Archive for the ‘Sponsorships’ Category

By Ray Paulick
The 2009 Triple Crown marks the fourth consecutive year the sport’s three premier races – the Kentucky Derby, Preakness and Belmont — will be run without the benefit of a title sponsor, and the Breeders’ Cup championships will be without some of their longtime corporate partners when it is held for the 26^th time later this year. Wagering on Thoroughbred racing is at its lowest level in more than a decade, and the bankruptcy of major racetrack owner Magna Entertainment has put the sport in peril in some areas.

The good news? At least we’re not alone.

The gambling industry is suffering through some very difficult times now, thanks to the international economic crisis. One victim is the “Folies Bergere,” the longest-running show in gambling mecca Las Vegas, which will have its final curtain call on Saturday after nearly 50 years at the Tropicana Hotel. Spending on travel and tourism dropped in 2008, and this year figures to be worse. The gambling industry used to be considered recession-proof, but not any longer. Las Vegas gambling revenues dropped 16% in January, and conventions and groups are cancelling in droves.

Crushing losses in the corporate world – particularly in the automotive and finance sectors – have also had an immediate impact on professional and amateur sports. Sponsorships have been lost, teams in many leagues are struggling to fill seats, and luxury suites are increasingly sitting empty at different venues. The New York Times reported that the National Basketball Association has cut 10% of its staff, NASCAR teams have laid off hundreds of workers, ESPN has decided not to fill 200 job vacancies, and the LPGA has eliminated four tournaments after losing title sponsors. Even the mighty National Football League is feeling the effect: its commissioner has taken a 20% reduction in salary.

Two of the worst-hit industries, automakers and financial institutions, have traditionally been major participants in sports sponsorships, in large part because of the hospitality and entertainment options they provide their customers and employees. Chrysler was the original sponsor of the Triple Crown Challenge from 1986-95, and Dodge sponsored the Breeders’ Cup Classic for five years, beginning in 2003. The credit card company VISA took over from Chrysler as Triple Crown sponsor in 1996. When its contract expired, it continued as a marketing partner of the Kentucky Derby, a deal that ends next year.

But pity the PGA Tour, where fully 40% of its tournaments are hooked to the financial and auto industries. Government officials are insisting on cutbacks in spending by financial and auto companies that have received federal bailout money. Chrysler, the longtime sponsor of the Bob Hope Desert Classic, was missing in action when the tournament was held earlier this year. The Northern Trust bank was raked over the coals by Congressman Barney Frank and others after its executives partied to the music of Sheryl Crow and entertained clients and employees at the PGA Tour’s Los Angeles tournament that it sponsors. Buick, a brand in the nearly bankrupt General Motors, dropped its endorsement agreement with Tiger Woods.

The NBA and NHL are struggling like never before as corporations cut back on promotional and entertainment budgets, and families reduce their discretionary spending. The NBA has issues unrelated to the economy, namely a labor contract that many think will lead to a lockout by owners in 2011, but the question many sports observers are asking is how many teams will be forced to be sold, move or seek financial help from the league before then, simply because they are losing money (the New York Times reports that 15 NBA teams are operating in the red). The future of a number of NHL franchises is also in jeopardy as teams cut ticket prices and offer package deals to fill seats. Many corporations are either not renewing luxury suite rentals or cutting their losses by letting them sit empty rather than add mandatory food and beverage expenses each time they are used.

Most Major League Baseball teams are maintaining their ticket prices at 2008 levels, something Churchill Downs did with a majority of its seats for the 2009 Kentucky Oaks and Derby. The Breeders’ Cup, which significantly increased ticket prices to the 2008 two-day championships (and, like Churchill Downs does for the Oaks and Derby, required buyers to purchase tickets for both days), acknowledged the increases were a mistake. It hasn’t announced its pricing structure for the 2009 Breeders’ Cup, but many people will be disappointed if there isn’t a serious rollback.

Sponsors are more difficult than ever to find. When VISA dropped its Triple Crown sponsorship, Ed Seigenfeld, executive director of Triple Crown Productions, said, “We’re not going to let the grass grow under our feet” in the search for a replacement. That was in 2005, when business was booming. What are the odds of getting a Triple Crown title sponsor in the current climate, one that promotes the series the way VISA did?

Carter Carnegie, the senior vice president of sales for Breeders’ Cup, acknowledged the difficulty of replacing companies like Dodge and Bessemer Trust (the latter is controlled by the Phipps family, which has been involved in horse racing and breeding for generations). “Like NASCAR, the PGA Tour, NHL and MLB, horse racing also faces a challenging time for retaining and attracting sponsors,” he said. Carnegie said the “silver lining” for horse racing, compared with other sports, is that “corporate partnerships do not play as significant a role in terms of being a core revenue generator needed to maintain the day to day operation of the game.”

