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Recession slams brakes on U.S. sponsorships - IEG

Reuters, January 26, 2009

By Ben Klayman

CHICAGO, Jan 26 (Reuters) - The U.S. recession will lead North American companies to slam the breaks on sponsorship spending in 2009, especially for sports, leading to the smallest growth rate since tracking firm IEG began studying such data.

North American companies are expected to increase spending on sports, arts, cause and entertainment marketing by just 2.2 percent to $16.97 billion, according to Chicago-based IEG, which is owned by advertising giant WPP Plc. Last year, spending rose 11.4 percent to $16.61 billion.

In a report obtained by Reuters on Monday, IEG said that no other downturn in the past 20 years has had such a negative impact on the outlook for industry spending, adding that spending even rose 3.7 percent in 2002 after the Sept. 11 attacks on the World Trade Center and the Pentagon.

"It is precisely the uncertainty and instability of the current situation that has sponsors holding tighter to purse strings than ever before, not knowing whether the economy is near bottom or whether tight credit, lackluster consumer spending and the threat of more corporate collapses will extend this recession through and beyond next year," IEG said in its report.

"Sponsorship professionals can take some comfort in the fact IEG is projecting even a small increase," it added.

In comparison, overall media spending is expected to fall by 3 to 5 percent this year, according to estimates by various advertising industry executives.

Sports will feel the biggest hit, IEG said.

"Conventional wisdom ... up until now has viewed sports deals as the safe bets to turn to and kept investment in sports sponsorships steadily growing at a rapid pace," IEG said. "Such thinking apparently has been trumped at many companies by the more basic need to save money."


Major sports marketers from General Motors Corp to FedEx Corp and Deutsche Post AG's DHL unit have cut spending on such sponsorships, as well as advertising, due to the recession.

Last year, the sports industry's sponsorship spending growth rate was nearly 15 percent -- almost double the next-closest category -- but it is projected to have the smallest increase in 2009, IEG said. Sports makes up 68 percent of the projected 2009 total, down one percentage point from the previous year.

Sports sponsorship spending in 2009 is expected to hit $11.61 billion, up 1.8 percent from last year; entertainment tours and attractions was forecast at $1.66 billion, up 1.9 percent; causes is seen rising $1.57 billion, up 3.1 percent.

Spending on categories such as the arts, festivals, and associations and membership organizations was seen up in a range of 2.5 to 4.4 percent.

The cutbacks will not be quite as great internationally despite the absence of the Beijing Olympic Games, which attracted unprecedented levels of spending in 2008, IEG said.

Including North America, international sponsorship spending in 2009 is expected to rise 3.9 percent to $44.8 billion. Excluding the United States and Canada, the projected growth rate is 4.9 percent to $27.8 billion.

Companies in Europe, Asia Pacific, and Central and South America are expected to report spending increases of 4.3 percent, 7.4 percent and 2.9 percent, respectively, according to IEG. (Reporting by Ben Klayman, editing by Matthew Lewis)