In response to an unprecedented economic situation not faced by the sponsorship industry in the past two decades, IEG is issuing the first-ever mid-year update of its annual spending forecast.

The revision projects that North American companies will still spend more this year than they did in ’08, but only by a tiny margin of 1.1 percent.

That compares to 2.2 percent growth predicted in the 24th annual industry forecast issued at the end of last year, which at the time was the smallest growth rate in the forecast’s history.

The new figure means sponsorship spending by U.S. and Canadian companies will total $16.79 billion this year compared to $16.61 billion in ’08.

Globally, sponsorship’s growth rate also will slow. IEG’s December forecast projected a rise in spending of 3.9 percent above the $43.1 billion spent in ’08; that figure has been revised downward to 3.1 percent, resulting in total global expenditures of $44.4 billion for ’09.

Although the lower forecast is sure to be disappointing to industry practitioners, the glass-half-full perspective is that sponsorship is one of the few forms of marketing where spending figures remain in positive territory, even if not by much.

Revised forecasts for spending in media advertising and promotions are showing even steeper declines than those projected in reports for those industries issued last year.

North American media spending is predicted to decline 4.2 percent in the coming year, according to the worldwide media and marketing forecast produced by GroupM, the global media investment management operation of WPP Group plc. The drop was anticipated to be just 3.2 percent in the company’s December report.

Similarly, spending on business and consumer promotions is now expected to decline at a rate of 2.3 percent, according to the mid-term forecast from private equity firm Veronis Suhler Stevenson. In its Communications Industry Forecast 2008-2012 issued last August, the firm expected promotion spending to grow at a rate of 1.7 percent in ’09.

Slow Start Curbs Enthusiasm; Still Hope For Year’s End
IEG’s December forecast anticipated positive developments in the economy would occur in the first half of the year in response to the new presidential administration and the federal stimulus plan, alleviating some sponsor fears and uncertainty about the future that have kept many budgets locked down.

However, without strong signs of an overall recovery, the deal-making environment has not changed significantly since the beginning of the year and anticipated spending has been kept on hold.

The mid-term update retains an expectation of economic skies beginning to clear, in the fourth quarter of ’09, which should still allow time for deal signings and the small increase in overall sponsorship spending.

If the economy does not show signs of a rebound by that time, the North American sponsorship market may indeed be looking at its first spending decline in its quarter-century history.

No Major Changes Within Property Segments, Geographic Markets
The revised forecast does not project significant changes in the breakout of how sponsor dollars are allocated across the industry’s six major property sectors. Each segment will see its earlier projected growth trimmed proportionally.

Projected dollar amounts for each property type are sports: $11.48 billion, up .7 percent from $11.4 billion in ’08; entertainment tours and attractions: $1.64 billion, up .7 percent from $1.63 billion; causes: $1.55 billion, up 2.2 percent from $1.52 billion; arts: $838 million, up 1.3 percent from $827 million; festivals, fairs and annual events: $775 million, up 2.9 percent from $753 million; and associations and membership organizations: $498 million, up 3.3 percent from $482 million.

Globally, subtracting U.S. and Canadian activity, spending by the rest of the world is expected to reach $27.6 billion, according to the mid-term update, down from a projected $27.8 billion in December.

European firms are now projected to spend $12.1 billion in ’09 instead of $12.2 billion, representing a 3.4 percent increase from ’08. Asia Pacific companies should increase spending to $10.1 billion instead of $10.2 billion, for an increase of 6.3 percent over last year.

Spending projections are relatively unchanged for Central and South American companies and those based in all other parts of the world.