Fight for Your Rights
During the dot-com boom, corporations couldn’t buy up naming rights for sports arenas fast enough.
Massive deals worth $200 million over 20 years became common. Banks, airlines, telecommunications companies, and beverage giants all bought in. Little-known technology startups looking to boost brand awareness spent over their heads. The economic downturn put an abrupt halt to this trend. The companies backing PSINet Stadium, Pro Player Stadium, and Enron Field all went bankrupt.
The days of contracts with $10 million annual fees are over, says Jim Andrews, editorial director for sponsorship gurus IEG, Inc., Chicago.
“The naming-rights phenomena had an explosive surge that overtook marketing, and there were a lot of companies that went flying in headfirst,” says Mike Reisman, a principal at Westport, CT-based Velocity Sports & Entertainment. “The most blatant misuse was done by those that got into it only for brand awareness. Most deals are for 20 or 30 years — so after a few years, what are you going to do with it?”
Naming rights provide exposure, but the companies that get the best return for their money incorporate promotions and make positive connections with the local community. “At the end of the day, people will not buy your product because your name is on the building, but because of the promotional and marketing programs you’ve created to influence them,” Reisman says.
Some companies can’t get enough: Verizon Wireless and Tweeter Home Entertainment Group are name-in-title sponsors of six and four music theaters, respectively. (All the properties are owned by Clear Channel Entertainment, New York City.)
Not in Name Only
Philips Royal Electronics is ahead of the pack with comprehensive deals. In 1999, the Netherlands-based company’s North American consumer electronics division entered a 20-year agreement with Time Warner’s Turner Broadcasting System, Atlanta, that included naming the city’s new arena. Reportedly worth $185 million (with $9.25 million in annual payments), the deal includes a broad media package with Time Warner properties (and, now, America Online properties as well) and a supplier agreement for the use of Philips products. Philips and TBS set up two inter-company teams to explore and develop new media, promotional, and merchandising opportunities.
“The partnership is arguably the most complex and multi-faceted of any of the other entitlement platforms,” says Bob Williams, president of Philips Arena and a Time Warner employee. (The company leases the property from the city of Atlanta.) “As a media company, we had unique assets that other teams and arenas don’t have, and we decided to exploit those opportunities.”
Philips Consumer Electronics had moved its U.S. headquarters to Atlanta from Knoxville, TN, in 1997 and saw the arena as a way to build relationships in its new hometown, says Jim McFalls, vp of the Philips Arena Partnership (an operation formed to oversee the arena and relations among investors, Philips, and AOL Time Warner).
The centerpiece of the arena is the Philips Experience, a 10,000-square-foot area where fans can demo Philips products, play computer games, and pose for a mock cover shot for an AOL Time Warner magazine. One wall holds 100 TV monitors for programming highlights; another bank of TVs plays a loop of popular company TV spots. Philips light bulbs and security cameras are in use throughout the building. “Our product is all over the arena. No other naming-rights company has that opportunity,” McFalls says.
Hitting Home
Although multi-layered partnerships like that are an exception, many companies find naming rights a cost-effective tool. “People will look at a company that spends $4 million a year for 25 years and see that as a lot,” Reisman says. “But you have to consider that the price is locked in, and that $4 million will be worth more in 10 or 15 years.”
That kind of long-term thinking is key, says Maidie Oliveau, principal at Los Angeles-based LawSports. “Rights holders need to have some idea of how the deal is going to be used down the road and not just look at it as a $50 million buy.”
Determining the value of a particular venue can be daunting, says Julie Zdziarski, executive vp of Sponsorship Research International, Norwalk, CT. “You have to look at various events that are broadcast in the arena, verbal mentions, pictures in print,” she says. “But it is something that can be done.” Still, few companies are taking the time to do it, she says, citing SRI client FedEx Corp. as a notable exception.
The simplest form of measurement is venue ticket sales, Oliveau says. “In some cases, sales [projections] are documented in the agreement and are enough to self-liquidate the sponsorship.”
Other companies track exposure themselves. Randolph, MA-based Dunkin’ Donuts has been tracking local consumer attitudes since it acquired rights to the former Providence (RI) Civic Center last June. “Dunkin’ Donuts is part of the community,” says Ken Kimmel, vp of Dunkin’ Donuts Concepts, the chain’s marketing group. “The beauty of a deal like this, as opposed to a normal sponsorship, is that it is the Dunkin’ Donuts Center. It makes us a much more prominent part of the city.”
Providing community goodwill is a common goal among naming-rights holders. Eighty percent of name-in-title sponsors have strong local ties, Oliveau says.
“Any connection a company can make to say, ‘We have put our name on that arena and something good has resulted’ needs to be exploited,” says Jed Pearsall, president of Newport, RI-based Performance Research. For example, FedEx agreed to buy the rights to the $250-million, 18,000-seat arena currently being built in its hometown of Memphis. The company’s promise helped bring the city its first professional sports team, the National Basketball Association’s Grizzlies.
“We are the biggest private employer in the city and we are frequently asked about the quality of life in Memphis,” says company spokesperson Jess Bunn. “Now we are providing something that will attract and retain employees.”
Although Staples, Inc. hails from Framingham, MA, the company has made quite a home for itself in Los Angeles’ Staples Center, whose rights it acquired in a reported 20-year, $116 million pact.
Promotions leverage the arena and its tenants. Past sweepstakes, for instance, have awarded tickets to the Grammys and a ride on the Zamboni at a National Hockey League game, according to Marci Grebstein, Staples’ vp-media and marketing communications.
Last month, Staples kicked off a three-on-three basketball tournament for local small businesses that is hosted in the arena. The grand-prize package includes tickets to events and free office supplies. (CMI, East Rutherford, NJ, handles.)
Fools Rush In
Changing the name of a local arena isn’t always received favorably. And it’s hard to get exposure when the local media refuses to use the new name. (The Denver Post currently refuses to call the former Mile High Stadium Invesco at Mile High.) Portland, OR-based nonprofit Commercial Alert even petitions sportswriters to avoid corporate nomenclature.
“These arenas are part of the psychic glue that holds us together, and when a company comes in and plasters its name all over it, it loosens that glue,” says Gary Ruskin, Commercial Alert’s executive director.
Change-resistant people do adapt, however, and the new arena name generally takes hold within a few years, Oliveau says.
For Tweeter, Canton, MA, the adjustment has taken about three years, according to Anne-Marie Boucher, the company’s director of promotions, events, and p.r. “It’s a habit that’s hard to break, but you have to spend money promoting what you do.”
“Music-venue sponsorships have been less expensive and more attainable,” says Boucher. That, of course, is a natural fit for a company whose “roots are in audio,” she adds.
Tweeter enlists its vendors to help with on-site activation at its amphitheaters. The company has teamed with Sprint PCS, for example, to offer a babysitter hotline for season-ticket holders with children.
“It’s not just having a table out there and showing off product. It’s about putting it to use,” Boucher says. In addition, Tweeter uses the venues to offer perks to top customers and employees.
Because it doesn’t pay to be there in name only.
