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Forecast: Sponsorship Spending Will Slow In 2014

Advertising Age, January 07, 2014

By E.J. Schultz

Sponsorship spending by North American companies is expected to slow this year as marketers deploy alternative, digitally-based programs, according to a forecast by IEG, a sponsorship, research and consulting firm owned by WPP.

"Although sponsorship is still seeing steady growth, corporate interest in other marketing alternatives, particularly digital (including social and mobile), has dampened enthusiasm for significantly increasing sponsorship spending," IEG said in its forecast, which it has published annually for 29 years.

Spending is expected to increase 4.3% to $20.6 billion, which is lower than last year's 4.5% jump, which came in under the forecasted 5.5% increase.

till, IEG noted that the sponsorship increase is forecast to exceed outlays for regular advertising, which IEG parent company GroupM has forecast will grow just 2.8%. Big digital increases — including a nearly 10% jump in the U.S. — will be offset by declines in newspaper ads and slow growth in TV (2.6% increase), radio (1%) and magazine (1%), according to the GroupM forecast cited by IEG.

Sports sponsorships will continue to dominate, accounting for 70% of all sponsorship spending, followed by entertainment at 10%,causes at 9% and arts at 4%, according to IEG. But the rate of sports-sponsorship growth is forecast to slow to 4.9%, reaching $14.35 billion, which is down from from last year's 5.1% growth.

By contrast, spending on entertainment sponsorships is expected to grow 4.6%, more than double the category's 2013 growth of 2.1%. Jim Andrews, IEG's senior VP-content strategy, said the increase was mostly due to a change in definition.

Specifically, IEG is grouping some spending that used to be considered simple product placements or branded entertainment as sponsorship spending because it is being executed more robustly. Mr. Andrews cited Chase Sapphire Preferred's partnership with Bravo's "Top Chef Masters" show, which includes elements such as allowing cardholders to redeem reward points for VIP access to attend a "Restaurant Wars" episode. "We expect more of these types of deals in 2014, helping to drive up the growth rate for the entertainment category," Mr. Andrews said.

Overall, sponsorship continues to be a "tale of two cities," IEG stated, with spending on larger and more prestigious properties remaining strong. But "increases in funding directed toward smaller rights holders — especially those outside the sports and entertainment segments  — are expected to be below 2% in most cases."