The year just ending marks an historic milestone the sponsorship industry would rather not have achieved. For the first time, less money was spent on sponsorship by North American companies than in the prior year.

The 25th annual year-end industry review and forecast from IEG SR reveals that spending shrank 0.6 percent in ’09 to $16.51 billion, representing a loss of $100 million that previously had gone to properties.

Those unprecedented numbers reflect a marketplace that never recovered from the economy’s freefall toward the end of ’08. That collapse and related developments (automaker bankruptcies, public and government criticism of TARP-recipient spending, etc.) devastated spending from certain quarters of the industry and put other companies into lock-down mode.

A year ago, IEG SR projected a slight gain in spending for ’09 based on the assumption that the economy would spring back by the second half of the year. When stimulus measures and bailouts did not provide a quick jump start, we cut our projection in half in June, still anticipating a comeback in the fourth quarter that never materialized.

On the bright side, the recovery now is showing signs of life. Conversations with buyers and sellers reflect optimism, and so we predict the $100 million and more will come back into the market in ’10 as the recession fades in the rear-view mirror and corporate budgetary restrictions are relaxed. IEG SR forecasts a 3.4 percent increase in spending by North American companies in ’10, projecting the total amount spent to be $17.08 billion.

The sponsorship market did not fall as far—and should rebound faster—compared to spending on advertising and promotion.

North American media spending dropped 7.8 percent in ’09 and will continue to fall another four percent in ’10, according to the worldwide media and marketing forecast produced by GroupM, the global media investment management operation of WPP Group plc. (GroupM is the parent company of IEG SR publisher IEG, LLC.)

Spending on business and consumer promotions declined 4.6 percent in ’09 and will not fully recover in ’10, facing another decrease of 1.5 percent, according to the Communications Industry Forecast 2009-2013 from private equity firm Veronis Suhler Stevenson.

A Year To Forget: 2009 Was Kind To No Category
For an industry accustomed to double-digit growth, the year just ending was nightmarish indeed. Success stories of properties doubling or tripling income over the course of a few years were replaced by kudos for rightsholders who were able to maintain existing relationships and eke out a small increase in revenue.

Sports, the largest sponsorship category in dollar terms, saw spending decline one percent from $11.4 billion in ’08 to $11.28 billion in ’09. Two of the other six major property sectors suffered a drop in revenue also: Spending on causes slipped a scant 0.3 percent from $1.52 billion to $1.51 billion, while arts spending fell 0.8 percent from $848 million to $820 million.

The other sectors managed gains, but not of the variety that cause leaps of joy. North American corporate spending on entertainment tours and attractions rose 0.8 percent from $1.63 billion to $1.64 billion; spending on festivals, fairs and annual events increased 0.4 percent from $753 million to $756 million; and spending on associations and membership organizations went up 2.9 percent from $482 million to $496 million.

Each of the six sectors continue to earn the same share of the sponsorship pie as they did in ’08, with sports taking 68 percent of the dollars, followed by entertainment tours and attractions at 10 percent.

Global Spending A Rosier Picture
With the U.S. economy at the heart of the downturn, spending by companies based outside North America has not been as negatively impacted by the recession. Global sponsorship expenditures reached $44 billion in ’09, a 2.1 percent increase from the $43.1 billion spent in ’08.

Minus activity by U.S. and Canadian companies, spending by the rest of the world hit $27.5 billion in ’09, a 3.8 percent rise over $26.5 billion in ’08.

For ’10, IEG SR projects 4.5 percent growth in worldwide sponsorship to $46 billion. The largest gains will come from Africa and South America, in part due to activity and interest surrounding South Africa’s hosting the 2010 FIFA World Cup and a developing sponsorship marketplace in countries such as Argentina and Brazil, the latter of which will host both the 2014 World Cup and 2016 Olympic Games.

Countries based in Central and South America will increase spending by 5.7 percent to $3.7 billion, while companies from all other countries, including those on the African continent, will grow their spends by the same 5.7 percent proportion to $2.1 billion.

European companies will boost spending five percent to $12.7 billion and those based in the Asia Pacific region will see a four percent rise to $10.4 billion.