We are pleased to serve as the primary source of sponsorship information and analysis for news media around the globe. Our current annoucements and news releases are viewable through the links below.

U.S. automakers cut sports ad budgets; Foreign firms play bigger role

The Washington Times, October 19, 2008

By Tim Lemke

Struggling U.S. automakers are slashing advertising budgets, costing major sports leagues and their broadcasters tens of millions of dollars in revenue and support - and foreign automakers increasingly are stepping in to fill the void.

American car manufacturers General Motors, Ford and Chrysler have long been big backers of the National Football League, Major League Baseball and other leagues, striking exclusive sponsorship deals and spending more than a third of their television advertising budgets on sports-related commercials.

That spending has dipped significantly over the past year and many experts predict an even steeper decline ahead, leaving the sports world scrambling to find new money.

Spending by U.S. automakers on television commercials during sporting events has dropped more than $100 million, or 10 percent, according to statistics from TNS Media Research.

Television ad spending by most foreign automakers, meanwhile, has increased at asimilar rate, and the National Hockey League, National Basketball Association, the United States Golf Association and other sports entities have struck new partnerships with non-U.S. firms as Toyota, Honda and Hyundai/Kia, among others.

"So much of it is tied to the bottom line and how well companies are doing," said William Chipps, senior editor of the IEG Sponsorship Report. "You look at some of these numbers coming out of Detroit, and the answer's right there."

With tightening credit markets and a dragging economy, October is expected to be one of the slowest months in more than 25 years for U.S. auto sales, with the industry seeing a 13 percent drop, according to J.D. Power and Associates.

Foreign automakers also have experienced sales declines, but these decreases have not been as severe as those suffered by U.S. counterparts, and the foreign manufacturers are more healthy financially overall, analysts said.

Shares of GM and Ford weeks along with the rest of the stock market. GM closed Friday at $6.43, down from more than $23 a month ago. Ford closed at $2.43, down more than 50 percent from the beginning of October. The struggles of GM and privately held Chrysler have led both firms to discuss a merger.

Sports leagues have found their support from U.S. automakers dwindling for more than a year. Ford, for instance, has dropped several sponsorships on golf's PGA Tour, including the Senior Players Championship. GM's Chevrolet brand is dropping sponsorships at as many as a dozen NASCAR tracks next year. And Dodge was recently replaced by Honda as the official car of the NHL.

TNS Media Research reported that total television ad spending from the Big 3 manufacturers was $2.53 billion between July 2007 and June 2008, down more than $446 million from the same period a year earlier. During that same period, television advertising tied specifically to sporting events fell from just more than $1 billion to $896 million.

Toyota, meanwhile, increased its sports-related television advertising from $254 million to $264 million over the last year, and Volkswagen boosted spending from $35 million to $53 million. Mitsubishi, Mazda, Hyundai/Kia, Subaru, BMW and Porsche also increased spending on sports-related television commercials.

The NBA in January struck an exclusive deal with Kia, a South Korean automaker. Lexus, the luxury division of Japanese manufacturer Toyota, said it would be the official car of the USGA, and Major League Soccer struck an exclusive deal with German automaker Volkswagen.

The figures of U.S. automakers' ad sales show, however, that sports-related advertising has not dropped off as rapidly as ad spending overall. League executives and industry analysts said sports still offers advertisers a good return on investment because of the attractive demographics of fans.

"We've seen no change this year," said John Brody, senior vice president of sales and corporate marketing for Major League Baseball, which has an exclusive multiyear deal with Chevrolet. "They've been aggressive in their activation, both with us and our broadcasters.

"In some ways, sports is an opportunity to minimize risk. It's a tried and true media buy. We believe baseball is comfort food."

Nevertheless, the drop in television advertising represents a loss of more than $100 million in revenue for sports broadcasters including ESPN, Fox Sports, CBS and NBC. A steeper drop is expected in the final months of the year as auto sales continue to decline.

A report last month by investment group Sanford C. Bernstein & Co. said U.S. automakers could cut overall ad spending from $12 billion to $9 billion, down from a high of $24 billion in 2004.

A spokeswoman for ESPN declined to comment, citing a quiet period between earnings announcements and confidentiality agreements with advertisers. A Fox Sports spokesman also declined to comment, and CBS and NBC did not respond to questions. The Big 3 automakers also declined to comment.

The drop in ad spending comes as major sports leagues brace themselves for an economic downturn. The NBA last week announced it was laying off 80 workers, or 9 percent of its domestic work force, as it faced lower ticket sales and sponsorship revenue. NASCAR and the PGA Tour have reported smaller crowds at events, and the NFL said recently it was facing higher costs and revenue pressure.

"I think the one thing people are seeing is that sponsorship dollars are getting much more scrutiny from those who spend them," NHL commissioner Gary Bettman said last week. "And that's a product of the economy."

Industry sources said some sports executives have quietly been unhappy with the amount of money U.S. automakers are spending to activate and promote these partnerships and that foreign manufacturers, despite sales declines of their own, seem like a safer bet.

Despite the advertising cuts, GM and Ford still rank Nos. 1 and 2 in total sports-related television advertising in America, and Chrysler ranks fourth. Chevrolet has used baseball's postseason to advertise its new "Traverse" crossover model on Fox, while also sponsoring several playoff awards. The GMC Sierra is the official truck of the NFL and sponsors an award for the league's best defensive player each week.

"When times are tough, you have to be there for your partners," Mr. Brody said. "We're paying very close attention, but we've found that General Motors looks at us as a solid platform for selling their products."