March 10, 2009 / 7:45 PM / 11 years ago

Over half of firms to cut sponsorship spend: study

CHICAGO (Reuters) - More than half of companies surveyed plan to cut 2009 sponsorship spending, including sponsorship in the sports world, while almost as many are seeking to get out of current deals, according to a study.

The GMC logo on an SUV is seen in Detroit, Michigan in this file photo from December 7, 2008. REUTERS/Carlos Barria

The study, which tracks sponsorship spending, was prepared by IEG, a unit of giant advertising company WPP Plc, and research firm Performance Research.

Fifty-one percent of companies surveyed said their sponsorship fees would be down from 2008, and another 36 percent said their budgets would remain little changed. Executives from McDonald’s Corp and American Airlines parent AMR Corp told Reuters on Monday that their companies would keep sponsorship budgets flat this year.

More ominously, 47 percent of companies surveyed said they were seeking to get out of current deals even though they were not up for renewal, according to the study.

In one case, IEG said a company it did not identify paid additional money to a group whose event was already in progress to take down its signage and erase other identification.

Many companies, including General Motors Corp, FedEx Corp and Deutsche Post AG’s DHL unit, have cut back on sports-related spending as the recession has hurt demand for their products and services.

The spending cutbacks by companies as well as consumers in turn have hurt most U.S. sports leagues. The National Football League and National Basketball Association cut jobs, Major League Baseball froze its 2009 budgets and some smaller leagues have folded teams.

But not all sports have lost their luster. In a separate study, IEG estimated corporate spending on college athletic programs, conferences and events is expected to total $572 million in 2009, up 2.8 percent from last year, better than the overall market’s projected 1.8 percent increase.

IEG credited the higher growth rate to lower rights fees and the ability to access young adult students and affluent graduates. It said companies are increasingly aligning with college athletics as an employee recruitment tool.

In the main IEG/Performance Research survey, when asked about spending on related promotions and rewards — a practice called “activation,” in which companies try to leverage sponsorships into stronger relationships and ultimately sales with consumers — 40 percent of respondents said they would cut such spending this year. Another 43 percent said activation spending would remain flat.

The average amount spent on activation related to rights fees slipped for the second straight year to $1.40 for every $1 spent on rights fees, according to the study. In 2008, the ratio was $1.50 to $1.

The IEG/Performance Research survey was conducted online in February and received 110 responses.

Reporting by Ben Klayman, editing by Gerald E. McCormick

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