Tuesday, June 19, 2007

A lesson in ambush marketing

One of the ongoing marketing challenges most sports organizations face is ambush marketing. In the simplest terms: ambush marketing occurs when a brand pays to become the official sponsor of an event and another brand tries to connect itself to the same event, without paying the sponsorship fee and without breaking any laws. It’s coming as close as you can to that mythical line in the sand without actually crossing over that line. The key is don’t cross over that line and be careful that the product and/or company you’re involved with doesn’t get singed by the ensuing fire. The latest example of a company playing with ‘fire’; AT&T who Sunday was served with a lawsuit on behalf of NASCAR. NASCAR a sports property driven by their successful ability to meld sports sponsorship are suing AT&T for $100 million accusing the wireless provider of interfering with its exclusive sponsorship agreement with rival wireless company Nextel.

NASCAR through the lawsuit intends to ban all telecommunications companies other than Nextel -- out of its top series in 2008. Nextel is the title (lead) sponsor for NASCAR’s premier racing series, The Nextel Cup.

R.J. Reynolds through their company Winston was the longtime lead sponsor for NASCAR’s lead series, The Winston Cup. The Winston Cup ran for 31 years, ending at the end of the 2003 NASCAR racing season. Nextel stepped in signing a 10-year $700 million contract.

The contract gave Nextel exclusivity in the telecommunications category, with two notable exceptions. Cingular and Alltel were grandfathered into the sport when Nextel entered in 2004. Both had sponsorship contracts with NASCAR teams that preexisted NASCAR’s Nextel agreement. There are two sides to that issue, Nextel was making a major (10-year’s $700 million) commitment to the sport and needed to have their interests protected, but at the same time NASCAR officials recognized sponsorship agreements that were in place before Nextel expressed any interest in the opportunity. Included in the contract between Nextel and NASCAR is an agreement that would forbid any NASCAR team from signing a sponsorship agreement with any telecommunications company.

The issue that has become a legal minefield – the logos on Jeff Burton’s car and his Richard Childress Racing team. Burton and Childress have a sponsorship agreement with Cingular, which has since been purchased by AT&T. From NASCAR’s perspective AT&T was never a part of the ‘grandfathering’ in of any telecommunications companies. At the same time Jeff Burton and Richard Childress Racing have a multi-million sponsorship agreement they believe needs protecting.

On Friday May 18 U.S. District Court Senior Judge Marvin H. Shoob in Atlanta granted AT&T Mobility a preliminary injunction that will allow the placement of AT&T Wireless logos on the No. 31 Cingular Chevrolet owned by Richard Childress and driven in NASCAR Nextel Cup racing by Jeff Burton.

"I am just really happy for AT&T that we are going to be able to re-brand our car to AT&T and carry on," Childress said in a news conference that day "We want to get back to really trying to win this championship. It is just a great day for RCR and AT&T."

At the same time according to a report at NASCAR.com: AT&T wasted no time following the ruling. John Burbank, AT&T vice president of marketing, told reporters in a conference call that Burton's car was to be repainted in time for next day's Nextel All-Star Challenge at Lowe's Motor Speedway in Concord, N.C., on May 19.

"We're not hurrying in any way, shape or form to in any way make a statement about our relationship with NASCAR or Sprint Nextel,'' Burbank said. "This really is the normal course of business.''

In his ruling, Shoob said, "The court concludes that the continued appearance of the Cingular brand on the No. 31 car, unaccompanied by any indication that Cingular now does business as AT&T, is likely to confuse NASCAR fans.''

NASCAR didn’t sit on the fence releasing the following statement after the Judge’s ruling: "NASCAR is disappointed with today's ruling but will continue to provide a sponsor friendly environment for the industry and its partners. NASCAR is currently weighing any and all options for appeal of today's decision. Meanwhile, NASCAR will continue to protect the industry from actions designed to interrupt a business model which has been beneficial to all.

