The NBA has banned L.A. Clippers owner Donald Sterling for life, but that's not good enough for many advertisers and sponsors.
Nearly 20 brands suspended or terminated their sponsorships of the Clippers after the release of a recording in which Sterling, 80, scolded a female friend for associating with black people in public. The prospects for their return hit a major snag this week when Sterling's wife, Shelly Sterling, announced that she would fight to keep control of the team.
Her involvement puts the NBA — and advertisers — in an awkward position. The ban applies only to her husband, but local civil rights leaders are threatening to boycott the team if his wife retains ownership. And if Shelly Sterling takes her claim to court, the Clippers could be in limbo for years.
Sponsors won't want to wait out the instability, said AJ Maestas, president of sports sponsorship analytics firm Navigate Research. Although Shelly Sterling has publicly condemned her husband's comments, she bears a name that has already proved to be toxic to advertisers and is "tied to this situation, beyond her control," he said.
"If there's a negative perception of that last name, fair or not, sponsors aren't going to want to associate with it," Maestas said. "They're not going to risk damaging their brand just because Shelly Sterling might have a good legal argument."
Until Sterling's ownership is resolved, money that flows into the team's coffers winds up in Sterling's pockets — a reality that's difficult for some advertisers to stomach.
"Even though the commissioner has made it very clear that Sterling is out, the perception and the negativity that has developed is something the brands will be very cautious about," said Chris Cakebread, a professor of advertising at Boston University.
Many Clippers sponsors are big spenders when it comes to marketing. Sprint last year shelled out nearly $766 million on various advertising campaigns, while State Farm's total was nearly $627 million, said advertising and media research company Kantar Media.
The average NBA team has 130 sponsors and about $20 million in annual sponsorship revenue, according to Maestas of Navigate. The Clippers have not disclosed their revenue from advertising and sponsorships.
When golfer Tiger Woods was embroiled in a sex scandal, he lost roughly 30% of his endorsement money, according to Navigate. The Clippers could lose up to 40% if the Sterling controversy drags on.
After NBA Commissioner Adam Silver came down hard on the team's billionaire owner last week — banning him from all games, issuing a $2.5-million fine and moving to strip him of ownership — a few companies, including Samsung and Kia Motors America, resumed their sponsorship of the Clippers.
But many are still waiting on the sidelines, wary of backing a team that Sterling continues to control, at least in name.
Burger King has yet to resume its business relationship with the Clippers, saying it was "working to determine our course of action."
State Farm, which had all of its in-stadium signs removed along with Clippers-specific online and radio spots, said it was "continuing the pause of our sponsorship of the Clippers organization as we evaluate this ongoing situation."
Virgin America, the Santa Ynez Band of Chumash Indians and CarMax have also declined to return as sponsors for now. CarMax, which had sponsored the Clippers for nine years, said it would "welcome the opportunity to discuss future sponsorship if this matter is fully resolved."
Sprint said it was pleased with the NBA sanctions but would continue suspending its marketing activities with the Clippers. The telecommunications company had court-side displays, LED ads on the concourse level of Staples Center and public address announcements at the arena.
"One of the things we'll consider as we evaluate that relationship is what ends up happening with respect to the ownership of the Clippers, which remains unclear at this point," Sprint spokesman Dave Mellin said. "Unless there is further action taken regarding ownership of the team, we will continue to suspend our marketing activity."
Mellin declined to say whether Sprint had to pay a termination fee for pausing its sponsorship, saying the company doesn't discuss financial terms for competitive reasons.
Constellation Brands, parent of the Corona beer brand, was much more blunt.
"At this time, we will not restore our relationship with the team as long as Donald Sterling is still the owner," the company said in a statement.
Backing away from the team seems to have helped some brands. In the days after TMZ released the Sterling recording, public perception of companies that suspended their Clippers marketing efforts improved substantially, according to sentiment tracking service YouGov BrandIndex.
"When they take a very public and quick stance condemning something that is universally despised, it's like a public rally behind each of those brands," said Drew Kerr, a YouGov spokesman.
Advertisers have a tough choice to make. Pulling ads means losing the chance to tout products to consumers, a big missed opportunity now that the Clippers have emerged from the shadows of rival Los Angeles Lakers. The Clippers are in the playoffs, the Lakers are not.
But with many fans incensed by Sterling's remarks, an appearance of close ties to the team could seriously damage a brand's reputation. That's especially true in the age of social media, when corporate missteps are lambasted and ridiculed online.
Social media "is like a forest fire: very easy to ignite, very hard to extinguish. And once perceptions are developed, it's tough for the brands," Cakebread said. "It takes time for them to build up again."
The easiest solution for many is to simply stay away, he said.
Faced with the loss of millions of dollars, the NBA has been trying to woo back reluctant companies. During last week's news conference, Silver encouraged marketers to judge the league on its response to the incident.
A handful brands have come back, but with caveats.
Yokohama Tire quickly reinstated its sponsorship of the Clippers after Silver's news conference, but mandated that half of its 2014 NBA playoff sponsorship funds be earmarked to charities dedicated to anti-discrimination and tolerance efforts instead of going to the organization.
Red Bull followed with a similar approach. For the remainder of the postseason, the Clippers must donate half of the funds the team is set to receive from the energy drink brand to the anti-discrimination charities that Silver named as beneficiaries of Sterling's $2.5-million fine. Red Bull also dictated that the rest of its sponsorship proceeds be used exclusively to run the team, according to a statement.
Adidas also returned to its contract, but replaced its usual ads and logo placements with the Clippers logo and the phrase "We Are One" during the team's April 29 game in an effort "to support the team and fans in the healing process."
The NBA is now selling "We Are One" T-shirts from Adidas, with all proceeds going toward anti-discrimination and tolerance organizations.
Richard D. Parsons, the newly named interim chief executive of the Clippers, could help soothe sponsors' fears, said David M. Carter, executive director of USC's Marshall Sports Business Institute.
"He would be an influencer to the extent that he can deliver a sense of stability and coherent strategy going forward — the fact that he's a minority is a plus," Carter said. "But the issue that still arises is that as long as Mrs. Sterling is involved, it adds to uncertainty. Sponsors are going to have to measure those two factors against each other."
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