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8
Insight
While the economic crisis continues
to ravage the world, there are more
important things to discuss.
Like sport...
Many of us turn to sport as time to enjoy
away from the doom laden financial
headlines, but whether it’s your village
cricket team or your Premiership team of
choice, sport is feeling the crunch.
But what are the repercussions of the stock
market plunge for your local cricket team?
Not directly linked you may imagine, but
the chain of events starts at the top.
One man in the Premiership sobbing
uncontrollably into his pillow at night is
Newcastle United owner Mike Ashley who
saw £180 million wiped off the valuation of
his club as he desperately seeks a buyer.
Ashley has also seen personal losses of
£300 million as HBOS shares plunged and
despite clearing £60 million worth of debt
at the club, the Geordies have vociferously
called for his head.
Elsewhere, West Ham saw their shirt
sponsor collapse, Travel Company XL
having only paid one year of a three
year £7.5 million million deal when they
went bust. The East London club’s plight
deepened as Icelandic bank and club
owner Landsbanki went into receivership,
leaving the clubwith questions surrounding
the finances of the owners and their long
term future.
West Bromich Albion also failed to secure
sponsor by the start of the season.
Lord Triesman informed us all that “debts
in English football as a whole have
probably edged to the £3 billion mark”,
but teams in the Premiership don’t appear
too concerned. Much of the finance is
secured long term, with season tickets
paid up until May and the lucrative £2.7
billion TV deals run until 2010.
Many of the top clubs are operating
with huge debts, Manchester United
approximately £660 tmillion in the red,
and even potentially losing AIG as shirt
sponsors would pose little obstacle for the
marketable European Champions.
Liverpool’s stadium plans have been
delayed as a result of the credit crunch
and the Merseyside club have been
saddled with £350 milion of loans by the
dynamic duo of Hicks and Gillett.
However, none of this has deterred
investors such as Manchester City’s
new billionaire owner, Sheikh Mansour
bin Zayed Al Nahyan from showering
the league with their petro-millions.
Moreover, the majority of football clubs
boast die hard fans who have somewhat
surprisingly defied the credit crunch to
pack out grounds to the rafters across the
country, matching record attendances and
bolstering season ticket waiting lists.
The credit crunch is not limited to
football; financial uncertainty shrouds
the Six Nations Rugby tournament which
faces losing the Royal Bank of Scotland
as sponsor. RBS has a major sports
sponsorship programme including the
British Open Golf tournament, supporting
the Williams F1 team as well as the Murray
brothers in tennis. With the government
taking majority stake in the bank as part of
its rescue package, future brand marketing
commitments will be reassessed and the
£4 million annual Six Nations obligation
may be under scrutiny.
Across the pond, amongst a host of ailing
American sports deals, the second most
watched sport on TV, Nascar is suffering
similarly. Four of the main racing teams
will be cutting or dropping sponsors for
next season while winners of the 2007
Indianapolis 500, Dario Franchitti, has
been forced out of the stock car series by
a lack of sponsors.
Many potential sponsors are flinching at
the $25 million cost of supporting a top
team and Formula One convert Juan
Pablo Montoya is facing starting next
year with no main backer after Chevron
decided to spread its funding across the
lower echelons of the sport.
It’s a similar story in Formula One where
owners have begun to realise that the
$4.7 billion extravaganza that is the
F1 Empire may be under pressure. “It
has become apparent, long before the
current difficulties, that Formula One was
unsustainable,” Max Mosley, President of
motor racing’s governing body said. “It
really is a very serious situation. If we
can’t get this done for 2010, we will be in
serious difficulty.”
Last year F1 was subsidised by roughly
$900 million in sponsorship revenue, but
potential sponsors are growing hesitant
due to questionable business models in
a sport where team owners splashed out
a combined $1.6 billion this year. Now
there has been an announcement that
Honda are withdrawing entirely from
Formula One.
It is clear that although companies are
carefully rethinking multimillion pound
sponsorship deals in professional sports, it
is not the giant elite that will suffer. It is a
trickier situation however for lower league
clubs and grass roots sports.
The major players in sports sponsorship
are understandably attracted to the
biggest, most marketable teams and as
they spread themselves thinner holes are
left in the lower leagues, making survival
a struggle.
A perfect case study of this occurring
prior to the current economic meltdown
is in Australia leading up to the Olympic
Games in 2000.
Sportscover Director Chris Nash had
first hand experience of the ‘flow effect’
initiated by the allure of the Olympic
Games for Australia’s biggest sponsors.
Chris explains: “The Olympic Games are
Sponsors heading for relegation?
St ry by Chris Hoott n