Sponsorship Spending Struggles to Recover
In 2010, things are looking up for sponsorships.
Sponsorship spending by North American companies is expected to grow 3.4% to $17.08 billion, according to the IEG Sponsorship Report.
But as the numbers came in from 2009, for the first time, these companies spent less on sponsorships with expenditures declining 0.6% to $16.51 billion, compared to $16.6 billion in 2008.
“Those unprecedented numbers reflect a marketplace that never recovered from the economy’s free fall towards the end of ’08,” William Chipps, IEG SR’s senior editor, said.
And for some companies that are inexperienced in using sponsorships and never really had a strategy behind it, see it as an expendable item and have cut those sponsorships,” he said.
In addition, two industries that play a large role in sponsorship spending—automotive and financial—have drastically cut spending in the wake of government bailouts and other financial problems.
“These industries have pulled back after haven taken major hits over last couple of years,” Chipps said. “And they have historically been two of the most active sponsorship categories.”
Sports, the largest sponsorship category, saw spending decline 1% from $11.4 billion in ’08 to $11.28 billion in ’09. Two of the other six major property sectors also suffered a drop in revenue: causes slipped a mere 0.3% from $1.52 billion to $1.51 billion, while arts spending fell 0.8% from $848 million to $820 million.
Other sectors managed gains. Spending on entertainment tours and attractions rose 0.8% from $1.63 billion to $1.64 billion; spending on festivals, fairs and annual events increased 0.4% from $753 million to $756 million; and spending on associations and membership organizations rose 2.9% from $482 million to $496 million.
Each of the six sectors continue to earn the same share of the sponsorship pie as they did in ’08, with sports taking 68% of the dollars, followed by entertainment tours and attractions at 10%.
Firms are also looking more closely at return on investment.
“Companies are increasingly asking themselves, ‘are we generating ROI or a return on objective?” Chipps said.
Outside North America, the outlook improves.
Global sponsorship expenditures reached $44 billion in ’09, a 2.1% increase from the $43.1 billion spent in ’08.
Minus activity by U.S. and Canadian companies, spending by the rest of the world hit $27.5 billion in ’09, a 3.8% rise over $26.5 billion in ’08.
For 2010, IEG SR projects 4.5% growth in worldwide sponsorship to $46 billion. The largest gains will come from Africa and South America, in part due to activity and interest surrounding South Africa’s hosting the 2010 FIFA World Cup and a developing sponsorship marketplace in countries such as Argentina and Brazil, the latter of which will host both the 2014 World Cup and 2016 Olympic Games.
Countries based in Central and South America will increase spending by 5.7% to $3.7 billion, while companies from all other countries, including those on the African continent, will grow their spends by the same 5.7% proportion to $2.1 billion.
European companies will boost spending 5% to $12.7 billion and those based in the Asia Pacific region will see a 4% rise to $10.4 billion, IEG said.
