CHICAGO (Reuters) - Bank of America Corp's (BAC.N) top executive defended on Thursday the bank's spending on sports marketing activities at a time when such deals are under fire as wasteful.
Chief Executive Kenneth Lewis, speaking to the Chief Executive Officers Club of Boston, said the multimillion-dollar sports marketing deals at Bank of America are worth the investment because they generate sales and profits.
I was never inclined to pump big sums of money into sports marketing until I saw the facts and the numbers," he said. "In general terms, for every dollar we spend on sports marketing, we get $10 in revenue and $3 in earnings. This is not wasted money."
Bank of America does not disclose how much it spends on sponsorships, but revenue generated by such deals comes from the sales of sports-themed consumer banking products, as well as providing financial services to sports leagues and teams. The bank spent $120 million to $125 million in 2007 on U.S. sponsorships including sports deals, according to IEG, a unit of ad giant WPP Plc (WPP.L) that tracks such spending. That was the last year IEG provided estimates for individual companies.
The value of North American sports industry, including franchise values, athlete endorsements and broadcast rights, was estimated at $225 billion in 2006 by Street & Smith's SportsBusiness Journal.
Bonuses, perks and other spending by banks that were long considered acceptable have grown politically untenable as the U.S. government pumps hundreds of billions of dollars of taxpayer money to help revive the banking system. Last month, U.S. lawmakers railed against Chicago-based Northern Trust Corp (NTRS.O), which received $1.6 billion from the government's Troubled Asset Relief Program, after it hosted lavish parties at a Southern California golf tournament it sponsored.
Citigroup Inc (C.N), which received $45 billion of TARP funds, has been criticized for its 20-year, $400 million naming-rights deal for the New York Mets' new baseball stadium. And Morgan Stanley (MS.N), which got $10 billion, said it would not entertain clients and executives at a June golf tournament in Ohio that it sponsors, citing the tougher market and political environment. Lewis, who said it would be "a nightmare" to nationalize U.S. banks, acknowledged that sports marketing has come under fire and added it was easy to be skeptical about such deals. "Obviously, there are lots of business executives who just really enjoy having access to the teams and the athletes," he said. "For the record, I don't. I really enjoy going to the mountains for the weekend with my wife."
Bank of America has sponsorships with the National Football League, Major League Baseball and NASCAR, as well as with individual NFL and baseball teams. It also is a title sponsor for a NASCAR race in North Carolina as well as the Chicago marathon. Last fall, there were reports the bank was close to finalizing a long-term deal worth as much as $20 million a year to become the biggest sponsor of the new Yankee Stadium, which is opening in April, as well as the baseball club.
However, Bank of America recently said it ended those talks in January, citing contractual complexities, the economy and the mood of the country. It chose instead to continue an existing sponsorship agreement.