ISL shutdown raises World Cup questions

<p>TOKYO: Bankruptcy proceedings in Zug, Switzerland have brought to </p><p>an end Dentsu's lucrative relationship with ISL, the Swiss sports </p><p>marketing company, just months before Japan co-hosts the 2002 World </p><p>Cup. </p><p><BR><BR> </p><p>ISL's failure has caused consternation in Tokyo where sponsors and </p><p>broadcasters worried whether FIFA, which have taken over ISL's marketing </p><p>functions for the 2002 World Cup in Japan and Korea, would honour the </p><p>sports marketing firm's commitments. </p><p><BR><BR> </p><p>However, Dentsu had already banked a letter from FIFA president, Sepp </p><p>Blatter, dated January 17, giving the necessary assurances. </p><p><BR><BR> </p><p>Dentsu recently signed both Toshiba and NTT as corporate sponsors for </p><p>the 2002 World Cup. </p><p><BR><BR> </p><p>These are on top of sponsorship deals with Fuji Xerox, Fujifilm and JVC, </p><p>which were signed earlier. </p><p><BR><BR> </p><p>ISL was founded by former Adidas chief executive, Adi Dassler, in 1982, </p><p>in partnership with Dentsu, which once owned a 49 per cent share. </p><p>Dentsu's share was reduced to 10 per cent in 1996. </p><p><BR><BR> </p><p>The partnership became a jewel in Dentsu's crown and led to its </p><p>dominance of sports marketing in Japan, especially for international </p><p>events such as the Olympics and World Cup. </p><p><BR><BR> </p><p>As ISL won broadcasting and sponsorship rights, Dentsu's auctioned these </p><p>to its own clients in Japan, earning both a commission on the deals and </p><p>a share of ISL's resulting profits. </p><p><BR><BR> </p><p>Things went wrong when ISL tried tomuscle into new sports and overpaid </p><p>for global rights. For most of this year, the company has been trying to </p><p>find a white knight saviour, but by early May had found none with deep </p><p>enough pockets. </p><p><BR><BR> </p><p>The Zug court declared ISL bankrupt late last month. </p><p><BR><BR> </p><p>The full consequences for Dentsu will not be clear until ISL's financial </p><p>affairs are unravelled. </p><p><BR><BR> </p><p>However Dentsu's 10 per cent equity should prove worthless and bank </p><p>guarantees Dentsu provided earlier this year are likely to called </p><p>in. </p><p><BR><BR> </p><p>"It is true that Dentsu delivered a bank guarantee to ISL during an </p><p>early period of that organisation's financial difficulties and as a </p><p>consequence of ISL's bankruptcy, this has resulted in a loss to us,"said </p><p>a Dentsu official in Tokyo. </p><p><BR><BR> </p><p>"This loss was already appropriated in our financial statement ended </p><p>March 31," added the official, who subsequently confirmed the guarantee </p><p>was for about Y5.1 billion (USdollars 42 million). </p><p><BR><BR> </p><p>There is an off chance of more ISL bills, but "it is very unlikely that </p><p>Dentsu has any further financial responsibilities to FIFA in relation to </p><p>ISL's bankruptcy. </p><p><BR><BR> </p><p>"However, we are now in the final stage of confirming that with them", </p><p>added Dentsu's spokesperson. </p><p><BR><BR> </p><p>With sponsorships costing a reported USdollars 40 million and associated </p><p>media spend estimated at USdollars 150 million, Dentsu's 2002 World Cup </p><p>account could still show a healthy surplus and beat previous records, </p><p>despite the losses entailed in ISL's bankruptcy. </p><p><BR><BR> </p>