Thursday, 22 January 2009

Royal Bank of.... Stupid

This makes sense.

This does not.

In the first instance, AIG is to end their £14m-per-year sponsorship of Manchester United on the back of their financial meltdown and subsequent bail-out by the US Government.

In the second instance, RBS, on the verge of announcing record-breaking losses of close to £8 BILLION and now 70% under public ownership, with share prices falling as low as 11.6p, has announced that it will continue to sponsor the Six Nations Championship - to the tune of £20m.

Obviously I'm not an economist and I don't know how these things work. But 70% of that £20m is public money. So why are they allowed to spend it on what is effectively advertising? I mean, I like rugby as much as a the next guy (and I can't wait to see us beat Grand Slam holders Wales in a couple of weeks) but surely, when you are making a loss that big, advertising should not be a primary concern?

Just a thought.


PJ 22 January 2009 at 17:12  

It does seem a bit ridiculous but for the sake of the sport it's probably a very good thing.(And I've got tickets to see Scotland versus Ireland at Murrayfield so glad it's still going ahead!)

I also think it's highly unlikely that they'll drop their sponsorship of Andy Murray either if he does as well as hoped in Melbourne.

doctorvee 22 January 2009 at 18:43  

If a firm spends money on advertising, it does so expecting to be able to make it all back and more. That surely applies whether or not the firm is part-publicly owned, so in that sense taxpayers will probably see a benefit. That is assuming RBS has not made a terrible miscalculation here, which I realise is not exactly outside the realms of possibility given their recent record.

Shuna 23 January 2009 at 11:47  

Speaking to hubby last night about the level of advertising the company he works for is doing at the moment (which is quite a bit) he explained that the advertising is cheaper at the moment and that a decision was made that they would continue to spend on advertising as a way of in the longer term ensuring that when things do pick up they will be uppermost in everyones minds.
There is a fine line between what is good business sense and tact - not sure how I feel about RBS spending large amounts when they look so shaky - maybe it is a bit of confindence, maybe arrogance? Mmm not sure..

Malc 23 January 2009 at 12:12  

For me, in the current climate, advertising is like gambling. You have to speculate to accumulate - or whatever the gamblers' mantra is.

Your points (doctorvee & shuna) make sense in that respect. It is about expecting that when (and not in their mind, if) the economy recovers, people see their name first and want their product.

Which is fine... except that, yet again, a bank is speculating with my money. Correct me if I'm wrong, but isn't that how the mess started in the first place?

To me, it doen't make sense to be spending money sponsoring things when the government has had to bail you out. If they screw up again, will they be bailed out again?

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