Games (Winter & Summer), with Doyle attending eight of his own.  This bi-annual pilgrimage has been a mix of business and inspiration, allowing us to provide observations and insights to sponsors worldwide, while also being reminded of how lucky we are to work in such a fascinating industry.

However, starting with the controversial and antagonistic laws against gay rights propaganda passed by the Russian government, we both felt we could not, in clear conscience, attend these Sochi Games.

Now, following weeks of reports of possible terrorism, U.S. Department of State warnings, reports of the near certainty of computer hacking against any and all devices brought into the country, and most recently the U.S. Department of Homeland Security bulletins to airlines warning of the potential threat of explosive materials being contained in toothpaste tubes, we are convinced more than ever that we made the right choice.   

Apparently we are not alone–  just yesterday TMZ reported that AB-InBev is not hosting its traditional “Club Bud” party at the Olympics, suggesting that the threat of terrorism is just too large even for corporate America.

While we are disappointed to not attend the Games, we are proud of our integrity that drove the decision.  And, we will always question the rationale of the IOC (especially when we could have been headed to competing bid city Salzburg, Austria right now instead of staying away from Sochi).  So for this Olympic Winter Games, for the first time in nearly three decades, you will be reading Performance Research updates (now tweets) written from the viewpoint of our couch instead of from the bleachers.

See you in Brazil!

More Links:

http://www.cnn.com/2014/02/06/world/europe/russia-sochi-winter-olympics/

http://abcnews.go.com/blogs/headlines/2014/02/sochi-visitors-report-hotel-horrors-dangerous-conditions/

http://www.globalpost.com/dispatch/news/regions/europe/russia/140203/6-openly-gay-athletes-sochi-olympics-russia

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Quicken Loans and Warren Buffett Team Up for Billion-Dollar Hype Machine

March Madness

Quicken Loans and Warren Buffet hope to make a sponsorship splash during this year’s edition of March Madness. Despite their lack of official NCAA sponsorship, the two seem poised to do just that.

March Madness is about to get even wackier this year, but at what cost?

The annual NCAA Men’s Basketball tournament of champions attracted 23.4 million television viewers last year, says CBS Sports.  Each year millions of armchair point guards try their hand at predicting the outcome of the 64-team bracket in local office pools.  However, Quicken Loans and Warren Buffett hope to initiate much more than water cooler bragging rights this year with what could be considered the mother of all guerrilla marketing tactics.

Quicken Loans founder and NBA owner Dan Gilbert announced a $1 billion prize to any fan that correctly predicts the “perfect bracket” before the 2014 rendition of the NCAA tournament.  This prize is being insured by Buffett, the world’s fourth richest man, through one of his companies – Berkshire Hathaway.  Essentially, Quicken   Loans pays Berkshire Hathaway to cover the billion-dollar prize, should someone enter a perfect bracket in the contest.

While the odds are astronomically low, the buzz is deafeningly high.  The question we ponder is how a brand like Quicken Loans can effectively own this considerable  amount of the positive energy surrounding the NCAA Men’s Division I Basketball tournament without paying to be one of the organization’s corporate champions and partners.

While Quicken Loans has sponsored the Carrier Classic, an annual college basketball contest turned outdoor spectacle aboard a US Navy aircraft carrier, since 2011, this does not garner them rights to the NCAA Tournament.  With this announcement, president and marketing chief Jay Farner hopes they can earn an even larger place in the heart of college basketball fans.  But at what cost?

It’s tough to argue the virtuosity of Quicken’s marketing ploy.  The buzz generated by the incentive of a billion bucks should make their investment worthwhile, especially since they are paying pennies on the dollar for Berkshire Hathaway’s insurance policy.  In fact, Quicken could emerge as one of the biggest corporate victors come tournament time.

Each March, companies amp up marketing efforts around the NCAA tournament in an attempt to increase brand recognition and drive revenues.  Busiest among them are NCAA’s official Corporate Champions AT&T, Capital One and Coca-Cola, whose support helps fund 89 different championships and over 400,000 college student athletes nationwide.

Quicken Loans, on the other hand, is not an official NCAA corporate sponsor, thus their promotion isn’t benefiting anyone but themselves, along with a very unlikely new billionaire.

Performance Research studies tell us that modern fans are much more likely to favor a brand when that brand’s sponsorship of an event or campaign adds substantial value to the user-experience, regardless of its “official” status.  In other words, if a promotion can engage consumers on a personal level it becomes considerably more effective.  Thus this billion-dollar bracket contest offers the potential for huge returns for Quicken Loan.