"It is important to understand that Sprint/Nextel is a cornerstone sponsor that benefits the entire industry by way of its contribution to the championship points fund, technology bringing fans closer to the sport, and its massive marketing and advertising campaigns."

And choosing their words carefully a Sprint/Nextel official released the following statement: "While we respect the court's decision, we disagree with this preliminary ruling," said Dean Kessel, director of NASCAR Nextel Cup Series marketing for Sprint/Nextel. "Sprint/Nextel has been committed to enhancing the NASCAR fan experience in many ways, including increasing the point funds payout and developing cutting-edge technology and services for the betterment of the fans, the teams and the sport.

"All of this was possible through the exclusivity granted to us as the series sponsor for the Nextel Cup, and that exclusivity from NASCAR also grants us protection from other telecommunications competitors infringing on our sponsorship rights. The merger that created the new AT&T means their brand now represents a much broader and more comprehensive company than the Cingular brand, which was allowed to retain its existing brand position with the racing team. We will continue to follow the case closely."

Which led to the Sunday lawsuit. There have been plenty of examples of ambush marketing in sports before the events that unfolded over the weekend and Monday, many linked to the Olympic Games. The International Olympic Committee protects the Olympic rings zealously, at each and every turn.

At the 1984 Olympics Kodak sponsors TV broadcasts of the games as well as the US track team despite Fujifilm being the official sponsor.
At the 1988 Summer Olympics, Fujifilm sponsors the games despite Kodak being the official sponsor.

At the 1992 Summer Olympics in Barcelona, Nike sponsors press conferences with the US basketball team despite Reebok being the official sponsor.
At the 1994 Winter Olympics, American Express sponsors the games despite Visa being the official sponsor.

For the 1996 Cricket World Cup, Pepsi ran a series advertisements titled "Nothing official about it" targeting the official sponsor Coca Cola.
At the 1998 World Cup, Nike sponsored a number of teams competing in the Cup despite Adidas being the official sponsor.

At the 2000 Sydney Olympics, Qantas Airlines’ slogan "The Spirit of Australia" sounds strikingly similar to the games’ slogan "Share the Spirit." despite Ansett Air being the official sponsor.

At the 2002 Boston Marathon, as Adidas-sponsored runners come off the course Nike are treated to spray-painted messages honoring the day of the race, but not the race itself.
At the 2006 FIFA World Cup, fans of the Netherlands had to disrobe Bavaria Brewery's leeuwenhosen because Budweiser was the official beer sponsor.

The IOC so strong protects their sponsorships and at the same time protecting the number one rule relating to the Olympics and sponsorship (Olympic events area must be free of any sponsorship areas) the IOC includes contractual language in every Olympic bid agreement forbidding any commercial signage of any kind within a cities geographical area during the 16 days of an Olympic Games.

In Atlanta during the 1996 Olympic Games Nike purchased huge billboards in and around the entire city, focusing on the major Olympic venues. To the hundreds of thousands of visitors attending the Games and the thousands of reporters covering the Games it would have been easy to assume Nike was a 1996 Olympic sponsor. And 1996 wasn’t the first time Nike came brazenly close to that line in relationship to the Olympic Games.

Nike has long been considered the benchmark when formulating and implementing successful ambush marketing strategies for the Olympic Games. Nike has a history of ‘ambushing’ the Olympic Games since 1984. On each occasion, Nike has successfully associated itself with the popularity of the event and has liquidated its investment in ambush marketing activities via increased sales. Nike ‘ambushed’ Reebok’s sponsorship of the 1996 Atlanta Olympics by strategically blanketing the city’s billboards with its ‘swoosh’ symbol. Likewise, Nike employed this tactic in ‘ambushing’ Converse’s sponsorship of the 1984 Los Angeles Olympics. Reebok who had to deal with Nike’s ambushing efforts at the 1996 Games ended their $10 million annual commitment to the IOC following the Atlanta Games.

