Discretionary Dollars Caught in Squeeze Play

Competition for consumers’ sports entertainment dollars in Northwest Arkansas has reached new heights this decade. And the upcoming 23,000-seat expansion of Reynolds Razorback Stadium will offer yet another venue for sports enthusiasts to spend what J. Frank Broyles called their “discretionary dollars.”

“Years ago we didn’t have to market the Razorbacks,” the University of Arkansas athletic director said.

“We took what money we got from radio and TV and that was it,” he said. “But because of rising costs, Title IX and all the other forms of entertainment out there now, we had to find new ways to raise money.”

(Title IX is a federal mandate designed to promote financial equality in men’s and women’s athletics.)

The Razorbacks are still the biggest game in town, but they’re not the only one. In addition to the Hogs three main venues of Reynolds Razorback Stadium, Bud Walton Arena and Baum Stadium — where acquiring and keeping priority season tickets at all three can run from a couple of hundred dollars to $20,000 a year — high school sports, golf and a variety of outdoor recreations are tapping into parents’ and participants’ pocketbooks.

That doesn’t even count the cost of equipment for hunting, fishing, diving or paintball games at Wild World Adventure Park in Tontitown or Extreme Paintball Inc. in Fayetteville. There’s also auto racing at Thunder Valley Speedway in Fayetteville or quarterhorse racing near Fort Smith at Blue Ribbon Downs in Sallisaw, Okla.

Stonebridge Meadows Golf Club in Fayetteville offers upscale public golf, and there are two more high-end courses under construction in town. So how do all of these businesses expect to stay above water?

Allen Sanderson, a sports economist at the University of Chicago, said evidence indicates that people who attend sporting events, “with the possible exception of professional wrestling,” tend to be from the middle- to upper-end of income distribution. Therefore, marketing pitches toward them tend to be more upscale.

The key is realizing it’s not only about putting rear ends in the seats. Broyles said the operative word for maintaining and growing revenue in the mainstream sports industry today is “sponsorship.” Companies will give big-time money to get big-time exposure.

“With our debt service and women’s athletics, we have to raise $12 million before we can put a dime into men’s sports,” Broyles said. “That money has to come from somewhere.”

In February, it came from Southwestern Bell in the form of an $11 million corporate sponsorship — $5.5 million up front and $5.5 million over the next 10 years — for the Razorbacks’ exclusive telemarketing rights.

The university annually pursues corporate sponsorships for everything from its concession beverages, currently sponsored by Coca-Cola Inc., to its website sponsored by Arkansas National Bank in Bentonville. The national trend is to land one major all-sports sponsor to avoid “ambush marketing” or sponsorships that clash businesses from the same industry.

Other institutions can’t be as choosy.

High dollar

High school athletics have proliferated in Benton and Washington counties thanks to successful programs and even more successful fund-raising efforts. But even with annual athletic budgets ranging from $50,000 to $120,000 (or about $75 per child) in school district money, high school sports comprise about 1 percent of an average school’s annual budget.

Dick Johnson, athletic director at Fayetteville High School, probably had the most work to do in the 1990s. His football stadium was condemned five years ago. Since then, the former coach has led the effort to raise $2.1 million in sponsorships and donations from individuals and companies. He credits boosters and sponsors with the turnaround.

“That was just to catch us up,” Johnson said. “During the 1980s, there was a philosophy nationally in education that athletics weren’t important. What happened here was fiscal investments in sports went dormant. We had to give the community an opportunity to say that athletics are worthwhile and important.

“This community has always supported education, and it’s always supported athletics. We just needed to create some new opportunities for people to both participate in and support our activities.”

Dave Holz, a regional vice president in distribution operations at Wal-Mart Stores Inc. and the president of Bentonville High School’s athletic booster club, said his organization raises about $30,000 a year to supplement the school’s athletic programs. Holz said annual fund-raising events are essential to the club’s success.

“We have Tiger Pride Night at the football stadium to kick off fall sports and start our main booster membership campaign,” Holz said. “We sell family memberships, and do mailings to seek corporate sponsors from the business community in Bentonville and Bella Vista, and we have a spring sports Tiger Pride Night for basketball.”

For the last two years, the Bentonville Booster Club has had enough money left over to award $6,000 worth of scholarships to graduating seniors. Holz said promoting a family atmosphere and targeting the parents of junior high and elementary school children keep the program rolling.

