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North American Sponsorship Growth ‘To Slow In Year Full of Contradictions’

sportcal.com, January 11, 2012

By Simon Ward

Growth in spending on sponsorship by North American companies is set to decline this year because of the challenging economic climate and uncertainty over the near future, but this will not stop some rights-holders from prospering, according to IEG, the US research and consulting group.

The Chicago-based IEG, which is a unit of advertising giant WPP’s Group M, claimed in its year-end industry review that sponsorship expenditure increased by 5.5 per cent, below the projected rise of 5.9 per cent, to $18.11 billion in 2011.

It said that corporate marketers are reluctant to make major investments as they await the outcome of solutions to national debt problems and this year’s US presidential election and, as a result, North American spend will grow by only 4.1 per cent to $18.87 billion in 2012.

Sports sponsorship was the fastest-growing sector in 2011, enjoying 6.2-per-cent growth, although this is predicted to fall to 4.6 per cent this year. Its share of the North American sponsorship market is expected to increase by one percentage point to 69 per cent.

Despite the projected fall in growth across the industry, Jim Andrews, the senior vice president of IEG, argued that organizations able to offer attractive opportunities to potential sponsors will reap the benefits.

He said: “Marketplace volatility will make 2012 a very interesting year for sponsorship – one likely to be full of contradictions. Some rights-holders will earn record revenues while others struggle to maintain status quo.”

Andrews added: “Although economic conditions are a contributing factor, individual properties will still live or die based on their ability to deliver the marketing and business solutions sponsors need.”

It is claimed that, as is customary at a time of economic uncertainty, established categories of sports and entertainment enjoyed the most growth in 2011 and this is expected to continue this year, "as risk-averse sponsors look for packages that bundle media exposure and offer activation platforms including retail, digital and on-site marketing."

IEG asserted that the global sponsorship market is performing closer to expectations than North America alone, with spending having gone up by 5.1 per cent, only slightly below the projection of 5.2 per cent, to $48.6 billion in 2011 as emerging markets such as Brazil and India compensated for belt-tightening in Europe.

The company forecast that worldwide spending will rise by 4.9 per cent to $51 billion in 2012.

IEG calculated that outside North America, spending on sports sponsorship totaled $30.5 billion last year and that this will grow by 5.2 per cent to $32.1 billion this year.

Even allowing for late spending around the Olympic Games, to be held in London in late July and early August, it is claimed that sponsorship spending by European sponsors will increase by only 4.4 per cent in 2012, down from 4.7 per cent in 2011.

The main growth region is seen as Asia Pacific, which, boosted by the “vibrant” Indian sponsorship market and continued activity in China, will experience a 6.3-per-cent increase in spending this year, according to IEG.

The company also foresees “healthy growth” in Central and South America driven by Brazil as it prepares to host soccer’s 2014 World Cup and the 2016 Rio Olympics.