According to NASCAR.com among the issues NASCAR raised in their lawsuit: "Cingulars refusal to follow NASCAR rules and accept NASCARs denial of this paint scheme, and the filing of this lawsuit, has undermined NASCARs authority as the sanctioning body of stock car auto racing,'' said the suit.

Most notable among those "certain actions'' is that "NASCAR may exercise its discretion not to offer NASCAR membership to Cingular or AT&T for the 2008 Nextel Cup Series season.''

In a related matter, and a classic example of throwing fuel onto the fire Monday, Richard Childress Racing making the following announcement: AT&T has exercised the option in its current contract with Richard Childress Racing (RCR) by signing a contract extension that will ensure that the popular No. 31 AT&T Chevrolet remains a competitor in the NASCAR Cup Series for years to come.

At the same time, Jeff Burton, driver of the No. 31 AT&T Chevrolet, has reached agreement with RCR on a contract extension with the 10-time NASCAR championship-winning organization.

“As long-time supporters of racing and its fans, we are very pleased to continue our involvement with the sport as a team sponsor in the wireless category,” said Dave Garver, executive director of high growth segments and sponsorships for the wireless division at AT&T. “We’ve enjoyed our relationship with Jeff and RCR, and look forward to continuing to work with them through many more winning seasons.

“In the past decade, we’ve developed innovative ways to bring fans closer to racing, with interactive content that can be accessed via their wireless handsets, alerts sent directly to their phones and on-the-ground activities promoting wireless services at and around racing events. We’re looking ahead, planning even more engaging ways to bring the latest in wireless technology to fans.”

And here’s how Childress Racing sees the sponsorship. As they see it “AT&T, as Cingular, has been the primary sponsor of RCR’s No. 31 team since 2002.” And as NASCAR looks at the issue – AT&T hasn’t been the sponsor and it’s immaterial to NASCAR’s position that Cingular was purchased by AT&T.

“AT&T has been an important part of RCR since 2002 so we’re very excited about renewing our contract with them and continuing that great relationship,” said Richard Childress, president and CEO of Richard Childress Racing. “AT&T has been a tremendous supporter of RCR’s fans and racing fans throughout the sport for more than a decade and I am eager to turn our full attention back to winning a championship.

“Jeff has been an important piece of the puzzle since he arrived at RCR in 2004. He’s helped our entire organization since that time and will continue in that role. He’s a true professional, whether it’s with his crew or with sponsors, so we’re very pleased to have him signed to a new long-term contract.”

Burton began driving for RCR in August 2004 and was named the driver of its No. 31 team for the 2005 NASCAR Cup Series season. He has earned two victories, four pole positions, 15 top-five and 33 top-10 finishes in 85 races driving the No. 31 AT&T Chevrolet.

“I’m really excited about AT&T extending their involvement with RCR. They’ve been a great company to work with,” said Burton. “They have great people and great products. It’s a real honor to represent AT&T both on and off the track.”

“My enthusiasm about what we are doing at RCR is as high as it’s ever been. I’ve never even considered doing something different. I’m glad we were able to re-sign with AT&T so that Richard and I could get our deal done. It’s a real honor to drive for Richard and I am looking forward to continue working with him over the next few years.”

You can assume Monday’s announcement by Richard Childress wasn’t a coincidence – once NASCAR filed its lawsuit Sunday, Richard Childress Racing announced its agreement with AT&T.

How this is going to play itself out is anyone’s guess at this point but there are a few major issues for all the parties involved to consider. History has shown if NASCAR isn’t successful in protecting their agreement with Nextel, Nextel may sue NASCAR to end their $70 million annual commitment. At the very least Nextel officials will likely seek a dramatic reduction in their sponsorship fee. Its in the best interests of AT&T they make life as difficult as they can for Nextel, after all their competitors. Stay tuned – the NASCAR sponsorship games have only begun.

For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: NASCAR.com, Wikipedia

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