Rather than cough up the dollars necessary to be dubbed an “official” sponsor, Quicken opted for this unconventional move.  However, they will be garnering serious exposure from an event without supporting the organization responsible for putting it on.  There are positive benefits to real people being bypassed by this agreement.

The Billion Dollar Bracket Challenge may ultimately be the best business decision for Quicken.  We’re just not sure that it is the appropriate one.

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International Corporate Partnership Just the First Step in This Man’s Plan to Take the NBA Global

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Vivek Ranadive has surrounded himself with BIG talent, including Shaq, to help him transform the Sacramento Kings into a global brand.

Photo – @James_HamCowbellKingdom.com

Rookie NBA owner Vivek Ranadive made a name for himself by revolutionizing Wall Street in the 1980s.  After his Kings announced their first ever international corporate sponsorship for the Sacramento Kings, Ranadive is well on his way to similar transcendence in the NBA, or as he likes to call it: NBA 3.0.

Last week, the Kings announced a partnership with Indian development company The Krrish Group, who recently finalized a multi-franchise agreement to operate Sacramento-native restaurant chain Jimboy’s Tacos in India.  Their sponsorship deal with the Kings will include Jimboy’s promotions during game broadcasts, inside Sleep Train Arena and on all digital platforms.

Ranadive, the first Indian-born majority owner of an NBA franchise, is convinced the greatest growth opportunities for the NBA brand lie abroad, particularly in India.

This partnership is indicative of his success in bringing globally minded companies into the NBA sponsorship fold.

Ranadive’s efforts to increase the Kings’ presence in India include multiple games broadcast in the country, as well as a Hindi-language version of the team’s website.  Deals such as the one with The Krrish Group can only expedite the growth of the Kings as an international brand.

Although this partnership is the first for the Kings with a company based outside the country, it is certainly not the last.  The Indian consumer market has experienced dramatic growth in recent years, a trend that is expected to continue.

“India is fertile ground,” says Sam Amick, who covers the NBA for USA Today. “A big part of what [Ranadive] wants to do fits the NBA’s agenda. It fits what they want to do.”

Ranadive and his team, one that includes future Hall of Famer Shaquille O’Neal, plan to use technology and data to construct a winning product on the court and to establish the Kings as a prominent global brand.  His ambition is to make basketball the premiere international sport of the 21st century.  Technology, according to Ranadive, will drive the success of the NBA abroad.  He plans to expand social networks, giving fans an opportunity to participate and identify with sports in ways that have not been done before.

He calls this philosophy NBA 3.0, a complete alteration of the fan experience, particularly in the developing world.

“When I look at the business of basketball, it’s more than basketball,” he says. “It’s really a social network. You can use technology to capture that network, expand it, engage it, and then, obviously, to monetize it.”

Look for other franchises to adopt similar methods of targeting around the world, presenting sponsorship opportunities for international companies in American professional sports that were never before viable.

Professional teams and leagues are always searching for new revenue streams.  Ranadive hopes to set the precedent for establishing relationships with consumers on a global scale.  Should the NBA 3.0 system of fan interaction succeed, it will serve as the model for breaking into emerging markets such as China and India.

In order to connect with international fans, teams will seek partnerships with international companies to bridge the cultural gap.  The Krrish Group aims to be the first of many to align with the international growth of American professional sports.  In the coming years, similar corporate sponsorships from companies in emerging markets will prove the catalyst to booming global fandom for progressive franchises like the Sacramento Kings.

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NASCAR seeks new partner for its B-level series

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Ricky Stenhouse Jr. will be sporting this new paint scheme powered by Nationwide for his 2014 Sprint Cup debut.

With Nationwide Insurance announcing that it will no longer continue its entitlement partnership with NASCAR’s B-level series, the nation’s top motorsports organization will have to find a new company that is willing to be the one of the major faces of a sport who’s interest has been steadily declining in recent years.

The decision by Nationwide to abandon its sponsorship wasn’t necessarily driven by poor performance. They have actually chosen to increase its overall investment in NASCAR sponsorships by increasing exposure on Sundays, where the fan base is about twice the size of its current Saturday series. Nationwide will be sponsoring up and coming Sprint Cup driver and two-time Nationwide champion Ricky Stenhouse Jr., continuing its TV ad campaigns featuring select Sprint Cup drivers, all while increasing its online media and good will efforts.

