Lee Igel, Contributor29/08/2011
Sports sponsorships have been one of the few consistent and relatively-safe places for corporations to direct advertising dollars during the economic turbulence of the past few years. After showing signs of contraction in the United States in 2009, sponsorship expenditures by North American companies suddenly grew 3.9 percent to $17.2 billion in 2010 and are anticipated to rise an additional 2 percent this year, according to research from IEG SR. One of the leading spenders in the market has been Bank of America, which garnered its latest headlines with the announcement of a $5 billion capital injection from Warren Buffett on behalf of Berkshire Hathaway.
Despite having significantly reduced its sports sponsorship portfolio in the last two years, Bank of America concerns itself as a major presence in the sports financing, advisory and marketing spaces. Company press releases andpublicity materials tout “proud sponsor” agreements with Major League Baseball and several of its clubs; NASCAR, some of its tracks and the banner of one race; the Dallas Cowboys, New England Patriots, Washington Redskins and Carolina Panthers of the National Football League, including stadium naming-rights at the home of the Panthers; and regional athletic events such as basketball tournaments and marathons. The bank also offers checking accounts, debit cards and credit cards featuring MLB and its 30 clubs, as well as various products aligned with the four NFL franchises listed above and the Detroit Red Wings of the National Hockey League.
Bank of America appears to be the latest recipient of Buffett’s deft use of private-sector bailouts, which are returned with guaranteed annual dividends that most investors wouldn’t mind achieving even during a healthy economic period. The timing and structure of the deal makes it clear that the bank is not only still weighed-down by decisions made around the prior financial crisis, but raises the prospect that such a“confidence building move” portends a larger financial crisis. It may be akin to something Peter Drucker observed in 2003 in his book, Managing In The Next Society:
“JP Morgan once mattered to the American economy. At his peak, he had enough liquid capital to finance all capital needs in America for four months. Adjusting for inflation, JP Morgan probably had a little less than a third of what Bill Gates has today. Such wealth possessed by one man has not been seen in the world since the time of the great Khan of China. But Gates’s $40 billion could only finance the American economy for less than one day. Bill Gates is important because of the Microsoft company he built and the software we use. As a rich man, he is totally irrelevant. How he spends or wastes his money will have no impact on the American economy. It is a drop in the bucket.”
Nevertheless, given the cash infusion and Buffett’s status and connections, it is highly-likely that Bank of America will live on in its relatively current form for some time to come. In turn, there will be no noticeable decrease in its sports sponsorship presence; any significant decrease will be a result of already-made decisions that have not yet been publicized. There may, in fact, be an increase in the bank’s sports sponsorship expenditures in the interest of demonstrating vigor and relevance.
The latest headlines about Bank of America ought to renew questions about sports sponsorships, beginning with “What is the benefit of a stadium named after a bank?” They might also invite some thinking on the part of league and franchise officials about how to fill the void left by sponsors who are wiped out by the next financial crisis.
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