“You’ve got to start getting them involved as early as possible so that going to games and supporting the program becomes a family activity,” Holz said.

Call it a draw

Measuring the importance of drawing crowds or sponsorships is like the old “chicken and egg” question. Sanderson, the sports economist, said unless the sports business is located in a metropolitan area, it’s probably going to be tough to do either.

The city of Fayetteville is considering introducing minor league hockey into the Northwest Arkansas market, banking on the idea that people from all over the area will be interested in the Western Professional Hockey League. The city council is still debating whether a new hockey area and team at Drake Field — Fayetteville’s underused airport — will be worth spending $200,000 to do a feasibility study.

Rick Lawrence, director of economic development for the city of Lamar, Texas, said his municipality is in the process of spending $100,000 for a similar feasibility study. But Lamar got started two years early, and a lot of the groundwork has already been done. He already thinks hockey will be a success since the city of 14,200 people is within a 30-minute radius of a population of 1.1 million.

“The people involved with the WPHL are entertainers,” Lawrence said. “There’s a lot of showmanship and entertainment value for crowds. Their players get involved in the community, and we have no doubt a WPHL franchise would be an outstanding asset to our city.”

According to the league, franchises sell for anywhere from $500,000 to $1 million, and the initial capital needed to get rolling the first year is about $1.5 million.

Stonebridge Meadows hasn’t had any problem attracting customers throughout its first two years in Fayetteville. The course has seen 54,000 rounds played or about $1.8 million worth of greens fees. Normally, public courses take four or five years to reach 30,000 rounds, but owner Bill Meadows said his course will probably reach that number before the end of the year.

“We have gone after a specific, high-end niche,” Meadows said. “We’re listed in the guest guides of all the local hotels, and we’ve also benefited from a lot of publicity from the media right off the bat.”

Matt marketing

Jim Host, president of Host Communications Inc. in Lexington, Ky., the NCAA’s marketing and publishing company since 1976, said the best way for athletic programs to create revenue is still simply by winning. But it’s also important to put a quality product on the floor regardless of how a team’s season turns out.

Host said college basketball, with the proliferation of dunking and the 3-point shot, has probably been hurt more than other collegiate sports because the quality of the game has deteriorated.

“People enjoy watching fundamentally sound teams,” Host said. “You’ve got teams today shooting so poorly because the only thing kids know is the dunk and 3-pointers. The ineptness is unbelievable, and it’s less entertaining to fans than it used to be.”

Host said, however, that ultimately the revenue schools can pull in from their sponsorships — generally between $150,000 to $600,000 annually — boils down to fundamental decisions about how far the institution will go. Some teams slap advertising on every available square inch of space, but Arkansas is relatively more conservative in its approach. Assistant Athletic Director Katie Hill credits marketing director Matt Shanklin with having the perseverance to keep coming back to her and Broyles with ideas.

“When we first hired Matt, his salary was an expense,” Broyles said. “Now, our revenue from his work far exceeds that amount. He’s earning his salary.”

Shanklin’s department could not provide yeat-to-year sponsorship revenue data in time for publication. But Hill said the amount has definitely increased, and that Shanklin was primarily responsible for closing the Southwestern Bell deal.

Shanklin’s family oriented marketing strategy, along with a new stadium, has been instrumental in helping the baseball program’s annual attendance rise from 60,308 in 1995 to 113,403 in 1999. He’s also helped grow revenue 87 percent since 1996.

“When we’re winning in football, it’s a sell out,” Shanklin said. “Baseball is a completely different approach. We’ve tried to incorporate face painters and encourage kids to play on the berm areas. Kids can keep foul balls and home runs, and the players sign autographs after every game.

“We try to make it as entertaining as possible so sponsors will feel like they’re getting their money’s worth because people keep coming back.”

Whether hockey becomes a competitor for the university’s smaller sports, like baseball, Shanklin said, there will always be great value in the Razorbacks name for sponsors.

“I’m not sure some people who are potentially spending dollars with baseball and basketball advertising-wise will pull those and go with hockey,” Shanklin said. “Any organization has to prove itself in this market. It’s got to be a win-win for sponsors to commit major money. They’ve got to see that they’re going to get an equal benefit in return in the form of traffic in their doors.”