For Nationwide, this decision seems like a no-brainer. Several studies developed by Performance Research indicate that there are solid returns to be made from an increased commitment to NASCAR’s top series. Nationwide’s longstanding relationship with NASCAR and its fans acts as a testament to these findings. With that being said, who will be willing to step into Nationwide’s shoes when the sport has been surrounded by so much controversy lately?

One can’t deny the sheer amount of people that consider themselves NASCAR die hards. On average, the Nationwide Series has pulled in about 1.7 million viewers throughout the 2013 season. While these numbers are down from last season, 1.7 million viewers is still a great number to have on a weekly basis over a 10 month season. However, one has to be wary when you see the fact that NASCAR’s ratings have been on a steady decline since 2005, sinking to their lowest level in 10 years

Some consider this downturn in recent interest as a direct result of a 2011 rules change which restricts drivers to only earn points towards one series per season. This means the big time Sprint Cup names that typically draw in fans to the Nationwide Series are no longer a key part of the action each week. Given the one-two punch of a decline in ratings and fewer big name drivers, who knows how long it will take the series to gain traction with its fans again.

And what about the issue of integrity?  The recent allegation of race manipulation against the Michael Waltrip Racing team has seriously damaged the competitive spirit of the sport and may spell the end of MWR. NAPA Autoparts has already pulled their sponsorship, with more sponsors waiting until the dust settles at the end of the season to decide if they are willing to continue their efforts. This wasn’t the first time MWR has been caught cheating either… Anyone remember the fuel tampering scandal of 2007?

From the outside looking in, one has to wonder how much of this continues to go unnoticed. While the organizing authority has enforced strict penalties on the team involved in the latest scandal, nothing may be able to make up for the damage done to the public’s perception of the sport.

This news comes in light of NASCAR signing a multi-billion dollar TV contract with FOX and NBC. While these two recently established networks are more than happy to open its doors to so many racing fans, it begs the question, why have ESPN and TNT been so willing to give up one of the only sport that consistently competes with the NFL for viewers each week? Perhaps NASCAR’s fan base isn’t as stable as this new deal would suggest. With NASCAR’s ratings in decline, who could blame the two incumbents for not wanting to pay any additional rights fees in order to renew their contract?

Sports Business Daily released the terms and conditions for NASCAR’s new entitlement sponsorship, expecting the new sponsor to shell out around $30 million a year in rights fees, activation and media expenditures. At this price, NASCAR is guaranteeing unmatched fan loyalty. Our very own Jed Pearsall will attest to the influence a NASCAR title sponsorship will have on consumer behavior. In a previous study on NASCAR fans, he said, “NASCAR fans provide one of the highest levels of brand loyalty and sponsorship support of any one of the hundred or so sports and special events we’ve tested.” In any case, it would be safe to say that any prospective sponsors should carefully consider paying a premium to replace Nationwide as title sponsor of NASCAR’s B-level racing series.

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International Soccer Sponsorship Provides GM with a Global Reach

Big things have been happening across the pond as October marked the signing of the largest jersey manufacturing deal in history. Manchester United has reportedly signed with Nike for £300 million over the next five years, giving Nike the right to manufacture Manchester United game kits (kits are apparel worn by football players during games) until 2019. This historic deal shatters the previous record held by Spanish football club Real Madrid and sponsor adidas, worth £248 million over eight years.

Not only does Manchester United receive a significant cash infusion, which is likely to be used for signing more star players to their roster, but also included in the contract is the right to sell the jerseys. Sales could generate another £15 million a year, pushing the potential worth of this contract close to £375 million.

The latest partnership with Nike isn’t the only record-breaking deal England’s most commercially successful football club struck this year. This past May, Manchester United worked a deal with Chevrolet for the American car company to become the principal sponsor of the team starting in the 2014/2015 season, replacing insurance company AON. The deal is supposed to run until 2021 and will be worth $559 million.

This deal doesn’t mean the end of AON’s involvement with the club. AON has partnered with Manchester United as the official sponsor of the team’s training facility and practice kits in a $240 million, 8-year deal. They will also assist the club with player analysis and risk management practices. While they were unable to secure the principal sponsorship again, AON’s reinvestment in the Manchester United brand speaks volumes about the marketing power of the world’s largest football club.

