Crowdfunding in sports

Sportwissenschaft, Apr 2018

The sale of naming rights to sport facilities is a widespread practice. However, there may be public resistance to naming rights because sport remains associated with tradition and local identity. In response, sport facility operators have searched for alternatives. The newest naming alternative comes from the stadium in Nuremberg, where the Consorsbank initiated a crowdfunding project. In this study, we primarily aim to evaluate the factors separating capital providers from non-participants and to determine which factors influence the investment decision. This study provides insights into a new financial instrument by focusing on a crowdfunding project in sport that was actually implemented. The findings, which are based on between-group comparisons and logit and probit regressions, indicate that participants who identify with the project are generally the most willing to participate in a crowdfunding project. Additionally, the findings underline the relevance of effectively integrating the most involved groups into a campaign.

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Crowdfunding in sports

German Journal of Exercise and Sport Research 2 · 2018 Crowdfunding in sports 0 Department of Sport Governance and Event Management, University of Bayreuth , Bayreuth , Germany 1 C. Huth Department of Sport Governance and Event Management, University of Bayreuth Universitätsstraße 30 , 95440 Bayreuth, Germany Introduction The sale of naming rights to sport facilities is a widespread practice. This approach is popular because the owner of a facility can collect the funds needed for stadium construction or operation, while the sponsor can pursue its marketing and communication strategy (Bezold, 2005; Clark, Cornwell, & Pruitt, 2002; Thornburg, 2003) . In addition, German stadium operators have recognized that naming rights can be commercialised, and therefore, the practice has become widely accepted in Germany (Humberg, 2005; Wittneben, 2006) . From the perspective of the naming rights holder, the sale of naming rights is beneficial because it reduces the portion of facility construction or operation costs that must be financed by public and team funds (Crompton & Howard, 2003; DeShriver & Jensen, 2003) . Therefore, sport facility naming rights could have a significant positive impact on the decisions made by numerous cities regarding whether to build a new sport facility or modernise an existing one. The financing of these facilities has become an important economic and political issue for public institutions (DeShriver & Jensen, 2003) . Thus, justifying publicly financed sport facilities has become increasingly difficult because the construction costs often outweigh the benefits (Baade, 2000; Noll & Zimbalist, 1997) . However, there may be public resistance to naming rights because sport remains associated with tradition and local identity (Greenberg & Gray, 1996) . Opponents of naming rights suggest that there are civic costs to naming public buildings after corporations (Crompton & Howard, 2003) and that corporate naming may negatively influence the local community (Welch &Calabro, 1997) . This effect is stronger when the naming rights are sold for an existing sport facility that already has a strong identity (Guzzo, 2001) . In such a case, the location may function as a symbol of group identity. For example, there may be fan songs in which the name of the sport facility is referenced (Woisetschläger, Haselhoff, & Backhaus, 2014) . Traditionally, sport facilities have been named after a local trait or landmark, the resident team, or local heroes to highlight the connection among the team, the facility, and the place (Boyd, 2000; Chacar & Hesterly, 2004) . Therefore, the use of a non-commercial name conveys a message about that connection as well as the club’s values and helps the team to be viewed as a part of the community (Chen & Zhang, 2012; Woisetschläger et al., 2014). Although the naming rights in German stadiums have experienced a boom for years (Grass & Backhaus, 2007) , sport facility operators have searched for alternatives in response to this criticism of commercial names. After possessing three different names since 1999, the football stadium in Hamburg was restored to its original name, Volksparkstadion, by a patron who decided to buy the naming rights. A second model of naming rights combines commercial and traditional names. The pharmaceutical company Merck AG bought the naming rights to a stadium in Darmstadt, giving it the new name Merck Stadion am Böllenfalltor. In Braunschweig, five companies joined together to buy naming rights and restored the stadium’s traditional name. The newest naming alternative comes from the stadium in Nuremberg. The Consorsbank–the naming right holder —initiated a crowdfunding project called Max Gemeinsam. In general, crowdfunding can be used to generate financial resources for different projects in which customers act not only as consumers but also as investors who are integrated into the value chain accordingly (Ordanini, Miceli, Pizzeti, & Parasuraman, 2011) . The central motivation for companies to engage in crowdfunding is capital allocation, which provides a supplement to other financial mechanisms in the majority of cases (Belleflamme, Lambert, & Schwienbacher, 2010) . Other motives include increasing the company’s prominence (Lambert & Schwienbacher, 2010) , collecting indirect feedback and customer preferences