Sport is now in the business of survival
Published 26/02/2012 | 05:00
Longford Rugby Club has just secured a deal with major recruitment company CPL for the naming rights of its club grounds at The Demesne on the town's outskirts. The club is in the red following a major redevelopment of its clubhouse and this deal with CPL will reportedly be used to service that debt.
It is a major coup naturally for the club to secure such a high-profile deal given its relatively lowly status in the game, in Division 1B of the Leinster league.
It's certainly an unusual partnership, which is probably best explained by the fact that the company's CEO and founder, Anne Heraty, is from the county. Because in an era where sponsors have very specific ideas on what bang they want for their buck, there is no real benefit for a company of CPL's stature in being associated with a low-profile rugby club. This is more likely a case of somebody who made good wanting to put something back into the area they came from.
But there is another curiosity about this sponsorship. It means that all three major sporting organisations in the town -- GAA, soccer and rugby -- have their own naming rights deals on their grounds. You now have Flancare Park, CPL Park and Glennon Brothers Pearse Park. The latter two are newly-agreed deals. This is a remarkable situation in a small town which has been as badly hit in the last three years by the recession as anywhere.
In a way, though, it is also a timely reminder of the shifting sands in world sport. The traditional form of revenue for sports organisations has been gate receipts, but this is under threat, and not just because of the financial climate in Europe and North America, the traditional strongholds when it came to making money from mass attendance at live sports events.
According to a report published last week by PricewaterhouseCoopers on the outlook for the global sports market to 2015, money taken at the turnstile accounts for just over 30 per cent of total worldwide revenue.
Yet in what you might refer to as the 'emerging markets' -- places like India, China, Brazil and Russia -- it is sponsorship which is providing the lion's share of the revenue. In China, for example, almost half of the money made in sport comes from sponsorship.
The report's author, Julie Clark of PwC's Sports and Leisure section, says that "the gate revenue market for some of the bigger sports appears to be mature and saturated". This means that because attendances have realistically peaked the only way to generate more income from ticket sales is to increase prices and, as we have seen with the GAA, IRFU and FAI, this is not an option in many countries. Even in those countries where ticket prices are historically low for a number of factors, sports bodies must be cautious because fans are evaluating events more than ever before.
Clark cites a match in India last year between Argentina and Venezuela where even the cheapest tickets were too expensive for most fans -- this despite the fact that the game was heavily marketed around the fact that Lionel Messi would be playing. So, even the best footballer in the world couldn't guarantee a sell-out, simply because the price wasn't right.
So sport is increasingly looking to other areas to keep the money coming in, and although these are challenging times for business in many countries the reliance on sponsorship continues to grow. According to Irish firm Onside Sponsorship, spending here in this area in 2012 will be steady at about €120m, after two years of steep decline, even if this is influenced somewhat by Euro 2012 and the Olympics.
Still, the challenge is there for sports to attract business. This applies just as much at local level -- as in the Longford example -- as the national or international spheres.
"Whilst the rationale for why companies decide to invest in sports sponsorships varies wildly, what can be said is that the key motivation is no longer just about maximising brand visibility and awareness, but is also about gaining deeper and more emotional engagement with fans and staff, and even managing the perception of the sponsoring company," says Clark.
Meanwhile, the two other main planks of sports revenue -- media rights and merchandising -- are also expected to play greater roles in the future. Baseball and American football, for example, are the envy of the sporting world for the way in which they can make large sums of money from merchandising. (In North America, this accounts for a quarter of all sports income. In fact, North America, accounts for 71 per cent of the total global sports merchandising market.)
Sport, no matter what the level needs money to survive and those who adapt and innovate to the changing landscape will most likely do just fine.
Sunday Indo Sport