The partnership with Manchester United sponsorship solidifies GM’s position in the English Premier League. Chevy has also worked a deal as the official automotive sponsor of Liverpool. The deal with Manchester United did not come without controversy for the American auto brand. GM’s Global Chief Marketing Officer, Joel Ewanick, resigned the day before the Manchester United deal was announced. It has been said that the deal with Manchester United was the breaking point for GM, which asked Ewanick to resign on his own terms.

While there is much doubt in the GM camp regarding the value this sponsorship will bring, they cannot question the global reach their new partnership will extend to them. With over 650 million fans in nearly every country on the planet, Manchester United’s brand is recognized by millions of people all over the world. Receiving that kind of exposure will certainly bring Chevrolet a new level of awareness globally, especially among the 325 million Manchester United fans in Asia alone. Pair those numbers with the current trends in the auto industry outlined by the current KPMG report, and the Manchester United / Chevy partnership seems like a match made in heaven.

It should come as no surprise that Asia is slated to become the world’s next big market for autos. As rapidly developing countries such as China and India begin to witness an increase in the purchasing power for their ever growing middle class, the demand for quality, name-brand automobiles should provide the auto industry with plenty incentive to shift the focus of their global supply chain to Asia. GM has already positioned itself to take advantage of this growth by establishing an Asia-Pacific headquarters in Shanghai, as well as developing several manufacturing plants throughout China, Russia, and India. Three countries that, when grouped together, are expected to surpass the US in automotive sales in the next 5 years.

These moves mark a significant shift in the corporate philosophy of GM, showing that in order to maintain their expansive share in the automotive market, a serious effort needs to be made to get the attention of the people living in developing areas. Although the team at GM recognizes that there is foreseeable future in the Asia-Pacific region, bringing awareness to these people will come at a cost for the American auto giant.

In order to fund their global football initiative, GM has been forced to cut spending on domestic advertising and sponsorships. Last year it was forced to eliminate advertising on Facebook and even cut their ad in the Super Bowl. While their new sponsorship with Man U and the One World Futbol Project paints Chevy in a positive light to footballers everywhere, GM could appear to be neglecting the needs of its own city.

As we mentioned in a previous post, Detroit is desperately seeking a corporate sponsor for its new hockey stadium. However, with a price tag of $650 million, a new stadium for only the US’ 3rd most popular sport pales in comparison with the Manchester United deal. Although soccer fans around the globe will begin to recognize Chevy, this iconic symbol of American ingenuity may risk losing the support of the city that fondly refers to itself as Hockeytown, and built the company up to where it is today.

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From RB to IPO: Fantex Offers Fans Chance to Own Shares of NFL’s Arian Foster

Arian Foster is set to become the first professional athlete to be publicly traded on a Fantex platform that valuates the its high-profile clients as a ‘brand.’

Fantasy sports have long provided a platform for fans to become more connected to their favorite professional athletes.  Monday Morning Quarterbacks obsess over player statistics and weekly matchups all in an effort to win fantasy games against their friends.  However, thanks to Fantex Brokerage Sevices, fans will soon be able to get even closer to their favorite athletes.

Arian Foster is set to become the first professional athlete to be publicly traded on a Fantex platform that valuates the its high-profile clients as a ‘brand.’ The bay area company is finalizing its Initial Public Offering (IPO) to raise $10 million for a 20% return on the running back’s future earnings.  Fantex is offering 1.06 million shares at $10 a share to the bidding public.

Investors will be able to buy and sell shares of “Fantax Series Arian Foster Convertible Tracking Stock,” exclusively online through the Fantex platform.  The company has also reached an agreement with San Francisco 49ers tight end Vernon Davis to receive 10% of his future earnings in exchange for $4 million up–front.  If these ventures are successful, Fantex plans to secure athletes in other sports, as well as celebrity entertainers and musicians.

More: Fantex Arian Foster Brand Launch Video 

This move leaves many wondering: Why would Arian Foster sell an interest of his future earnings during the prime of his career?  Essentially, Foster is securing an insurance policy on his football prowess.  Currently in his fifth year in the league, he has already outlived the average 3.5-year shelf life of an NFL player.  Foster is hedging his bets as he approaches his 30’s, and presumably, a decline in production.

In the case of Arian Foster, this offering gives all fans, rich and poor, an opportunity to own a piece of their favorite player.  The idea seems more of a novelty than an economic opportunity.  However, if other players express interest in similar insurance policies, corporations could step forward offering a lump sum in exchange for an interest of their earning potential.  And unlike Fantex, they could proceed without selling shares to the general public.

