Market Saturation? Attracting Sponsorships in a Changing Climate | Sports Destination Management

Market Saturation? Attracting Sponsorships in a Changing Climate

Feb 08, 2017 | By: Mary Helen Sprecher
Owners and Rights Holders Face Tough Decisions When Lack of Sponsorship Becomes an Issue

When an event can’t move forward because something goes wrong with the venue or when factors such as weather, political or transportation problems make it impossible to bring in athletes, the unpleasant decision often has to be made to cancel the event. It’s unfortunate but unavoidable, and not viewed as the fault of the event owner or planner. But when an event has to be cancelled for financial reasons, it’s downright scary for the whole sports business industry, and it reflects badly on the event itself. And the recent cancellation of several world-class events proves it’s not something that happens once in a while.

Last week, organizers were forced to cancel the Philadelphia International Cycling Classic due to a lack of financial support. According to an article in Inside the Games, the one-day race had been scheduled to take place on June 4, with the women’s event featuring as part of the International Cycling Union (UCI) Women’s WorldTour.

On the same day that news broke, so did that of the cancellation of the London Spring International, a new world-class equestrian event. That event too was called off for financial reasons.

They were two different international events on two different continents, but their common denominator was an inability of event owners to secure funding. And they’re far from being the only examples.

In late 2016, SDM carried the news that the date for the World Beach Games had been moved. The multi-disciplinary waterside sport extravaganza sponsored by the Association of National Olympic Committees (ANOC) went from being announced with much fanfare as taking place in San Diego in the fall of 2017, to quietly changing the website to reflect a new date of 2019 and including few other details as to why. Despite reports stating that ANOC’s official position was that the step of rescheduling was taken in order to allow national Olympic committees and international federations “optimum time to prepare their athletes” for the event, pundits said there was doubt as to whether the Games were actually marketable or that financing was in place. A later announcement of a stripped-down program and budget appears to bear this out.

While it’s easy (though true) to say new events (the World Beach Games and the London equestrian competition are both inaugural events) have a hard time finding financing, there are other examples of established events cancelling for financial reasons. In early January, the International Ski Federation (FIS) announced the cancellation of two February Snowboard World Cup competitions in Kazan, also for fiduciary reasons. (It was reported recently that the FIS and the Russian Snowboard Federation are currently in discussions over a replacement venue in the country.) Similarly, the Philadelphia cycling championship had been presented annually since 1985, with the event having been billed as a “top international cycling classic, and one of the richest and most prestigious one day races outside of Europe.”

Cycling has been hit particularly hard. It was announced in December that the Tour of Qatar cycling event was cancelled due to lack of sponsorship. And cancellation can even have a ripple effect, according to Cycling News, which noted, “The loss of the women’s Philadelphia International Cycling could also damage the UCI 1.1-ranked Winston-Salem Cycling Classic (scheduled for May 29), giving European-based riders less incentive to make the trip to the USA.”

It’s a worrisome trend among events. An article in The Economist recently discussed the difficulty for events to attract sponsorship in the current climate. In particular, women’s events seem to have the most difficulty.

Sponsors are unwilling to finance individuals and teams that don’t get good exposure – and few female athletes do. The Women’s Sport and Fitness Foundation (WSFF) estimates that in 2013, women’s sports received 7 percent of coverage and 0.4 percent of the total value of commercial sponsorships. This is a vicious circle: viewers want to watch sports at the highest professional standard, and sponsors want to be associated with the best athletes.

It’s easy to simply dismiss the problems with attracting sponsorship by attributing it to ‘the economy,’ but as it turns out, that’s actually an answer that has several facets.

One complicating factor has been the proliferation of sports events in the marketplace. As the number of events increases, events are often held within days or weeks of one another, meaning even more competition for dollars from the potential pool of sponsors. The Philadelphia cycling event, for example, was vying for sponsorship dollars with the Aviva Women's Tour, scheduled to be held only three days later.

Another problem is less discretionary spending among companies that previously sponsored events. Whereas companies might have been able to put out enough funds to sponsor an entire season’s worth of activities for a sport (or even just to sponsor one big event), these days, the money is harder to come by and smaller amounts are being parsed out.

Some events have turned to crowdfunding sites to help finance events. Others have been working with the same sponsors for years and do no more than minor tweaks to the format or date of the event in order to maintain the status quo. Still others have moved to stripped-down formats and cut out many ancillary events, such as socials, expos and more in order to save money. Some have begun accepting financial support from companies associated with products such as alcohol and tobacco – something that may or may not sit well with everyone.

Another problem is the fragmentation of consumers’ attention; according to an article in Forbes, sports enthusiasts no longer need to watch television or go to a live event; they can stream the event online or follow it on social media, for example.

In other words, the options available for an individual to spend their free time have become essentially limitless. While it took years of diminished returns to realize this, consumer brands have now recognized that simply paying for their logo to appear next to that of a professional sports team, or purchasing advertising television or in stadium advertising during games no longer provide the same return on investment. Consequentially, there has been an escalation of advertising spend brought on by an proverbial arms race of rowing competition coupled with  a limited market of potential consumers. Finding ways to stand out is no longer an option, but a necessity.

And as recent events have taught us, those that do not keep up are being left behind.

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