regarding the company’s products or services (Belleflamme et al., 2010; Lambert & Schwienbacher, 2010) , and from a financial and administrative perspective, reducing the risk of loss of corporate control (Gerber & Hui, 2013) . In the case of the Max Gemeinsam campaign, the bank sought to collect € 800,000, 25% of the required total sum of € 3,200,000, via a crowdfunding project to give the Nuremberg stadium the name MaxMorlock-Stadion, a name that the fans had strongly desired for years. If that sum could be collected through crowdfunding, the bank was willing to provide the remainder of the required total funds (Consorsbank, 2017) . Ultimately, more than € 400,000 was donated by 4210 capital providers during the campaign, and thus, the project failed to collect its initial target sum (Startnext, 2017) . However, the Consorsbank provided the Min 0 Wilcoxon signed-rank tests Prob > |z| Mean INVEST YES Mean INVEST NO Pairwise Correlation Obs Observation, Mean Mean value, Std. Dev Standard Deviation, Min Minimum value, Max Maximum value, Prob Probability *p < 0.10; **p < 0.05; ***p < 0.01 balance of the required sum so that the stadium could have a non-commercial name for the next three years. Focusing on the Max Gemeinsam campaign, we evaluate the factors separating capital providers from nonparticipants to determine which factors influence the investment decision. This study provides insights into a relatively new financial instrument by focusing for the first time on a real implemented crowdfunding project in sport. After the method is discussed, the results of the empirical analysis are presented, followed by the conclusion. Methods For our empirical analysis, we first considered bivariate procedures. Using the decision to participate (or not) in a crowdfunding project as the dependent variable, we focused on the results of between-group comparisons that were calculated via Wilcoxon signed-rank tests. Additionally, pairwise correlation coefficients were calculated. Finally, multivariate analyses were conducted using logit and probit regressions. Consistent with our research-leading aim, we selected a dependent variable and different independent variables. First, focusing on the dependent variable, we opted for the general decision to participate and invest [INVEST] in the crowdfunding project Max Gemeinsam. In the next step, derived from the research aim and previous literature, we introduced factors in our empirical model that may have an influence on the individual decision to participate in a crowdfunding project (see also overview appendix 1). In the first category, participants’ related sport characteristics were considered to examine the role of the link between fans and their preferred football club, which Simmons (2006) has identified as important. In the questionnaire, respondents indicated their general relation to the 1. FC Nürnberg (from 1 = negative view to 4 = fan). Additionally, they indicated whether they were a club member [MEMBER_C], a fan club member [MEMBER_FC] or a member of the Ultras [ULTRAS]. They also specified the average number of home and away matches [MATCH] attended live in the stadium per season. Finally, they were asked whether they had previously invested in the fan bond of the 1. FC Nürnberg [BOND]. Considering the previous findings of Gorman, Calhoun, and Rozin (1994 ) and Huth, Gros, and Kühr (2014 ) in the context of supporter-based financial instruments in sport, we expect that all variables positively influence the decision to participate. In the second category, we consider different football club-related objectives. The sporting success [FCN_SUCCESS] and the financial health [FCN_ FINANCE] of the 1. FC Nürnberg are the classic aims of every football club (Benner, 1992) . Additionally, following our research aim, we also asked about the importance of the name of the stadium [FCN_STADIUM] and the preservation of the traditions of the 1. FC Nürnberg [FCN_TRADITION] (Greenberg & Gray, 1996) . We expect that the last two variables will particularly influence the decision to participate because they capture emotional topics that are relevant from the fans’ point of view. Based on the different existing models of stadium naming rights, we selected five variables that evaluated the preferences of respondents for different models of sport facility naming rights. The first variable focuses on the model in which the stadium is named by a sponsor who pays for the naming rights [NAME_COMMERZ]. The second model is a combination of the name of the sponsor and the traditional stadium name [NAME_COMBI]. In the third model, the sport facility retains its traditional name, and a third party meets the financial obligations [NAME_SPONTRAD]. The fourth model provides the stadium with a traditional name without a sponsor paying for the naming rights [NAME_TRADITION]. The last alternative focuses on the Nuremberg case, wherein the stadium name was co-financed by a crowdfunding project [NAME_CROWD]. Considering public resistance to the sale of naming rights (Greenberg & Gray, 1996) , we expect that participants who are against naming a stadium after a commercial enterprise are more willing to participate in and contribute capital to a crowdfunding project. Finally, sociodemographic information on the participants was entered into the analysis. These data included the age (AGE), sex (SEX), and six net income groups of the participants (INC). Crowdfunding-related studies indicate that the probability