Endorsement deals have served as the mutually beneficial vehicle connecting brands and players in the past.  Return on investment is certainly tied closely to on-field performance.  Under Armour, for example, is set to increase its revenue-generating abilities with success of its athletes such as Cam Newton and Foster.  The results, however, are not as concrete.  Under the parameters of the Fantex platform, athletes experience the security of cash up front, while investors enter a high-risk, high-reward scenario with the potential for massive dividends.

A successful Arian Foster stock market could leave traditional sponsorships and endorsement deals in the rear view mirror.  Instead, companies could begin to seek investments in athletes, rather than sponsorship of them.

Popular targets would include athletes with high earning potential during the dawn of their careers.  Imagine if Company X agreed to invest $3 million in Tom Brady after he was selected in the 6th round of the 2000 NFL Draft in exchange for, say 15% of his future earnings.  13 years and three Super Bowl Championships later, that company would be experiencing stratospheric profits.

However, would it be ethical for that company to capitalize on Mr. Brady’s hard work and good fortune?  Should he be penalized for insuring his football career before it took off?

By offering shares of the Arian Foster brand, Fantex raises some unique moral and ethical questions.  The success or failure of this Arian Foster stock will have a profound impact on the sponsorship industry.  With its groundbreaking Arian Foster IPO, Fantex may have opened the floodgates for forthcoming changes in sponsorship deals.

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When Can Stadium Naming Rights Turn a Corporation into a Hero?

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Corporate America: These fans could be cheering just as mightily for your brand soon enough.

Despite the crippling economic situation in Detroit, it seems like it is “all systems go” for the construction of a new home for the Red Wings in the city affectionately known as “Hockeytown.”

Although the City of Detroit filed for Chapter 9 bankruptcy in July in the largest municipal bankruptcy filing in the United States, a state board declared a unanimous vote the same week approving plans for a new downtown hockey arena.  The $650 million project will be funded, in part, with an estimated $285 million in tax dollars – even though the city is in an estimated $18-$20 billion in debt.

Detroit has become a place where police, on average, take an hour to respond to calls for help and 40% of streetlights are powered off in an attempt to save money.  Vacant buildings and empty schools litter the landscape of the former industrial powerhouse.  On the face of it, a new stadium dependent on public funding just doesn’t appear to be an appropriate allocation of property taxes given the dire situation of Detroit city services.

Advocates for its construction, however, view the 18,000-seat arena as the centerpiece in a development plan to inject life into the 45-block area linking midtown and downtown Detroit.  Michigan Governor Rick Snyder hopes the proposed retail, office, and parking space around the arena will create a better long-term environment for the city.

Completion of the area is anticipated for 2017, but to this point, there has been no public mention of any corporations vying for naming rights of the Red Wings’ new home.  The proposed arena would be home to one of the most storied franchises in all of professional sports and would supplant the Palace at Auburn Hills as the premiere indoor concert venue in Metro Detroit.  There is a lot riding on this venue, and it has the potential to breed a very positive influence on a very depressed city.  According to our research, this is the perfect situation for big business to find sponsorship success by playing the hero, rather than the exploiter.

In the first independent study of its kind, Performance Research revealed the critical “Naming Rights & Naming Wrongs” of stadium sponsorship.  When do companies get it right, you ask?  In situations such as this where there is a strong need for a new venue, and there is a deep appreciation for corporate contributions that help make the new stadium a reality, that’s when!

Some pertinent highlights from the study: Nearly 40% of respondents opposed the idea of changing the titles of existing stadiums and arenas to accommodate corporate naming rights, regardless of the reasoning.  However, companies that struck deals with new and developing arenas experienced a positive impact on public opinion with 6 out of 10 fans. Local supporters embraced named stadiums that were new because they often felt they benefitted personally as a result.  ‘Lower taxes,’ ‘more sports opportunities,’ and ‘lower ticket prices’ were the most appreciated benefits cited by fans.

Although hockey is not discussed, this intriguing USA Today infographic highlights the lucrative nature of stadium naming rights today.  Joe Louis Arena, Detroit’s current house of hockey, is one of only three in the NHL without a corporate sponsor.  Our prediction?  Look for the new Detroit arena to buck this trend and shop its naming rights this time around.  And, if corporate America is smart, they will surely listen.

