Why SWC sponsors aren't bailing out

2015-06-05 09:16
FIFA (Gallo)

New York - How much scandal is too much scandal?

With billions of dollars at stake and few other ways to tap into the global love of soccer, FIFA sponsors like Adidas, Coke and McDonald's are likely to hang onto their marketing deals and try to weather the scandal that has tarnished soccer's governing body.

It would seem like an advertiser's worst nightmare: More than a dozen soccer officials indicted in an investigation into decades of corruption and fraud. Some are even on Interpol's global "most wanted" list. There's no sign the revelations are ending.

But no FIFA sponsors have jumped ship. They've issued sternly worded public statements and called for change - some of which may have started when FIFA chief Sepp Blatter said Tuesday he would resign.

Whether the next two World Cups will be in Russia and Qatar as scheduled, or elsewhere, sponsors will still want to be there, said Rick Burton, a professor of sport management at Syracuse University.

"By the time we get to 2018, this will be in the rearview mirror," said Burton who has also served as chief marketing officer for the U.S. Olympic Committee. "By 2018 McDonald's is still going to want to sell cheeseburgers in all the countries of the world, and they know everyone in the world will be watching the World Cup."

But the investigation is still going on, and more indictments are expected. Sponsors have to ask themselves: How much can we take before doing business with FIFA isn't worth it?

"We've never had a scandal in international sports quite this large at the core of an organization," said Robert Boland, professor of sports management at New York University. "My sense is this is just the tip of the iceberg."

On a smaller scale, sponsors often pull support from athletes or teams tainted by scandals. Radisson last year pulled its sponsorship of the Minnesota Vikings after they said they said they would let Adrian Peterson play while facing a child abuse charge. Kia, Red Bull and others fled the Los Angeles Clippers after racist comments attributed to the team's owner Donald Sterling surfaced. And Nike, Anheuser-Busch and others dropped cyclist Lance Armstrong after a report that he had used performance-enhancing drugs.

But that rarely happens with big sponsorships like World Cup soccer.

In the first place, more money is at stake: FIFA said sponsorships totaled $1.6 billion between 2011 and 2014. And more than 3.2 billion people are estimated to have watched the 2014 World Cup, global reach that's unparalleled for advertisers.

In addition, sponsoring a big organization or event is less risky than individual athletes. Marketers can tie themselves to fans' love of the game, which is less likely to change than attitudes toward an athlete who might misbehave, or even teams whose fortunes can wax and wane.

"Very few global platforms help brands like Coke, Samsung or Hyundai reach as many consumers as these platforms do. That's a built-in strength that sometimes makes them think they're immune to any backlash," Boland said.

The FIFA scandal has grown to the point where sponsors felt they had to speak up. Visa threatened to reassess its sponsorship, although it pulled back after Blatter said he would resign.

While there are few precedents for the FIFA scandal, in 1998 members of the International Olympic Committee were accused of taking bribes to vote for Salt Lake City to host the 2002 Olympics.

At the time, Olympic sponsor John Hancock canceled $20 million in advertising with NBC. John Hancock President David D'Alessandro sharply criticized the IOC for its handling of the matter.

It remains to be seen if any FIFA sponsors will make a similar move. Many are in multiyear contracts. Sponsorship deals for Visa, Hyundai, McDonald's and Anheuser-Busch run through 2022, and Coca-Cola's and Adidas' until 2030.

Sponsors know that if they exit, they'll be quickly replaced, Syracuse University's Burton said. He said It's more likely that sponsors will ask for more concessions instead of opting out entirely. "They'll use the power of their money to say that if we don't get the extra value we now demand, we'll pay less than what you're charging," he said.

In the end, John Hancock renewed its multimillion-dollar Olympic sponsorship after the IOC adopted reforms in its voting process.

"They stayed in, but they made their point," Burton said.

Read more on:    fifa  |  fifa bribery scandal  |  soccer

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