The Breeders’ Cup has some long-term deals in place and some new prospects in the pipeline, Carnegie said. “I think it helps that our price tag is much less than other sports, and over the last few years, we have been able to make a compelling case that we deliver a certain demographic that is hard to reach through traditional forms of media.”

Still, he acknowledged that some of the existing sponsors are struggling. “We have worked with some of our partners during these challenging times on ways to reduce or restructure their terms and fees and, in some cases, have looked at extracting more value for them by developing some new ways to increase their exposure.”

One company I’m guessing won’t be back is the insurance giant American International Group, better known as AIG, which partnered with the Breeders’ Cup in 2007 and 2008, sponsoring a “ride of the day” feature during the ESPN and ABC telecasts. AIG, of course, was on the cutting edge of the financial meltdown and in the news recently for wasteful executive bonuses after getting bailed out by taxpayers.

Breeders’ Cup is in the middle of a long-term strategic planning process that we’ll be telling you more about in the coming weeks. This work couldn’t come at a better time, because the organization is widely acknowledged as one of the few bright spots on the racing landscape over the last quarter century. With so much bad news throughout the industry, it’s critically important for the Breeders’ Cup to weather this economic storm and emerge as a beacon of hope for the entire sport.

Copyright © 2009, The Paulick Report

Visit the Paulick Report for all the latest news throughout the racing world

By Ray Paulick

Random notes while waiting for the ice to melt …

The devastating snow and ice storm that hit Kentucky earlier this week has created serious economic hardships on Thoroughbred farms, many of which are without electricity and have suffered major damage, just as the foaling season is hitting full swing and the breeding season about to begin. Let’s hope organizations like the American Horse Council, the NTRA, Thoroughbred Owners and Breeders Association, the Kentucky Thoroughbred Association and the Kentucky Equine Education Project are in contact with government officials to seek relief, now that Gov. Steve Beshear has asked the Obama administration to declare a federal emergency.

Horse farms are already under extreme economic pressure because of the plunge in bloodstock prices, and this latest problem is only making things worse for them. It’s at times like these that these alphabet soup organizations can actually do some good.

DID FRANK STRONACH’S ONE-VOTE MARGIN over IEAH Stables in the Eclipse Awards outstanding owner category come by virtue of several racing secretaries who work for him? I have a great deal of respect for Stronach’s racing and breeding operation, which has produced solid numbers for many years now, but I just can’t fathom how 2008 was an Eclipse Award-winning year for him.  Ahmed Zayat’s stable earned slightly more money but only ranked sixth in the number of first-place votes. IEAH had a far superior year in terms of Grade 1 winners. George Strawbridge’s Augustin Stable had a better year when the number of starters was taken into consideration, as did the racing stables associated with Sheikh Mohammed. Here is the year-end ownership standings by money.

Apart from the National Turf Writers Association, which has historically published how its members vote, there is no disclosure from Daily Racing Form or the National Thoroughbred Racing Association about who votes – never mind who each individual votes for. But the NTRA should insist that racing secretaries or any other voters who work for racetracks owned by Stronach’s Magna Entertainment not be allowed to vote in categories where there is a potential conflict of interest. That would include the leading owner and leading breeder categories. The awards are too important to permit any conflicts of interest or suspicions of impropriety.

In the owner and breeder categories (the latter of which was for years determined by a committee vote), there seems to be little imagination or thought put in by voters, who more often than not look at which owner and breeder is at the top of the money list that is supplied with the ballot. If the people who vote for Academy Awards were that lazy, then “Paul Blart: Mall Cop” would win the Oscar for best picture this year.

Opportunity (the number of starters) should play a role in voting for outstanding achievement by an owner or breeder. Twice in the last eight years, a breeder who produced two individual champions in the same year from a small band of broodmares (Virginia Kraft Payson, with Farda Amiga and Vindication in 2002, and Aaron and Marie Jones, with Speightstown and Ashado in 2004) did not even get enough votes to be among the three finalists! That’s insulting to the thousands of Thoroughbred breeders who either can’t afford to or don’t choose to maintain massive numbers of broodmares.  (Click here to see what I wrote about this issue a few years ago at Bloodhorse.)

The NTRA needs to address this, either by eliminating the vote and simply giving the awards for leading owner and breeder to whoever wins the most money, or by changing the system of selecting the outstanding individuals in these two categories. I don’t think enough voters understand the importance of this category or what “outstanding” means when it comes to owning or breeding Thoroughbreds.