If a corporate sponsor emerges to help facilitate Detroit’s new downtown developments, the results would be tremendous for everyone involved.  A city in desperate need of salvation would see government funding allocated where it is needed most.  The new venue and surrounding infrastructure would provide a well-timed ray of economic hope for Detroit. And its residents, as well as those outside of the area, will recognize that sponsor’s commitment in making it all happen with substantial PR gains in the process.

That is how to become a corporate hero in one easy step.  What’s not to like?

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LGBT Community Calls for Boycott of Olympic Sponsors

ImageRussian president, Vladimir Putin has led a series of harsh political actions against homosexuals over the past month, including passing one resolution that bans propaganda of all non-traditional sexual relations.  With Sochi set to host the 2014 Winter Olympic Games, worldwide protest of this reform continues to grow leaving many calling for the International Olympic Committee to demand retraction of Russia’s laws under the threat of boycott.

The IOC has promised that it would work to ensure members of the LGBT community, athletes and spectators alike, safe participation in the games without experiencing any discrimination.  In a recent statement, the IOC claims to have received “assurances from the highest level” of Russian government that the anti-gay propaganda law will not affect anyone participating in or attending the Games.  Despite these assurances, many remain skeptical.  Would you feel safe?

Human Rights Campaign President Chad Griffin recently challenged NBC Universal, which paid $4 billion for exclusive rights of Olympic coverage, to fully disclose Russia’s human rights violations during its broadcasts.  NBC’s response left much to be desired, as they agreed to “provide coverage of Russia’s anti-gay laws IF the controversial measures surface as an issue during the upcoming Winter Olympics.”

Social issues of this magnitude are typically not on the minds of corporate sponsors when they are inking multi-million dollar contracts.  Their concern lies in putting together innovative and effective campaigns that will maximize their ROI.  With the Sochi Games fast approaching, however, opposition to Putin’s war on the gay community is gaining steam.

In addition to the rampant and growing calls on Facebook for boycotting anything Russian, the latest target on social media is aimed squarely at Olympic sponsors.  The controversy will challenge companies like AT&T, Coca-Cola, General Motors, McDonald’s, Panasonic, Samsung, VISA, and Procter & Gamble that have made huge commitments to sponsor all that is positive about the Olympic movement.  However, with the unanticipated turmoil in Russia, they run the risk of being associated with the event for all the wrong reasons.  The controversial nature of this issue leaves them vulnerable to offending the LGBT community to the point where they may lose the group as consumers for years to come.

Coca-Cola, sponsor of the Sochi 2014 Olympic Torch Relay, has a longstanding history of support for LGBT events and causes.  Coke has repeatedly stood behind their statement that they do not condone intolerance of any kind.  Despite this, it has refused to weigh in on the controversy, claiming that it “does not take positions on political matters unrelated to our business.”

Olympic sponsors will continue to feel immense pressure to make a statement against Russia’s policies as the February Opening Ceremony nears.  The Olympics are almost always accompanied with some form of controversy.  This includes, most recently, protests against Beijing’s 2008 Olympic Summer Games due to China’s human rights track record.  However, given the recent passion surrounding LGBT equality and the proliferation of social media since 2008 the potential for an issue to directly impact official sponsors in this capacity is unprecedented.

Regardless of how this plays out, the bigger question for sponsors will remain.  What level of responsibility should sponsors of the Olympics bear?  Where do you draw the line between sports and politics?   Is there truly an effective reaction for sponsors to take that will satisfy anyone in situations like this?

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Rough Sailing for America’s Cup and Sponsor Louis Vuitton

ImageTwo months before competing catamarans are scheduled to set sail in the San Francisco Bay for the 34th defense of America’s Cup, the event seems to be in deep water.

Oracle Team USA’s Cup title defense, following a 2010 victory that was the first for an American team in nearly 20 years, was pegged as a groundbreaking affair that would generate an estimated $1.4 billion in the host the city of San Francisco.  The opening weekend of the Louis Vuitton Cup, however, shows little promise for the 2013 rendition of sailing’s finest venture.

The Louis Vuitton Cup is a round-robin tournament featuring global competitors vying for the right to sail against the American team for the America’s Cup crown.  Since 1980, between 7 and 13 teams have competed in this preliminary round.  This year’s version, however, has only produced 3 competitors: Italy’s Luna Rossa, Sweden’s Artemis Racing and Emirates Team New Zealand.  Countries such as France and Spain pulled out of the races, most citing lack of funding as the primary cause.

