Fans should get used to sponsorship meltdowns similar to the one currently on display between Sports Authority and the Denver Broncos.
As more companies put their names behind teams, athletes and events, the likelihood of deals going wrong increases, said Bettina Cornwell, professor at the University of Oregon’s Warsaw Sports Marketing Center.
The deal between the Broncos and Englewood-based Sports Authority really started going wrong in early March when the sporting goods retailer filed for bankruptcy. That financial move was a precursor to Sports Authority ending its marketing agreement with the Broncos and auctioning off its naming rights to Mile High stadium.
Monday is the deadline for bids on the naming rights. Hilco Streambank, the private company auctioning off Sports Authority’s intellectual property, declined to comment on the bidding process.
The fallout between Sports Authority and the Broncos is similar to — albeit less scandalous than — the high-profile breakup between the Houston Astros and Enron Corp. in 2002.
Enron filed for bankruptcy — and eventually folded — after executives at the energy company were caught hiding billions of dollars in debt from shareholders. The Astros paid to get out of the sponsorship with the company and temporarily changed their baseball park name from Enron Field to Astros Field.
Financial reasons for leaving a sponsorship are very common, Cornwell said. The professor teaches marketing and is the author of “Sponsorship in Marketing: Effective Communications through Sports, Arts and Events.”
“Seeing a company filing for bankruptcy is more rare, but financial belt-tightening is normal,” Cornwell said. “When companies struggle financially they trim their sponsorship expenses a lot like with what happens with their advertising dollars.”
|Festivals, Fairs and Annual Events||$859 million|
|Associations and Membership Organizations||$590 million|
|Source: IEG; 2015 projected|
A high-profile example of a company scaling back is the imaging company Eastman Kodak pulling its long-standing sponsorship with Olympics after the 2008 games. Automaker GM had to withdraw several sports sponsorships, including pulling its brand Cadillac from the Masters golf tournament, after the financial crisis.
Typically in sponsorship scale backs the details of the deals are kept out of the media. But in bankruptcy cases, like Sports Authority’s the public is able to learn about the details.
The terms of the Broncos’ 2o11 sponsorship being so public might hurt the Broncos’ ability to ask potential sponsors for more money or less perks going forward because companies can see what Sports Authority paid and received, Cornwell said.
The Denver Broncos didn’t immediately comment on how sponsorships might be impacted going forward.
“The larger story is that these sorts of things are going to happen more frequently because there are more of these type of business relationships in existence,” Cornwell said.