Monday, December 28, 2009

Event study pegs cost of Woods scandal at $12 billion 

A press release from UC Davis discusses an event study done by economists Chris Knittel and Victor Stango, which examines the stock market returns to Woods' sponsors in the wake of the scandal. Here's the punch line:

To assess shareholder losses, the economists compared returns for Woods’ sponsors during this period to those of both the total stock market and of each sponsor’s closest competitor.

Knittel and Stango also reviewed returns for four years before the car accident to determine how each sponsor’s market performance normally correlates with that of the total market and of competitor firms.

The study focused on nine sponsors for which stock prices are available: Accenture; American Express; AT&T; Tiger Woods PGA Tour Golf (Electronic Arts); Gillette (Proctor and Gamble); Nike; Gatorade (PepsiCo); TLC Laser Eye Centers; and Golf Digest (News Corp.).

Overall, Knittel and Stango concluded that the scandal reduced shareholder value in the sponsor companies by 2.3 percent, or about $12 billion.

“(This) pattern of losses is unlikely to stem from ordinary day-to-day variation in their stock prices,” the researchers wrote.

Investors in the three sports-related companies (Tiger Woods PGA Tour Golf, Gatorade, and Nike) fared the worst, the study found. They experienced a 4.3-percent scandal-generated drop in stock value, equivalent to about $6 billion.

Two to four per cent of your company is a lot to have tied up in a wayward athlete. I don't doubt the measurement that Knittel and Stango have done, but the magnitude of such studies sometimes has a whiff of excess response to information. Here's a link to the study itself (pdf), which seems worth a read when you get the chance.

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permalink posted by Skip Sauer @ 1:49 PM

Tuesday, September 15, 2009

Putting a price on "announced attendance" 

This is dated, but interesting. Back in the 2005-06 season, the San Diego Gulls, a minor league hockey team (ECHL), reported an average attendance of 5,841 for its regular season games. The Gulls made the post-season, and had two home playoff games. The Gulls announced attendance for these two games was 2,003 and 2,690, less than half the regular season average. What gives? Mark Ziegler provides this answer:
During the regular season, teams are allowed to announce tickets distributed, often ballooning attendance figures 40 or 50 percent above the turnstile counts. In the playoffs, the league adds a surcharge to each ticket – this year it was $1.50 – to cover postseason expenses as well as a player bonus pool. You are allowed 50 comp tickets. Anything else is up to an individual team, with the proviso that it pays $1.50 per ticket. So if a team announces 5,000 in the playoffs when 2,000 are in the house, does it pay the surcharge on 5,000 tickets? “You bet,” ECHL Commissioner Brian McKenna says. “What is announced in the playoffs is very close to the actual number in the building.”
Apparently, "tickets distributed" is a euphemism for dropping off blocks of 50 or 100 tickets to local shops, civic groups, and the like. This pumps up the announced attendance and might make the team look more popular than it really is. When you put a price on it (however unintentionally), announced attendance plummets.

Ziegler also lists league policies for announcing attendance. There's a good bit of variation across the sports.

Thanks to student Wil Kirwan for the link!

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permalink posted by Skip Sauer @ 10:36 AM

Thursday, January 08, 2009

Naming Rights Pioneer Firm Folds 

The Bonham Group - a Denver firm involved in naming rights negotiations - has closed down, a reflection not just of the recession but the current state of sponsorship in sports. Here's a clip from an interesting story in the Denver Business Journal:

The 20-year-old company was involved in about 137 discussions around the world involving naming rights on sports stadiums, such as the new, $321 million Consol Energy Center — still under construction — where the Pittsburgh Penguins expect to play their 2010-11 hockey season.

The 21-year naming rights deal between Consol Energy Inc. and the Pittsburgh Penguins was announced in December 2008.

“Dean Bonham is known as one of the forefathers of negotiating naming rights,” said Vic Gregovits, the senior vice president of sales and marketing for the Cleveland Indians.

Dean Bonham is not the first innovator/entrepreneur to have made and lost a fortune in history, but it's a shame to see it happen in real time.

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permalink posted by Skip Sauer @ 4:38 PM

Wednesday, October 31, 2007

Marketing a Winner 

Most pre-season marketing campaigns promise some pizazz but not much more. Come see the Amazing Mets! Blast off with the Rockets! Let's go crazy with the Wild! This one from the Arena Football League is a little different:
How confident are the Arizona Rattlers that they'll make the playoffs in 2008? They are offering a money-back guarantee to their season-ticket holders: A trip to the playoffs or a full refund, no strings attached.

"We are putting millions of dollars on the line," said Rattlers managing partner Brett Bouchy. "However, we have full confidence in our new coaching staff, and look forward to returning to the playoffs in 2008."

The campaign, unveiled Tuesday, is unique in the fact that there are no caveats, clauses or fine print. If the Rattlers do not make the playoffs, fans will be refunded 100 percent of the cost of their season tickets by the team -- period.

...The Rattlers were 4-12 last season and missed the playoffs.
I'd say that's sticking your neck out. Maybe if they fail, the team can make it up on concessions. ;)

Thanks to Kurt R for the link.

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permalink posted by Skip Sauer @ 8:49 AM