Following a boycott by the Italian team and an Artemis shipwreck, Emirates Team New Zealand raced to the finish in deserted waters twice over the weekend, earning the first two points of the Cup sailing unopposed.  Safe to say, L-V did not fork over $10 million in sponsorship fees for New Zealand to hold open practices on the bay.

After a rough start to the competition, the stylish French retailer and title sponsor is having second thoughts about its initial investment.  Hopefully they kept their receipt, because L-V is reportedly looking to receive a $3 million refund due to the poor international showing.  Contractually, they are eligible to receive a $1 million refund for every team below six in the tournament.  More teams could be on the way out too, leading to an even greater return to Louis Vuitton.

Sponsorship refunds are relatively unheard of, but this year’s America’s Cup may set the precedent for future sponsorship contracts.  Frankly, nobody expected the event to be such an epic flop.  If an event with as much history as America’s Cup can falter, so can others.  Moving forward, the turmoil in the San Francisco Bay will serve as a cautionary tale for prospective sponsors across the board.

Louis Vuitton has been a Cup sponsor for 30 years.  Prior to its sponsorship, the teams competing in the preliminary rounds were forced to divide the cost of the event among themselves.  Title sponsorship of events rarely leads to such a profound direct impact on the competition as in this case.  Louis Vuitton has been a driving force behind the Cup for decades, but their commitment seems to be wavering.  Maybe their long-term presence with the event led America’s Cup to feel comfortable enough to include contractual provisions allowing them to get some of the money they fronted returned to them.  But if they are able to run away from an unsuccessful sponsorship deal with millions of dollars stuffed back into their designer handbags, other companies may look to follow suit.

It remains to be seen if the Louis Vuitton Cup will prove to be a strange gem in sponsorship history or a frontiersman for protected deals in the future.  Either way, a quiet storm is brewing in the city by the bay.

What is your take on the concept of sponsorship refunds? Comment below and give us your thoughts!

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Lack of Funding for US Speedskating Offers Huge Sponsorship Opportunity

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A recent USA today article highlights the plight of Olympic aspirants that struggle just to make ends meet.  Olympic short-track speedskating hopeful Emily Scott’s story is highlighted.  She has seen her monthly direct athlete stipend cut by nearly 70%, forcing her to take on the third-shift at a surgical supply factory and apply for food stamps.

Scott’s predicament is not an isolated one, however, as many other Olympic hopefuls are forced to live paycheck to paycheck.  Outside of a few skiers and snowboarders with lucrative sponsorship deals, other winter athletes endure the same kind of financial struggle as Scott.  The US Olympic Committee can only do so much for its athletes, and naturally allocates funding to the athletes with the greatest chance of standing atop the podium draped in gold.  Other athletes are left to fend for themselves as their direct stipends continue to decrease. 

The limited funding the USOC distributes to the lower-profile winter sports provides an ideal opportunity for resourceful sponsorship.  Funding sports like speedskating or bobsledding offer potential sponsors a cheaper method of becoming officially affiliated with the Winter Olympics that can do wonders for their public image.

Prior research conducted by Performance Research consistently suggests that companies who fund struggling Olympic teams hit emotional trigger points with consumers that make the venture a worthwhile one.  Olympics-related sponsorship is particularly good at generating good will, and companies who fill voids such as this one are viewed as altruistic and patriotic leaders in their field. 

US Speedskating currently boasts a 15-member sponsorship roster, but there remains plenty of room for any corporation looking to become an official Olympic sponsor on the cheap.  The domestic speedskating governing body has seen the money it receives from the USOC for direct athlete support cut by about $15,000 from last year.  This is particularly surprising because speedskating is historically USA’s most successful winter sport.  Not only will forthcoming sponsors be perceived as charitable, but their brand will also be associated with athletic success of the highest order.    

Before Tuesday, Emily Scott has raised $195 on her crowdfunding site, gofundme.com.  Since the USA Today story broke, she has raised $35,498 and counting.  This is a testament to just how impactful a new corporate sponsor can be not only to US athletes, but also to consumers across the country.  If people are willing to empty their pockets for an Olympic athlete in need, imagine their perception of a company that would do the same.

It is astonishing that additional sponsorship of US Speedskating is yet to emerge.   To any companies thinking about pulling the trigger on this type of deal: please fire away!  Opportunities like this to generate progressive public sentiment are hard to come by.  Our research suggests that you will not regret your decision.

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