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Last year, banks and financial companies spent an estimated one billion dollars on sports marketing: things like stadium naming rights, and NASCAR sponsorships. But the rules of the game appear to be changing now that the Federal Government is giving the same companies billions of dollars in bailout money. After sharp criticism, some banks are walking away from sports deals just to avoid the controversy. From member station WFAE in Charlotte, Scott Graf reports.
SCOTT GRAF: No banking company is more prominent in the sports world than Bank of America but sports marketing isn't something CEO Ken Lewis often talks about. Yet in a recent luncheon in Boston, he did.
Mr. KEN LEWIS (CEO, Bank of America): For every dollar we spend on sports marketing, we get 10 dollars back in revenue and three dollars in earnings. This is not wasted money, it's money that drives business results.
GRAF: Lewis's bank received Troubled Asset Relief Program, or TARP, money last year. For companies that took the bailout funds all aspects of their businesses are under scrutiny, including sports marketing. Ohio Congressman, Dennis Kucinich has being among the most vocal of critics.
Representative DENNIS KUCINICH (Democrat, Ohio): When these companies are getting huge amounts of money, billions of dollars from the federal government, it's just not right that they pretend that somehow it's their money, that's putting their name up there, it's not.
Mr. RAY BEDNAR (Senior Vice-president, Sports Marketing; Bank of America): Our response would be whatever generates great profits back to help us repay those TARP funds is a smart business for us to be into.
GRAF: That's Ray Bednar who oversees sports marketing at Bank of America. According to research from Nielsen, B of A spent more than any other bank last year, an estimated $44 million to advertise during televised sporting events. It also has deals with all the major sports in the Olympics. In turn, the bank gets to market its products to fans. Another benefit is handling the day to day finances of some very big clients. Paul Swangard is a sports marketing professor at the University of Oregon.
Professor PAUL SWANGARD (Sports Marketing, University of Oregon): I can't see why you'd have strong criticisms because that's what will get these banks out of the situation they're in, by engaging the right customers - those who will deliver economic value to the long term. And if it happens to be that its their loyalty to a sports brand that gets you the opportunity to have that conversation, I see nothing wrong with that.
GRAF: Bailout money can't be spent directly on sports but because of how sponsorship deals might look banks are weighing whether it's worth the PR hit. A February golf tournament in California caught Northern Trust all kinds of flack for the extensive entertainment package it provided clients. Soon after Wells Fargo announced it would not put its name on a PGA tour event despite being obligated to pay an estimated $6.5 million. Decisions like that had the attention of PGA tour commissioner, Tim Finchem.
Mr. TIM FINCHEM (PGA Tour Commissioner): The level of rhetoric has distorted really the business model that is used on the PGA tour where a sponsor sponsors the tournament - it's not lavish entertainment.
GRAF: Finchem thinks people who criticize sports marketing don't understand how it works. Regardless, the University of Oregon's Paul Swangard hopes the recent criticism will make a good business practice even better.
Prof. SWANGARD: I think the companies out there are just going to, you know, come out of this hopefully a little smarter and wiser about the way in which they spend their money but at the end of the day, what has to not be lost in all of these is, you know, sports marketing works.
GRAF: And at a time when financial institutions need all the help they can get, people like Swangard say not taking advantage of every business tool seems like anything but smart money. For NPR News, I'm Scott Graf in Charlotte.
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