Financial Mess Seepage

So the financial mess is spewing all over the place. Despite this fact, I had hoped the sports industry would be shielded from the shrapnel. Unfortunately it’s beginning to seep onto “Gridiron Street.”

General Motors recently announced that it will not air a primetime TV ad during the Super Bowl in 2009. GM has been rocked by the financial turmoil as their stock price went from a high of $43.13 in October of 2007 to a close of $9.03 yesterday. So, under pressure from rising manufacturing and materials costs, and decreasing sales, GM is looking for ways to cut costs as part of its restructuring plan.

Despite this decision, GM will remain a major sponsor of the NFL and expects to air ads during the Super Bowl’s pre and post-game shows. A GM spokeswoman said, “We’re in the midst of cost cutting. We’re scrutinizing all of our programs and all of our media spending.” Not buying a primetime slot will save the auto maker a cool $3 million. Last year, GM ran two 30-second spots for their hybrid and Tahoe SUV. GM ads were also noticeably absent Emmy Awards and won’t be appearing during the broadcast of the Academy Awards.

What’s interesting here is that, oftentimes, when a company is struggling media and advertising are the first expenditures to get cut. This makes some sense because you would probably want to protect workers, plant space, product investment etc. etc. Thus, cutting “non-essential” expenditures like advertising seems wise. But is it really?

Ads are signals to the public of what the company is doing. A good add can show consumers that the company is creative, up to good things, and is still making a quality product. Ads are also one of the more public aspects of a business. If a company ceases its marketing outreach it could indicate that something is amiss. Add to that the fact that companies under normal circumstance spend only around 4-5% of sales on advertising and it appears to be a minimal expenditure worth maintaining, especially during times of hardship.