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Financial and Economic Crisis - Law Firms
Sports Sponsorships: Another Bubble Burst?
2008 will be remembered (not too fondly) as the year the housing bubble and the credit bubble burst. One casualty of these bubbles bursting and the resulting global recession has been a decline in corporate sports sponsorships. As a result, the sports bubble may be the next to burst, adversely affecting the sports stars and teams we root for.
Corporate sports sponsorships are declining rapidly, particularly in industries hardest hit by the credit crisis, such as the automobile and financial services industries. According to data from the sponsorship agency IEG, global sports sponsorships doubled in the past ten years to about $30 billion annually. These dollars have caused stars such as Tiger Woods, David Beckham, and even lesser known sports personalities to become rich and famous. This massive spending has also enabled sports teams and leagues to realize tremendous profits, as well as fuel the creation, development and expansion of new sports leagues and teams. Due to declining sports sponsorships, many of these new leagues and teams will not survive.
Some of the biggest players in the sports sponsorship industry, such as General Motors, Honda, Wachovia and Merrill Lynch, have suffered severe financial losses from the economic downturn, and in some cases are no longer in business. In these situations, these companies are under huge pressure to cut costs, and marketing budgets (in particular sports sponsorships) are often the first to be cut. These sponsorships are viewed as excessive when a company is losing billions of dollars, laying off employees and asking for a government bailout. For example, General Motors has announced that it is slashing its promotional budget by 20 percent and one of the most well-known casualties is its $7 million annual sponsorship of Tiger Woods. General Motors has also...