SPEAKING OF THE NTRA, what is its future? The organization is a shell of its former self, when it had widespread industry support and a mission to improve the economics of racing and breeding through increased pari-mutuel handle, marketing and greater exposure on television. Following its split from the Breeders’ Cup, the NTRA has lost much of its economic clout and influence, as it no longer has the annual championships to promote to the general public or to race sponsors that were tied in to group purchasing (i.e., John Deere, NetJets, Dodge), which only a few years ago produced upwards of $100 million a year in sales. Following the NTRA-Breeders’ Cup “divorce,” group purchasing through NTRA Advantage has dropped significantly.

Today, the NTRA seems to be playing more defense than offense, reacting to crises (i.e., the death of Eight Belles in the Kentucky Derby, Congressional inquiries, totalizator problems) but not really having the resources to go on the offensive in any areas, including marketing and promotion.

Complicating matters (and this isn’t new) is the ongoing struggle to maintain membership in the NTRA. Churchill Downs Inc., which is tabbed to pay approximately $400,000 in dues for its various tracks in 2009, hasn’t recommitted to membership. A source says Churchill might considering paying $200,000 in dues.  An NTRA official told the Paulick Report he hopes Churchill executives see value in the NTRA’s legislative activities, the “Racing to the Kentucky Derby” television series on ESPN, NTRA Advantage purchasing, the National Handicapping Championship, and the Safety and Integrity Alliance. The interesting thing about the latter, I’ve been told by sources, is that Churchill Downs CEO Bob Evans is the one who insisted the NTRA do something about the safety issues that led to the creation of the Safety and Integrity Alliance.

Magna apparently hasn’t committed to renewing its NTRA membership, either. If the NTRA loses the two largest track ownership companies, it will be further weakened, perhaps terminally.

CORPORATE SPONSORSHIPS ARE A CHALLENGE in the current economic climate, whether it’s the PGA Tour, NASCAR or horse racing. But it was, nevertheless, a surprise to see Bessemer Trust drop its sponsorship with the Breeders’ Cup. I would think the wealth management firm formerly chaired by Ogden Mills (Dinny) Phipps and now run by his cousin, Stuart Janney Jr., is encountering the same economic challenges that many financial institutions are (though Bessemer’s investment strategy is believed to be conservative).  

Janney responded to an email with the following comments: “I would say our reasons for dropping out are as follows. First, we have been a sponsor for some time, which means many of our clients have been entertained at a Breeders’ Cup event and having them back again is possibly less appealing than providing a different venue. Second, the two-day format works better for others than it does for us. Third, we have never been able to really derive full value from the TV ads as our target audience is very narrowly focused. Fourth, as we look at other sponsorships and ways to thank our clients or meet prospects, it helps in tighter times to have this money available. We believe our involvement with the Breeders’ Cup has been beneficial to Bessemer and the staff at the Breeders’ Cup has been a pleasure to work with.”

Copyright © 2009, The Paulick Report

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By Ray Paulick

To hear Carl Pascarella tell it, you’d think corporate marketers would have lined up from Louisville, Ky., all the way to New York’s Madison Avenue to bid on the Triple Crown sponsorship that Visa USA dropped in 1995 after a 10-year run. The relationship between the Triple Crown and Visa ended the same year Pascarella retired as the credit card giant’s chief executive officer.

Pascarella, speaking at a Tuesday afternoon session on Marketing & the Customer Experience at the 32^nd Asian Racing Conference in Tokyo, used the familiar introduction from ABC’s “Wide World of Sports” to describe sponsorship of American racing’s highest-profile series, which begins with the Kentucky Derby on the first Saturday in May, continues two weeks later in the Preakness, and concludes three weeks after that with the Belmont Stakes.

First, there is the “thrill of victory,” Pascarella said. “From a sponsor’s standpoint, nothing gives you more of a thrill than the Kentucky Derby winner driving down the Preakness stretch with a three- or four-length lead and knowing, as a sponsor, that you’ve got legs, with another three or four weeks to promote in and outside the world of sports. It was something we could use from April on through to June.”

On the other hand, he said, there is “the agony of defeat. In six of eight years we had horses that won the first two legs and didn’t win the Belmont.” That defeat eliminated the possibility of further promotions congratulating the winner of the Visa Triple Crown Challenge and the accompanying $5-million bonus, as well as any additional races the winner might compete in, including the Travers Stakes or Breeders’ Cup.

The Triple Crown was one of several world-class sponsorships for Visa in the sports and entertainment world. “Each one of them,” Pascarella said, “had a common focus on a couple of very important things: understanding who their fan and audience was; and secondly, they understood how to drive value to that fan base. They had an unwavering commitment to both things. At Visa, we looked more to sports as being the pinnacle of entertainment for fans, or our customers. No other form of entertainment brings the same kind of excitement or elation as sports does.

“The sports that are best for our sponsorship,” Pascarella continued, “put the fan in the center of the activity. They create deeper relationships because it’s a fan-centric approach. They give the fan a way to get into the event itself.”
 
