Eric Risberg/AP
A file photo of the 2007 DHL All-Star Fan
Fest in San Francisco, California.

DHL Could Be Newest Company to End Its Sports Sponsorships

November 19, 2008 02:56 PM
by Josh Katz
Struggling DHL might pull out of MLB sponsorships; other companies have also been wary of their sports obligations thanks to the floundering economy.

A tough economy for being a team sponsor

DHL is the newest company that has to rethink its sports partnerships because of financial difficulties. Derek Schiller, executive vice president for sales and marketing for the Atlanta Braves, says that the express-delivery service has indicated a desire to end its sponsorship with the baseball team, Bloomberg reports.

DHL recently terminated 14,900 employees, shut down three-quarters of its outlets and pulled out of domestic U.S. deliveries. The company has been losing too much ground to the United Parcel Service Inc. and FedEx Corp in the U.S. market.

DHL has a number of other marketing commitments with Major League Baseball teams. For the next two seasons, the company has promotional contracts the Cincinnati Reds, Los Angeles Dodgers and San Francisco Giants, for example. In 2007, DHL also renewed its agreement with MLB to sponsor the monthly and yearly relief pitcher “DHL Delivery Man" awards. It is not clear how DHL will proceed with all of its baseball engagements.

A number of companies find themselves with expensive sports sponsorships on their hands as the economy tanks. British tour operator XL had to abandon its shirt sponsorship with the English soccer Premier League team West Ham United, according to Time magazine. Insurer AIG, the shirt sponsor of soccer powerhouse Manchester United, was saved from the brink of financial death by the U.S. government.

According to Bloomberg, “The situation's so dire that even the bookies are getting involved. Irish bookmaker Paddy Power has started taking bets on which team will be the next to announce that it's ending the current shirt sponsorship.”

Investing in a team or stadium is not usually the sole reason a business goes under, according to Time. Furthermore, sponsoring a team does provide the opportunity for growth, even though it is considered risky.

Sports team sponsorship trouble is nothing new. In 1999, Enron made a 30-year deal for $100 million to name the home of the Houston Astros Enron Field. In 1996, Fruit of the Loom signed an agreement for $20 million with the Miami Dolphins to name the football stadium Pro Player Stadium, for their new line of athletic wear. The company filed for bankruptcy in 1999 but the court ruled that Fruit of the Loom couldn’t get out of the contract. The stadium retained the Pro Player name until 2005, when the contract expired.

Background: Economy takes its toll on NASCAR

On July 1, news surfaced that car owner Chip Ganassi shut down the race team of 2007 IndyCar Series champion Dario Franchitti because the team lacked sponsorship; his 71 employees lost their jobs, according to the Associated Press.

Fifty-three cars strove to qualify for the sport’s season opener at Daytona International Speedway in February. Because of financial difficulties, only 45 made it back to Daytona the first weekend of July.

The economy has been hitting NASCAR from several directions. Automakers pump about $500 million a year into NASCAR, but General Motors shares hit a 54-year low after reporting an 18.2 percent decline in sales in June. Sales for Ford Motor Company dropped 27.9 percent, Toyota experienced a 21.4 fall, and Chrysler’s numbers tumbled 22 percent.

NASCAR teams are also fighting to win sponsors. Bob Margolis of Yahoo Sports explains how vital sponsors are to the sport: “Approximately 65–70% of the cost of this infrastructure, along with a team’s other operating expenses, is funded using sponsorship dollars. The rest comes from purse money and endorsements.”

But sponsors are hardly immune from the flailing economy, leaving many with less money to spend. Sponsors have also started moving some of their marketing money to media, particularly television, because gas prices have stymied plans to travel and watch the races.
The economy has hit smaller, less successful teams more seriously than larger ones who have more sponsors to rely on.

Fan attendance at NASCAR races has presented another problem. For the Daytona race the first weekend in July, attendance was 20 to 30 percent less than usual, WBTV 3 News reported. According to WBTV, high costs of hotel rooms and gas were responsible for the attendance drop.

Related Topic: Small-scale racers struggle with gas prices


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