of participation depends on the sociodemographic characteristics of the participant (Herzenstein, Andrews, Dholakia, & Lyandres, 2008) . We used a standardized pencil questionnaire for the study. To ensure consistent operationalisation, 5-point Likert scales (from 1 = very negative to 5 = very positive) were applied throughout the preference measurement (Revilla, Saris, & Krosnick, 2014) . We conducted the survey during the day of the last home match of the 1. FC Nürnberg in the 2016/17 season. This also was the last day of the crowdfunding project. We surveyed the respondents in the Nuremberg stadium, in the vicinity of the Nuremberg stadium and in well-known fan Ger J Exerc Sport Res 2018 · 48:293–298 © Springer-Verlag GmbH Deutschland, ein Teil von Springer Nature 2018 C. Huth Crowdfunding in sports. An empirical analysis of the crowdfunders of the Max Gemeinsam Campaign Abstract The sale of naming rights to sport facilities is a widespread practice. However, there may be public resistance to naming rights because sport remains associated with tradition and local identity. In response, sport facility operators have searched for alternatives. The newest naming alternative comes from the stadium in Nuremberg, where the Consorsbank initiated a crowdfunding project. In this study, we primarily aim to evaluate the factors separating capital providers from non-participants and to determine which factors influence the investment decision. This study provides insights into a new financial instrument by focusing on a crowdfunding project in sport that was actually implemented. The findings, which are based on between-group comparisons and logit and probit regressions, indicate that participants who identify with the project are generally the most willing to participate in a crowdfunding project. Additionally, the findings underline the relevance of effectively integrating the most involved groups into a campaign. Crowdfunding im Sport. Eine empirische Analyse der Crowdfunder des Max-Gemeinsam-Projekts Zusammenfassung Der Verkauf der Namensrechte von Sportstätten ist eine weitverbreitete Praxis. Allerdings kommt es immer wieder zu Widerstand gegen Namensrechte, da diese nach ihren Kritikern nicht zum Sport mit seinen Traditionen passen. Als Reaktion suchen Sportstättenbetreiber nach Alternativen. Die neueste Art der Namensgebung ist in Nürnberg zu beobachten. Hier initiierte die Consorsbank ein Crowdfunding-Projekt, um dem Stadion mit Unterstützung der Fans einen traditionellen Namen zu geben. In der vorliegenden Studie wird nun untersucht, inwieweit sich Projektteilnehmer von Nichtteilnehmern unterscheiden und welche Faktoren die Anlageentscheidung beeinflusst haben. Die Untersuchung gibt einen Einblick in ein neues Finanzinstrument, indem sie sich erstmals auf ein real umgesetztes Crowdfunding-Projekt im Sport konzentriert. Die auf Gruppenvergleichen sowie Logit- und ProbitRegressionen basierenden Ergebnisse deuten darauf hin, dass Teilnehmer, die sich mit dem Projekt am stärksten identifizieren, am meisten bereit sind, an einem CrowdfundingProjekt teilzunehmen. Ferner wird die große Relevanz einer Integration der am stärksten involvierten Fangruppen in eine Kampagne unterstrichen. Schlüsselwörter Crowdfunding · Finanzinstrumente · Fans · Sponsoren · Namensrechte pubs in the city of Nuremberg. In total, 255 out of 306 respondents completely filled out the questionnaires, and these questionnaires were considered in our analyses. The sociodemographic data indicate that the average respondent is nearly 34 years old, is male, and has a monthly net income of approximately € 2000. The sample was skewed towards males, with 76.1% of respondents fitting this profile. This bias largely reflects the fact that men traditionally have had a stronger connection to football than women, although football is becoming increasingly popular among women. Results . Table 1 illustrates the descriptive data and the bivariate results of the study. Nearly one-third of the respondents participated in the Max Gemeinsam crowdfunding project. Regarding the different models of stadium naming rights, participants prefer a traditional stadium name that is not financed by 0.999*** 1.687*** 1.301*** 2.237*** PROBIT a sponsor. T he option to give a stadium a traditional name financed by a crowdfunding project receives the third-highest rating. Conversely, both commercial names and combination names are rejected by the majority of participants. The bivariate results of the dependent variable reveal highly significant group differences between funders and nonfunders. Funders have a closer relationship to the football club, attend more matches in the stadium and are more likely to have invested in the fan bonds of the 1. FC Nürnberg. Next, the stadium name and the preservation of the club’s traditions are significantly more important for funders than for nonfunders. In the context of the preferred stadium naming rights model, capital providers view the commercial naming rights model more critically. Consequently, they strongly support a nonfinanced traditional naming rights model and a traditional naming rights model financed by a crowdfunding project. Finally, no significant differences exist in the sociodemographic characteristics. The pairwise correlation coefficients confirm these results and indicate a weakly significant positive or negative correlation between the majority of independent variables and INVEST. Finally, we also checked the correlation between