Advertisers are backing away from the Los Angeles Clippers after racist comments attributed to the NBA team's owner.
Used car dealership chain CarMax, airline Virgin America and the Chumash Casino Resort said Monday that they are ending their sponsorships of the Clippers in the wake of comments allegedly made by the team's owner, Donald Sterling.
Two other sponsors, Kia Motors America and Red Bull, said they are suspending their advertising and sponsorship activities with the team. Another sponsor, insurer State Farm, said it "will be taking a pause in our relationship with the organization."
The incident highlights the risks that companies face when they make sponsorship deals. The deals can bring goodwill when things are going well, but brands can find themselves in a tough spot when they link themselves with teams or athletes that become mired in controversy. Advertising experts say that once the bad news is out there, a negative association could have already been made in the eyes of consumers.
Allen Adamson, managing director of the research firm Landor Associates, said there's little benefit for brands to stick with their sponsorship deals in this instance.
"There's some benefit in moving quickly," he said. "You can always renew your sponsorship later, but the longer you're linking your brand to a brand in trouble, the higher the risk."
Paul Swangard, managing director at Warsaw Sports Marketing Center at the University of Oregon, said sponsorships such as CarMax and Virgin America can be worth hundreds of thousands of dollars to millions, depending on terms of the deal. He said many brands might be waiting to see what happens at the NBA's news conference today.
"The early indication is that this could be incredibly damaging to the franchise if things aren't dealt with quickly," he said
This isn't the first time companies have had to consider whether to keep a sponsorship deal after a controversy erupts. Nike and other sponsors dropped disgraced cyclist Lance Armstrong after his doping scandal. But many sponsors stood by golfer Tiger Woods after he acknowledged infidelities and went to rehab for sex addiction.
Sterling has come under fire for comments he is alleged to have made in a recorded conversation with a woman. Portions of that conversation were released over the weekend by TMZ and Deadspin, leading to a national outcry. The NBA is planning a news conference today on its investigation into Sterling.