'Day of Reckoning' Coming: Marketers Sound Off on Skyrocketing Sports Prices

Advertisers Say They'll Seek Ways to Speak Directly to Fans

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Honda ponied up for Super Bowl spots this year, but how much is too much?
Honda ponied up for Super Bowl spots this year, but how much is too much?

DANA POINT, Calif. -- Marketers such as American Honda Motor Co. are increasingly fed up with sky-high prices associated with sports marketing. They warn a "day of reckoning" is coming when Madison Avenue will just say "No" to hyper-expensive sports programming such as the Super Bowl.

As one of the last bastions of DVR-proof TV, the price of sports -- from the prices paid by marketers for sponsorships and 30-second ads to TV rights paid by media companies -- continues to climb. But it's rare for marketers to publicly declare they're reaching the end of their rope. And to threaten to move their ad dollars away from sports media and into cheaper social and digital marketing.

But that's what they did during one panel at the 2014 IMG World Congress of Sports presented by SportsBusiness Daily. When Terry Lefton, editor-at-large for SBJ, asked whether marketers had finally reached a tipping point with escalating sports prices, several marketers sounded off.

Tom Peyton, assistant VP-advertising for American Honda, noted that the auto-maker devotes 18% to 22% of its annual media budget to sports. And the company isn't getting more sports for its money. It's just paying higher and higher prices. The time is coming when resentful marketers like Honda could decide enough is enough.

"It could go very quickly. Yeah, the day of reckoning is soon," said Mr. Petyon.

Advertisers have no input when TV networks such as ESPN, Fox, NBC and CBS pay astronomical prices for live sports rights. But they ultimately end up paying through the nose due to increased ad rates that networks charge to try to make these expensive deals profitable.

Harry Arnett, senior VP-marketing for Callaway Golf, pointed to Fox/Fox Sports 1's successful bid to take over U.S. Open golf tournament TV rights from NBC/Golf Channel for 12 years starting in 2015. The terms of the deal were not disclosed. But Golf Digest reported Fox offered the United States Golf Association $20 million more a year than NBC/Golf Channel.

Said Mr. Arnett: "The golf viewer is not increasing. But we see rights fees are. So we're trying to figure out other ways to talk to consumers. That aren't necessarily reliant on them seeing a really good commercial."

Lily Knowles, VP-product marketing for Vizio, predicted "brands will start to challenge different sports organizations to get more creative."

How? Mr. Lefton speculated sports leagues and teams will try to justify higher prices by giving sponsors TV exposure in places that were mostly ad-free in the past, such as player sidelines and the field of play.

Tom Peyton, Honda
Tom Peyton, Honda

But Mr. Peyton didn't sound thrilled by that prospect. "To what degree do you start to really tarnish the quality of the event you're watching? Many would argue we've already reached that point."

After the panel, Mr. Peyton told Ad Age that frustration over high sports prices is building across the board.

"There has to be a point where the price of sports properties on TV, the price of tickets for consumers to games, is truly affecting the amount of sports we can engage in -- and the type of sports we engage in."

Consider the incredible inflation of Super Bowl ad prices, noted Mr. Peyton. Remember when advertisers were shocked to pay $2 million for a 30-second spot? Well, that was the good old days.

This year, Fox averaged $4 million per 30-second spots in its telecast of Super Bowl XLVIII. NBC's already selling ad time for Super Bowl XLIX in Phoenix. "What other venue, what other activity, has that kind of increase?" he asked.

Yes, Honda dug deep and spent millions on a Super Bowl spot starring Bruce Willis and Fred Armisen this year. But it will take a "year-to-year" approach on future Super Bowls. "Frankly, it's the extensions of the Super Bowl that are adding some value," Mr. Peyton said, referring to the social-media plays tied to the game.

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The marketer's panel came one day after a group of sports-rights-holders predicted fees will keep going up, up and up.

Major League Soccer Commissioner Don Garber said his league's poised to announce new TV deals that will boost MLS's rights fees by 50% or more.

Tim Leiweke, CEO of Maple Leaf Sports & Entertainment -- which owns the NHL's Toronto Maple Leafs, NBA's Toronto Raptors and MLS's Toronto FC -- said the most valuable programming continues to be "unpredictable live" events.

"Because we're unpredictable, because no one knows what's going to happen, our rights are going to continue to explode. The whole world now is our market, not just North America."

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