As major events struggle to attract sponsorship in the economic downturn, horse racing could buck the trend
Sovereign’s pure gold
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As economic gloom turns to full-blown recession and the Government rewrites formerly stringent rules which allow it to increase the national debt, there are few sports immune from the credit crunch’s unwelcome attention.
Last week, British Olympics officials were forced to admit that their £700million sponsorship target was looking rather too optimistic. The 2012 organising committee, Locog, issued a statement which said: “The current turmoil in the world economy is creating a tough selling environment across all categories.”
The body had forecast that around one-third of its £2.1billion expenditure budget would be recouped from sponsorship and, while it recently broke the £350million barrier after signing BP as the official oil and gas supplier in a deal worth £50million, there is little private sector appetite for sponsoring an Olympic Games more than four years away.
Several firms wonder whether they’ll be around in 2012.
Not surprisingly, Locog sources said they were relieved to have finalised half a dozen big-money deals before the economy took a nosedive. Privately, they concede that charging Lloyds TSB £80million to become the Games official banker while swinging a loan facility of £70million as part of the deal would have been impossible in the current climate.
Accordingly, the organising committee has taken the decision not to approach car manufacturers and other prospective sponsors until after next month’s Beijing Games. Despite this break, it faces an uphill task attempting to persuade up to 30 more sponsors that spending £20million can be justified as unemployment rises and even the Chancellor expects the economy to endure a prolonged spell in the doldrums.
Indeed, the Government too has experienced difficulties in its attempt to attract the £100million it says is required for Team GB in the 2012 Games.
The upshot of this lack of private-sector commitment to the Olympic cause is that the official Games budget of £9.3billion will continue to rise – although cynics do not anticipate the true cost being revealed until well after the chauffeur-driven Olympic circus has left town.
Apart from the Olympics, there is plenty of anecdotal evidence to suggest marketers of all sports events are finding it more difficult to pull in sponsors.
“Although sponsorship expenditure on sporting events is perceived as offering good value, the market has suddenly turned very tight,” said Stephen O’Neil, of sports marketing company SON Sport.
“Finding sponsors in this market is proving extremely difficult.”
But it is not just the Olympics that are suffering. The Women’s Tennis Association (WTA) has reluctantly accepted that its attempts to keep Sony Ericsson as title sponsor are likely to prove forlorn after the mobile telephone company issued a profits warning last month.
Back in 2005, Sony’s £47million sponsorship deal made the WTA the richest property in women’s sport. And, while the deal does not expire until 2010, it is unlikely that the company will extend. WTA negotiators will, therefore, have to approach a severely depressed sponsorship market in order to replace Sony Ericsson and their task is not made any easier by the indifferent attitude shown by a number of women tennis players towards the WTA tour.
Yet there is some light in a depressing economic downturn. Inspired by cricket’s Twenty20, British horse racing has revealed a series of ambitious plans designed to attract a fresh audience to the flat. At its heart is a potentially compelling competition, scheduled to start in 2010, to decide the year’s champion racehorse. But this is no unsupported blueprint. It benefits from the promise of £8million a year which will be injected to ensure the new venture succeeds.
Behind the plans are several of the country’s leading racecourses and Racing UK, the media rights company which they own. At its core, the new strategy involves the courses hosting a competition to be known as the Sovereign Series, which brings 10 Group 1 races together, points being awarded to the first three home in each.
At the end of the flat season, the horse with most points will be champion, earning his owners a handsome payout.
The Sovereign Series will boast a prize pool of £2million with an additional £3million in prizemoney divided among the races involved, already worth a total of £5million. A marketing budget of £3million will be used for promoting the annual series.
“Racing needs to evolve and appeal to a wider audience,” said Simon Bazalgette, executive chairman of Racing UK. “Our vision is that in five years the Sovereign Series will have become established as a major sports competition on the British calendar, alongside Wimbledon, the Open and other similar events.”
The first step is to sell the series to a single terrestrial broadcaster next year when all major terrestrial contracts come up for renewal.
Significantly, Racing UK knows it can effectively subsidise the series through tough economic times.
“Racing UK will be generating approximately £5million in profits this year, so it is big enough to be backing this competition,” says Bazalgette.
It is not, he says, a time to let the worsening economic conditions dictate racing’s future.
“Doing nothing is the worst option,” he said. “There’s an opportunity there to start getting the attention of general sports followers – and if we don’t do that, other sports will. There is no end of sponsorship money involved in sport and racing at present is not getting its fair share because it has not been creating a sporting story across a season. For sponsors, this new initiative is fantastically attractive.”
Sponsors are constantly being reminded proposition A or B is fantastically attractive, but are being considerably more circumspect when it comes to parting with money. Nonetheless, unlike Locog, which many industry professionals believe will do well to attract £500million in sponsorship, horse racing does have a great opportunity to give itself a timely, if modest, financial boost
Horse racing is second only to football as the UK’s most popular spectator sport, but it enjoys nowhere near the same annual revenues.
The Sovereign Series will never emulate say, the Champions League. But instead of asking sponsors for ridiculous sums of money, racing’s cautious approach is appropriate for the difficult times through which we’re living. As a result, it appears destined to succeed.
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