Sterling scandal threatens to upend Clippers sponsorships next season
The Los Angeles Clippers, after a long bout of losing and playing in the shadow of the Lakers, have in recent years started picking up star players, wins — and advertisers.
Clippers sponsorship revenue has grown four years straight and jumped 27% in the most recent season while the NBA average rose just 5%, according to league documents obtained by The Times.
But when owner Donald Sterling opened his mouth — into a friend’s audio recorder — he put that newfound revenue at risk. As the disgraced owner continues to fight for control of his team, advertisers are threatening to bail on next season’s sponsorships.
Sponsors have played a central role in pressuring the Clippers and the league since the Sterling scandal erupted, and many current and prospective advertisers spend the summer off-season deciding how to spend advertising money.
Nearly all existing sponsors distanced themselves from the Clippers in late April after a celebrity gossip website posted a recording in which Sterling chastised his friend V. Stiviano for associating with black people in public. Some sponsors returned after NBA Commissioner Adam Silver moved swiftly to ban Sterling from the NBA for life. But several — including Corona, Virgin America, CarMax and Burger King — held out.
Skeptical that Sterling would leave without a fight, they continued to boycott the team even after the beleaguered owner this month conceded to a sale of the team to former Microsoft Chief Executive Steve Ballmer. Sure enough, Sterling reversed course a few days later, saying the deal was off and that he was going through with his plans to sue the NBA for $1 billion.
Dozens of pages of testimony from several NBA executives, compiled as supporting evidence in the league’s effort to strip Sterling of ownership, reveal deep anxiety among league officials over the financial threat to both the Clippers and the NBA at large.
In a sworn statement made May 15 as part of the NBA’s charges against Sterling, Amy Brooks, the league’s executive vice president of team marketing and business operations, said that at least 20 Clippers sponsors pulled out within a week of Sterling’s remarks becoming public.
The annual combined revenue from those sponsorships exceeds $10 million — more than half of the Clippers’ total sponsorship revenue for the season. Forecasts for the Clippers to reach up to $22 million in sponsorship revenue next season “now appear to be unrealistic,” she said.
“Time is of the essence in terminating the Clippers’ current ownership to prevent further financial and reputational harm,” Brooks said.
Even with the recent surge in advertising, and a home in the nation’s second-largest city by population, the Clippers have fewer sponsors than all but two other NBA teams, according to league documents. The team ranks in the middle of the pack in total revenue — 16th out of 30 teams — but stands to lose more money than most from each lost advertiser, the league documents show.
Midway through last season, the Clippers had 47 sponsorship contracts. On average last season, each NBA team had more than 98 sponsors and received $203,000 in revenue from each. The Clippers, meanwhile, had collected an average of $389,000 from each sponsor, according to league documents.
Among the biggest was Chumash Casino, which spent $1.3 million on Clippers advertising in the team’s most recent season. The casino, the team’s second-largest sponsor, hasn’t softened its stance.
“As long as Donald Sterling owns the team ... the tribe will not be considering advertising with the Clippers,” tribal Chairman Vincent Armenta told The Times. “The comments hit very close to home, and we do not want to partner with an organization that has views that are opposite of ours.”
The Clippers pulled in an estimated $18.3 million in advertising in its most recent season, according to league documents.
The steady increase in advertising revenue underscores the growing popularity of the Clippers, which had been a perennial loser until the team signed stars Blake Griffin and Chris Paul.
Sprint reiterated that it would not reinstate its partnership until Sterling was no longer involved in the team in any way. The company spent $587,801 in Clippers advertising during the season, according to team documents.
Constellation Brands, the U.S. maker of Corona beer, also said Sterling’s continued presence was the sticking point preventing its return.
Even sponsors who restarted their Clippers sponsorships after Sterling’s lifetime ban said they reserved the right to pull ads again if the situation isn’t resolved before the new season starts in October.
League officials struggled to contain the backlash to just the Clippers. Soon after the scandal broke, chief executives of Disney, Turner Broadcasting, ESPN and American Express reached out to Silver to “make clear that the league’s response would have a major effect on the nature of their companies’ relationships with the NBA going forward,” the commissioner said in a sworn statement.
Samsung requested to have all mentions of the Clippers stripped from the NBA Game Time mobile app the company sponsors, according to a declaration from Dan Rossomondo, the NBA’s senior vice president of global media. The company also wanted its ads moved away from Clippers content on NBA.com.
Samsung later joined “every sponsor and the majority of advertisers” in pulling commercials and courtside signs from an April 29 playoff game between the Clippers and the Golden State Warriors — a move that Rossomondo said would have cost Turner Broadcasting roughly $5 million in lost revenue.
The day of the game, Silver banned Sterling from the league, issued a $2.5-million fine and moved to strip him of ownership. Twenty minutes later, Samsung agreed to sponsor the game and was joined within two hours by nearly every other sponsor, Rossomondo said.
For some sponsors, cutting ties to the team proved to be a smart strategy.
State Farm hit several consumer perception highs for 2014 in the month since the company distanced itself from the team, according to consumer perception research firm YouGov BrandIndex.
At the end of May, a quarter of the 12,000 people polled said they would consider buying State Farm products the next time they’re looking to buy insurance, up from 20% at the beginning of the month. The company is now leading the consumer insurance category in buzz and word of mouth.
Public conversation about Kia surged 80% in the three days after the recording became public, when the company temporarily suspended its Clippers sponsorship, according to marketing analytics firm SponsorHub, which measures the value of sponsorships of teams, players, events and leagues.
But the Clippers are still struggling to recover their likability and influence, qualities tracked by SponsorHub in real time via social media and other metrics.
The company, which uses a 100-point metric called Xscore, said the team is hovering below an 80. The Clippers had a 99 pre-scandal Xscore, which plunged to 66 the day of Silver’s news conference and began slowly improving in May.
The league has been adamant that Sterling will eventually go away. If so, Armenta said Chumash Casino “would reconsider some form of advertising, I am sure.”
But he hinted that Sterling’s remarks could continue to sting.
“Those comments,” he said, “linger in the background.”
Twitter: @byandreachang, @tiffhsulatimes
