When organizers started raising money to hold the 2010 Alltech FEI World Equestrian Games in Lexington, they thought they could follow a pretty simple financial formula: Get six or seven big sponsors to underwrite the $76 million needed to put on the equine world championships.
That worked at first. Alltech, the Nicholasville-based international feed supplement company, quickly signed on with $10 million, the largest sponsorship in the Games' 19-year history.
But then global economic catastrophe struck, forcing WEG organizers into a very different kind of game
"Corporations and businesses are not as prone to either the same levels of sponsorship, or sponsorship at all," said Jamie Link, the CEO of the World Games 2010 Foundation, the non-profit group putting on the first Games to be held in the United States. "A lot of them have taken a wait-and-see attitude, or given a lower dollar amount."
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Organizers say they are confident they will meet the final goal, but admit that the Games' marketing division has had to take a more flexible and creative direction, looking for smaller sponsorships, along with more in-kind donations and products.
For example, says Terry Johnson, vice-president for marketing, John Deere, a major sponsor, has given some tractors for the Games. This counts as cash to the World Games budget, and helps John Deere with an excess of inventory. Also, the company has decided not to buy some of the luxury hospitality items as part of its sponsorship, such as extra tickets or special seating, as they might have in years past.
"There are luxury items that can be added to sponsorship packages, but now companies have to re-evaluate what is important," Johnson said. "
Johnson said he was recently negotiating with a major retailer over a sponsorship package that included signs that would be visible in television coverage of the Games, which will be broadcast all over the world.
"They said, 'That is not valuable to us because a year ago our corporation decided we would not do television advertising,'" he said. That meant less sponsorship revenue.
But, he said, the many in-kind contributions count as very helpful cash on the Games' budget. For example, Ariat International, an equine clothing company, is providing shirts and hats to thousands of volunteers and officials. L.V. Harkness, a local luxury goods store, is donating the trophies.
The same kinds of changes are happening with sporting events all over, said Bryan Pettigrew of Affinity Sports Marketing in Dallas, who works with both John Deere and the American Quarter Horse Association.
"All of the people that are selling sponsorships are having to get creative and do things differently than they have in the past three to five years," Pettigrew said. "Some things they might have wanted in a partnership package last year is not necessarily something they want this year."
The World Games Foundation won't release any details about how much sponsorships are worth or what companies get in return, citing confidentiality agreements.
The Games are being paid for with revenues from tickets, sponsorships, licensing fees and trade show rental spaces. Currently, Games officials won't discuss the budget, but in previous months they estimated that sponsorships would make up about $30 million of the $76 million operations budget, while ticket sales would make up another $30 million.
Organizers expect to sell about 600,000 tickets for the event, which will take place Sept. 25-Oct. 10, 2010. Each person attending is likely to buy tickets to more than one event.
Taxpayer money is not being used for the Games, but the state has provided about $81 million to build an indoor arena and an outdoor stadium and provide extensive road upgrades at the Kentucky Horse Park.
Johnson said the new economic realities have made raising money more challenging. And past European Games have always been supported with government dollars.
Doing business with the Games usually falls into one of several categories:
■Sponsorships—when a company gives money or in-kind donations to the Games in return for a variety of benefits, such as signs visible on TV, naming rights, tickets, or VIP treatment. Sponsorships could also include the right to an "official" designation of the Games; for example, Alltech paid an additional $1 million for the right to make its Kentucky Ale the only beer available for sale at the Games.
■Contracts—when the Games foundation actually pays for services, such as catering or tents. Johnson said that, in most cases, the Foundation has put out a request for bids, trying to get the best product for the lowest price.
■Partnerships— include simple agreements, in which money may or may not change hands. For example, the Games Foundation is required to arrange transport for the participating horses. Peden's, which has a long history of equine travel, is the "official" transport company of the Games, but they are paid by the various athletic delegations that use their services.
Every agreement, however, can be structured differently. Air 51 is the "preferred" provider for private aviation at the Blue Grass Games, an agreement that caused some waves because a larger provider, TAC Air, had planned an $11.5 million expansion to coincide with the Games.
According to WEG hospitality director Kim Bennett, they chose Air 51 because its officials contacted them first, and it is co-owned by Alex Boone, who is from a prominent local family and was an early supporter of the Games.
Johnson said that Boone approached the World Games organization with an idea of creating a greeting area for VIPs, and transporting guests to and from the airport.
"It's true that he understands this equestrian community very well and that's why he knew what was needed," Johnson said of Boone. "But Alex is writing us checks, we're not paying him anything. This is not a good-old-boy situation."
He declined to say how much Boone is paying.
TAC Air officials were not available for comment on Thursday, but have said previously they suspected the choice was made regardless of aviation issues.
As for the biggest sponsor of all, Alltech officials say the recession is nothing compared to the benefits the World Games will bring the company.
"If you were to ask Dr. Lyons today, he would tell you without hesitation that he considers Alltech's $10 million bet on the Alltech FEI World Equestrian Games the best decision he has made in his career," said Susanna Elliott, an Alltech spokeswoman, in a statement.