Arts sponsorships, long viewed by financial companies as a sure bet for burnishing their reputations, may be the next victim of a crackdown on spending.
Several banking companies, especially those accepting government funds, have been criticized by consumers and politicians for sports-related marketing deals. So far financial institutions have avoided the same level of scrutiny for spending on arts or nonprofit programs. But observers are warning that any sort of sponsorship spending — even donations that have long been considered philanthropic — could generate a public backlash.
"It used to be that having your name, if you were a bank, associated with a major arts initiative that really was wonderful for the community would be one of the best things you could do. Flip of the coin, the world changes, and now it may not be," said Davia Temin, the chief executive of the strategic marketing firm Temin & Co. and a former head of corporate marketing at General Electric Co.'s GE Capital. "What could be good for your reputation on one day could be terrible a week later."
The price tags for arts sponsorships — even the most expensive ones — are often piddling compared with sports deals like Citigroup Inc.'s $400 million purchase of the naming rights for the New York Mets' new stadium.
William M. Chipps, the senior editor of a sponsorship report published by the advertising firm WPP PLC's IEG division, said arts sponsorships can vary widely, though most cost "tens of thousands to hundreds of thousands" of dollars. "In a major market with a major venue with a major exhibition, it could easily go into high six figures, if not low seven," but even in large markets, "most such deals are in the six figures."
And many of the most prominent arts deals involving financial services companies were signed long before the recession, banking bailouts, or the resulting taxpayer scrutiny of line-item spending.
Bank of America Corp. signed a three-year contract in late 2007 to give a reported $2.8 million to the Bridge Project, a theater collaboration between the Brooklyn Academy of Music and the Old Vic theatre in London.
In April of last year American Express Co. signed a five-year renewal of its sponsorship of the Tribeca Film Festival in lower Manhattan. A spokeswoman for the New York card company would not say how much the sponsorship cost.
Rena M. DeSisto, a senior vice president for B of A and its arts and heritage executive, acknowledged in an interview Wednesday that "there's a lot of misunderstanding out there" about sponsorships, but she said that the Charlotte company remains committed to supporting arts programs in "a smart, strategic way."
B of A is expanding its "Museums on Us" program, which currently gives credit and debit cardholders free admission one weekend a month to 75 museums nationwide; in April it will add 25 more museums to the program.
For the museums, which can also be potential B of A clients, "we're helping with audience development," DeSisto said. "We're giving them cash up front. It drives additional traffic in stores and for membership, and Bank of America customers know that this is a differentiator."
B of A executives are trying to communicate with both shareholders — including the government — and customers, she said. "The customers who know about what we're doing are thrilled that we're remaining steadfast. … Thus far the response has been neutral to positive, nothing negative."
Temin agreed that "community support has always been an integral part of the local bank branch." However, these days "that's colored by the fact that people are getting dispossessed by local banks … so what constitutes a good neighbor in a local community is changing."
Participation in the Troubled Asset Relief Program has complicated matters for large companies like B of A and Amex and even for small institutions sponsoring anything from local museum exhibits to community picnics.
"They definitely have to re-evaluate what the public perception of these investments is going to be, especially if you've received and taken even 5 cents of Tarp money," said Ron Shevlin, a senior analyst at Aite Group LLC and the author of a report published last week about banks' return on advertising spending.
"The reality is if you are any of those financial institutions, you have to look at this line item by line item and realize, even if you've put money in the film festival for the past 20 years, you may not want to do that this year," Shevlin said. "And if you're the film festival, you may want to say, 'Hey, I don't want your money this year.' "
The Brooklyn Academy of Music did not respond to requests for comment. But Jane Rosenthal, a co-founder of the Tribeca Film Festival, said Wednesday, "We couldn't be prouder to be associated with American Express."
Chipps said more philanthropic sponsorships could "definitely" increase the negative feelings consumers have toward their financial services providers, especially those that have cut back on consumer credit. "Obviously, the Tarp thing is an issue," but a bigger consideration might be the souring of a direct relationship with a lender, he said. "If a credit card company is hiking up the fee on my credit card, and I see them throwing away money on these events, I would think, 'Am I paying for these events?' And in a way, I am."
Leslie Berland, an Amex spokeswoman, said the company, including its philanthropic foundation, has scaled back on marketing and sponsorship spending this year.
"In this environment, we have taken carefully considered steps to manage risk," including "selectively" reducing credit lines, Berland said.
"At the same time, it is important to continue to both invest in business-building efforts like our sponsorships and support communities that are hurting as a result of the economic conditions."
Observers said that concerns over nonprofit sponsorships apply even to companies that have passed up Tarp assistance, like Advanta Corp. The Spring House, Pa., small-business issuer has spent the last few months raising the interest rates on some accounts, in some cases by almost 30 percentage points.
Last month its name was emblazoned around Philadelphia's 30th Street train station as part of an ad campaign for a Cezanne exhibit at the Philadelphia Museum of Art. Last week Advanta was prominently featured in a full-page ad for the same exhibit in The New Yorker.
Affected Advanta cardholders were less than pleased with the sponsorship. Alan Finkel, a Long Island lawyer, said that he had had the interest rate on his card raised from 7.99% to 35.9% over the course of several months.
"If I were a cardholder who had a promise of a low interest rate for life, and then my interest rate were jacked up to three or five times what it was, that would annoy me to begin with," he said. "If the company that did that took that money and sponsored an art show, … that would certainly concern me that they were using money that they weren't entitled to, on what I'd consider a frivolous venture."
Advanta would not discuss Finkel's account or its sponsorship of the exhibit. A spokeswoman for the company said by e-mail: "We've increased the average rate of interest that we charge our customers in response to the worsening risk profile of many customers. … Our practice is, and has been, to notify customers by mail of such increase to their rate and explain how the customer can opt out of this increase."
The Philadelphia Museum of Art did not return calls.
For financial institutions worried about a backlash, observers advised care in picking commitments.
"Every single instance" of sponsorship has to be thoroughly examined, Temin said, "and then the decision may be made that to continue your good corporate citizenship in a community, it's the right thing to sponsor a local art exhibit. Or you may say, 'no, we're in the middle of too much foreclosure, and it's just not the right thing for us to do now.' … It just can't be formulaic any more."