Pascarella recalled how much value he was able to give to Visa’s best customers — bankers and merchants — who would come to Louisville for the Kentucky Derby. “We’d bring them on a backside tour of Churchill Downs on the day before the Derby,” he said. “They’d see the horses who would be racing in the Derby the next day, meet trainers like Bobby Baffert and D. Wayne Lukas, and these people felt like they were part of it all. We were giving them something special because of a sponsorship that was invaluable. That’s what we were paying for, that extra feeling that allowed our customers to get inside the sport.

“We’re not looking at fan numbers, we are looking at fans who are engaged, fans who will be engaged with us and our products and services,” Pascarella said. “We look at selecting and evaluating sponsorships based on being able to drive consumer behavior. How have we lifted the brand, how have we changed behavior, how have we made the consumer closer to us as a result of the association? The more we win, the more we put into a sponsorship. But it’s not just about the money. It’s about the relationships you can build with your sponsor and what you can give your sponsor in return. You need mutually beneficial objectives.”

Interestingly, while Visa dropped its sponsorship of the Triple Crown, it entered into a five-year agreement with Churchill Downs to sponsor the Kentucky Derby. No company has stepped forward to sponsor the Triple Crown since Visa’s exit from the series. One reason may have been a decision by the New York Racing Association to end its association with NBC Sports, and put the Belmont on ABC/ESPN. Another may have been fragmentation within the three tracks that comprise Triple Crown Productions and a power struggle over how sponsorship revenues were divided. Currently, of course, they have nothing to divide from a Triple Crown title sponsor.

 Pascarella, now an executive adviser to TPG Capital, also cautioned racing associations that the current economic climate will cause nearly every major corporation to reevaluate its advertising, marketing and sponsorship budgets. “Every economist projects a very deep and long recession,” he said. “That means your sponsors are going to be under a great deal of pressure. You need to reach out to them, even though your revenues also are going to be under pressure. If you reach out to them, and say, ‘How do we work together to get through this?’ that will go a long way.”

BRANDING GURU DAVID AAKER , professor emeritus of marketing strategy at the Haas School of Business at the University of California-Berkeley, talked about how racing can build its brand.

At a time when brand trustworthiness and quality perceptions of most brands are down significantly in the minds of the public, Aaker said there are opportunities to improve branding through increased energy. He cited the Nintendo video game brand as one recent phenomenon in the branding world. Five years ago, Aker said, Nintendo ranked 165^th among brand names in Japan, moved up to 65^th three y ears ago, fifth two years ago, and now ranks as the country’s leading brand, thanks to the energy created by the Nintendo Wii platform and games.

He cited five other very diverse brands that have energized themselves in recent years: 1) the Memphis Redbirds minor league baseball team; 2) the Indianapolis Motor Speedway; 3) PGA Tour golf; 4) Harley Davidson; and 5) Avon cosmetics.

All of those brands used one of two methods: energizing the business itself, or finding something with energy that is interesting and involving and attach it to the brand. “Both options are really powerful,” Aaker said.

The Memphis Redbirds, Indianapolis Speedway and Harley Davidson energized their brand by engaging their customers in multiple activities that built on the customer experience. The PGA Tour and Avon tied themselves to something with energy. The PGA Tour used Tiger Woods to its best advantage, and Avon linked its products to a breast cancer crusade and created the Avon Walk for Breast Cancer, with millions of people engaged each year. Similarly, Aaker said, Lowe’s home improvement stores attach their brand to Habitat for Humanity. In the case of Avon, he said, “Breast cancer is so important an issue and involving to the target audience that it provides Avon a way to get energy that it could never do through their products and services.”

Aaker said companies seeking to strengthen their brand should “find role models, companies in related or unrelated industries…someone who’s done it well with a brand people are talking about. What can you learn from them?”

In addition, he said, self-reflection is necessary. “What about the customer experience is boring or unpleasant? How can you mitigate that? What can be added to en rich and improve the customer experience.”

To find what he calls “branded energizers” like Avon’s breast cancer campaign, Aaker said companies should examine “what existing program has energy that fits your brand and can be connected to your brand…programs that aren’t part of the experience people are currently buying? What new program with energy can be developed that fits the brand and can be connected to the brand?”

“You have one of the most exciting events in sports and entertainment,” Aaker said. “But you need to ask yourself, ‘How can I add energy to my brand?’”

TELEVISION ADVERTISEMENTS PROMOTING RACING around the world were shown to the group and  audience members were asked to vote on their favorites. The ads were divided into five categories: Celebrating the Horse; Sex and Glamour; The Punt; A Good Laugh; and The Buzz.Most provocative were ads from Australia promoting sex and glamour. Other countries featured included France, Turkey, Japan, Hong Kong, Germany, Ireland and the United States (two ads from Santa Anita were featured). Details tomorrow on the winning ad.