the independent variables and identified only weak correlation between certain independent variables. Focusing on the multivariate analysis, the results show that the variance inflation factor (VIF) test for all regression models is below the limit of 10 (Beckham, Cai, Esrock, & Lemke, 2012) , indicating no issues with multicollinearity. The considered scalar measures of fit—McFadden’s R2 and McKelvey and Zavoina’s R2—show that both applied regression models fit equally (. Table 2). The results illustrate that five factors significantly influence the decision to participate in the Max Gemeinsam crowdfunding project. In detail, two of the six related sport characteristics of the participants are relevant—MATCH and BOND. FCN_STADIUM positively promotes the decision to invest, whereas FCN_TRADITION has a negative effect. Out of the five stadium naming rights models, only NAME_CROWD is significant and has a positive effect. Moreover, the sociodemographic characteristics have no impact on the decision to participate; this result is found for both regression models. Conclusion Consistent with the results of Ordanini et al. (2011) , the results underline the significance of the respondents’ identification with the project. Both bivariate and multivariate results indicate that respondents who prefer a commercially based stadium name do not participate, whereas sport facility naming rights models that retain a traditional stadium name increase the likelihood of participation. Additionally, respondents who attend a large number of home and away matches are more willing to participate in the crowdfunding project. They have more contact with the stadium name because they regularly attend matches. Noticeably, the results show the relevance of other supporter-based financial instruments for crowdfunding. Respondents who are experienced at purchasing supporter-based financial instruments have fewer reservations about investing money in a crowdfunding campaign. However, in contrast to fan bonds, the capital providers of the Max Gemeinsam project receive no financial returns. Instead, they obtain a non-monetary reward such a pin, poster, t-shirt or gift package depending on the sum they provide. As mentioned above, the project initiator did not reach the target sum, and therefore, the campaign was not completely successful. One reason may be that the groups most involved in the 1. FC Nürnberg—the club members, fan club members and Ultras—do not support the project significantly more than non-members. Although this result is understandable for the Ultras based on their general anti-commercial attitude, the non-significant findings for the two other fan groups are quite surprising. Previous research indicates the relevance of peer groups (Herzenstein, Dholakia, & Andrews, 2010) and the family-and-friends effect (Agrawal, Catalini, & Goldfarb, 2011) . It seems that the Consorsbank, as project initiator, did not sufficiently succeed in attracting and integrating these central groups into the crowdfunding campaign. Due to these two effects, the integration of these fan groups is a key factor for the successful realisation of such a crowdfunding project. Therefore, the project initiator should aim to more effectively include the most involved groups in future crowdfunding projects. In summary, our study offers insights into the characteristics and attitudes of capital providers of a real, implemented crowdfunding project in sport. In accordance with previous research, we show that participants who identify with the project—in our case, to support giving a stadium a traditional name without a sponsor—are generally the most willing to participate in a crowdfunding project. Additionally, the findings underline the relevance of effectively integrating the most involved groups into the campaign. If this integration is not successful, the campaign risks failure because the most involved groups generally act as catalysts at the beginning of the funding period of a crowdfunding campaign. Finally, because the results are based on one project only, their generalisability is limited. Other projects may well produce different results. However, the results of this study are quite comparable to the results of other general crowdfunding projects in other sectors and other fan financing instruments in sport, which indicates a certain generalisability. Corresponding address Compliance with ethical guidelines Conflict of interest. C. Huth declares that he has no competing interests. All procedures performed in studies involving human participants were in accordance with the ethical standards of the institutional and/or national research committee and with the 1964 Helsinki declaration and its later amendments or comparable ethical standards. Informed consent was obtained from all individual participants included in the study. Appendix Agrawal , A. , Catalini , C. , & Goldfarb , A. ( 2011 ). The geography of crowdfunding (NBER working paper no. 16820) . Retrieved from http://www.nber. org/papers/w16820 Baade , R. ( 2000 ). Home field advantage? Does the metropolis or neighborhood derive benefit from a professional sports stadium ? In W. C. Rich (Ed.), The economics and politics of sports facilities (pp. 71 - 89 ). Westport: Quorum. Beckman , E.M. , Cai , W. , Esrock , R.M. , & Lemke , R.J. ( 2012 ). 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Christopher Huth. Crowdfunding in sports, Sportwissenschaft, 2018, 293-298, DOI: 10.1007/s12662-018-0512-5