TV, sponsors battle to recoup World Cup costs

BRUSSELS Wed Jun 2, 2010 10:22am EDT

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BRUSSELS (Reuters) - The soccer World Cup has lured companies hoping to boost revenues after two slow years but broadcasters will struggle to make a profit and top consumer goods marketers will have as keen an eye on cost as impact.

For the tournament beginning next week, companies from faster-growing emerging markets have come forward as sponsors with money to burn and online and mobile media are expecting large benefits.

The massive viewer ratings make the tournament irresistible to broadcasters, but they have paid $2 billion for television rights, up 50 percent on the last World Cup in Germany in 2006, according to media research group Screen Digest.

"The World Cup is more than ever the biggest show on earth... Advertising sells at a premium, but paradoxically it is not always profitable for many broadcasters," said Vincent Letang, Screen Digest's head of advertising research.

"Many brands have spent enormous amounts to be official sponsors and might bet on online and viral marketing rather than spend millions to outbid competing brands from top (TV) spots."

French broadcaster M6 did not bid for rights to the 2010 competition and rival TF1 has sub-licenced some matches to Canal+ after neither recouped costs for the 2006 World Cup, according to Screen Digest.

Letang says TF1 might expect a 20-30 million euro ($24.5-$36.8 million) surge in advertising sales and Britain's ITV a 30 million pound ($43.8 million) boost. Gains will depend though on the fate of the national soccer teams, given viewers and brands lose interest if the side is knocked out.

MORE FOR LESS

Sponsors too have paid more for this World Cup -- an 80-percent increase to some $1 billion, according to Nigel Currie, a director at the European Sponsorship Association.

FIFA's "partners" have paid some $100 million each -- Adidas , Coca-Cola, Emirates, Hyundai/Kia, Sony and Visa.

Coca-Cola, granted the right to take the World Cup trophy on a global tour, has declared its World Cup campaign will be the largest it has ever mounted.

But Emmanuel Seuge, director of sports and entertainment marketing at Coke, said the company was seeking "more for less," adding that the marketing campaign would be $45 million lower than it might otherwise have been due to savings.

Still, the World Cup's allure is clear, even for companies that have suffered two years of crisis and, for many, lower sales.

"It is the world's most valuable media event," said Adam Smith, a director at GroupM, the media management arm of WPP, the world's largest advertising firm by sales.

Kevin Alavy, director of futures sport and entertainment at media strategy firm Initiative, said many sports were losing 5 percent of viewers per year due to a surfeit of choice.

"Completely bucking the trend are just a handful of premium events," he said, naming the World Cup and the summer Olympics.

World Cup viewing was likely to be up 5 percent from 2006.

"It brings credibility to our message and access to something very exclusive," said Coke's Seuge.

EMERGING MARKETS, NEW MEDIA PUSH

Advertising agencies are arguing that companies need to push their brands now to exploit the recovery in full.

Corporations typically spend as much on promotions and marketing as they do on sponsorship, but after a bruising financial crisis, this is in doubt.

"The Super Bowl in the United States showed at least that big brands cannot afford to pass on big events," Letang said.

Overall global advertising spending is forecast to grow by 2.9 percent this year, according to media consulting agency Carat, after a 9.0 percent drop in 2009.

Economic recovery is the main driver, but the four weeks of soccer should lead to a rise, not just a shift, of spending.

Alavy said the impact was likely to be less than 1 percent of an industry worth some $400 billion to $450 billion.

"Even a decimal point is pretty significant... Of course, it will be more significant in terms of spending growth." he said.

This World Cup also marks the entry of sponsors from China, Brazil, India and Africa - Yingli, Seara, Mahindra Satyam

and MTN -- reflecting the faster economic growth of emerging nations.

Carat forecasts advertising growth in Asia Pacific will be 6.8 percent this year and in Brazil 11.6 percent.

This World Cup will also be the first with large-scaled online streaming of matches, such as on Disney's ESPN. Carat forecasts online advertising will grow by 10.1 percent.

Polished adverts and other World Cup-linked games and promotions will increasingly be viewed through sites such as YouTube, and pushed with "viral" distribution.

"(Online advertising) tends to be cheaper and more effective because we can target more. There is less waste," said Alain Heureux, chief of new media marketing association IAB Europe.

(Editing by Sitaraman Shankar)

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