When celebrity sponsorship becomes a brand issue

Maria Sharapova’s drug scandal is a crisis for the world’s highest paid female sports star. But it also raises major issue management challenges for her big brand sponsors and any other companies with high profile celebrity sponsorships.

Whether she has a future in tennis is less important here than the issue of how companies deal with celebrity sponsorships which go bad, and how to manage any reputational fallout.

Three of her major sponsors – Nike, Porsche and TAG Heuer – almost immediately announced they had either suspended or would not renew their contracts. But was that inevitable and was it the right decision? The question was further confused when tennis racquet maker Head said it would not only retain but planned to extend its contract with the embattled star.

It’s hardly new for celebrities to get into trouble, yet the corporate response can vary widely. One of the highest profile cases was when World #1 golfer Tiger Woods was caught out in a rolling scandal of serial adultery. Many sponsors immediately dropped him – including Gillette, Gatorade and Accenture – but Nike and EA maintained their support, despite considerable criticism, particularly from female consumers. By contrast, two years later, Nike instantly dropped drug cheating cyclist Lance Armstrong.

The argument at the time was that Woods had cheated on his wife but had not cheated to achieve his status in sport. It seems like a neat distinction, but it hardly stands up to scrutiny, even for Nike. For example they stood by basketball star Kobe Bryant in the face of rape allegations (eventually dropped), but they dumped footballer Michael Vick accused of organising dog-fighting. And to return to tennis, Australian underwear maker Bonds dropped bad-boy Nick Kyrgios as a “brand ambassador” last year – reportedly because of his on-court tantrums and foul sledges, not for any allegation of cheating.

There’s no doubt that high-profile scandals cost multi-millionaire celebrities a packet of money. But the business impact for corporate sponsors is much less clear. In the wake of the Tiger Woods scandal, two Professors at the University of California created a media stir by calculating that his major sponsors could lose between $5 billion and $12 billion in shareholder value. However, a few months later, Advertising Age reported a study showing that, while Woods did major damage to his own brand, most of the brands he endorsed escaped relatively untarnished.

Then two Professors from Carnegie Mellon University used a complex analysis related to golf ball sales to conclude that Nike’s decision to stand by Woods was the right decision, because “even in the midst of the scandal, the overall profit was greater by $1.6 million for Nike with Tiger Woods than without him.”

So what will be the corporate impact of the latest scandal? Last week, one analysis in the Australian Financial Review carried the unlikely headline: “Maria Sharapova’s downfall could be a Nike windfall.” Really? When sport and the law combine, predictions in issue and crisis management are just about impossible. Just look how long Sepp Blatter managed to survive. My guess is the Sharapova story still has many surprises, and that the pundits and armchair critics who are already writing her off will be proved wrong . . . again.

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About managingoutcomes

Issue and crisis management expert
This entry was posted in Issue Management, Reputation risk and tagged , , , , , . Bookmark the permalink.

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