Courtesy of Joesph P. at River Ave. Blues is everything you ever wanted to know about the cratering of corporate sponsorships but were afraid to ask:
The risk for the sports industry and those who follow it is that a collapse in sports sponsorships could cause a downward spiral similar to the housing and credit bubbles. For example, television broadcasters who rely heavily on advertising may be forced to stop bidding so aggressively for the rights to broadcast sporting events. These broadcast fees, together with sponsorships, make up a significant source of revenue for sports teams and leagues, so a substantial decline in these amounts would adversely affect the industry. Team owners are also feeling the squeeze personally, as the financial crisis has put a dent in their portfolios, and in the case of the owner of the New York Mets, Fred Wilpon, who invested a large portion of his wealth with his childhood friend, Bernard Madoff, such investments have been lost. In addition, media groups such as the Tribune Company, owner of the Chicago Cubs, have recently filed for bankruptcy. Teams that are unable to offer the highest salaries will be unable to attract the best players and without the best players, teams will have difficulty winning. Losing teams will have a more difficult time attracting sponsors. It is a vicious cycle that is bound to have a lasting effect on how the sports industry has been operating during this sports bubble, which could be the next bubble to burst.
The kicker to all of this — and the thing that pro sports and big media should really worry about — is that an economic rebound is no guarantee of a sponsorship rebound. Why? Well, I’m no expert, but I have always suspected that such sponsorships weren’t worth the money spent on them. I feel this way about most advertising, really, and suspect that if the numbers were really scrutinized, it would become apparent to most would-be advertisers. Such scrutiny hasn’t come, however, because business has been more or less good and well, such sponsorships have been around so long that they are part of the corporate culture with executives just assuming that they are valuable.