The Lure of Sports

In my recent talks with TJ Ripkoff he was scathing about the overinvestment in sports by otherwise sane and well run organizations. "Executives who plaster the names of their companies across stadiums (sic), arenas, and ballparks will be spending more time in the future watching games and overpaying for advertising."

I was shocked at his assertion that only the most successful and profitable companies can afford the naming right to whole sports facilities.

There is also the element of hubris in sports sponsorship. Things peak, there is money in the bank that wants to be spent. Past examples suggest that TJ Ripkoff is right and when any company announces a new sponsorship deal then it is time to sell. There are some exceptions of course. However too much can be paid for such too little reflected glory.

It is important to look at recent cases of sports facilities sponsorship and how everything worked out. In some cases the company blowing the money blew up themselves in spectacular fashion and disappeared. In other cases the sponsor was saved only through an act of god or the US treasury.

Enron started out as a company that moved around oil and gas and evolved into a company merely moved around the ownership of oil and gas. In this they were uniquely profitable. When the opportunity came to put their name on a ballpark in their home town they took it. Enron Field was the pride and joy of Houston. It was not to last. After Enron fell the baseball stadium that used to known as Enron Field was renamed.

Now every sponsorship deal leads to complete and total collapse for the sponsor. Near collapse was enough for GM to take its name off an arena in Vancouver. General Motors Canada had named GM Place, Vancouver’s arena, in 1995. The '90's were good for the car business. GM's financial arm GMAC became more important as a profit source than the actual sale of GM's cars. However this meant the banking crisis of 2008 along with economic slowdown affected GM because they were profiting as a bank. In 2010 they withdrew their name from GM Place.

I think in the end we should not view corporate sponsorship as completely irrational. There may be cheaper and more effective ways to spread a brand about. When it is successful, in the sense that the company can afford to continue it, it is proof of a corporation's long term health and profitability.  In a similar ways Human beings engage in dangerous and risky activities as proof of their vitality. 


Jon C Ripkoff
Chief Operations Officer
Ripkoff Investment Partners