February 10th, 2008
Prices of Stadium Name Sponsorships Soar
By Janet Frankston Lorin
All sports teams want bragging rights, but with the cost of a new stadium now more than $1 billion, it’s naming rights they’re after.
As several of the most storied franchises in sports replace their stadiums, sports marketing experts expect corporations to pay record amounts for the right to name them.
And the teams are finding ways to make the big price tags worthwhile by maximizing the amount of exposure of a company’s name and logo, even integrating it into the design of the building.
“There’s more value to what’s being offered,” said Marc Ganis, president of SportsCorp Ltd., a Chicago sports marketing firm. Especially in the New York market, where several new stadiums are going up and garnering record deals, corporations are getting more exposure and visibility, he said.
Already sold for record numbers: rights to the New York Mets’ new stadium, purchased by Citigroup Inc. for more than $400 million over 20 years. Next up, the Chicago Cubs, as its new owner, Sam Zell, says he wants revenue from the historic ball field that still bears the name of a former owner that pays nothing to call the stadium Wrigley Field.
But the deal expected to set naming rights records is the new football stadium for the New York Giants and New York Jets in East Rutherford.
The stadium would create a historic proposition, Ganis said: The most value ever offered, in the most expensive media market, and for two NFL franchises. He predicts the deal to go for at least $25 million to $30 million annually.
“The NFL is such a marketing juggernaut in the world of sports, that there’s just no other league that’s close to it,” said Denver sports consultant Dean Bonham. While he wouldn’t estimate the amount, he predicted it would be a landmark deal.
Naming rights prices are escalating for several reasons: public support to build stadiums is waning, player salaries are increasing, and stadium construction costs are rising. Stadium costs are “out of control,” said Ganis, from the $325 million it cost to build the New England Patriots’ Gillette Stadium in 2002 to $1.3 billion for the Giants and Jets stadium opening in 2010, a 300 percent increase.
David M. Carter, executive director of the Sports Business Institute at the University of Southern California, said recent deals are moving away from just advertising and branding. For example, the Oakland A’s new Cisco Field would use Cisco Systems Inc.’s technology to enhance ticketing, concessions and management of game-day operations.
“These newer deals are crafted as very, very elaborate business alliances such that these corporate partners are really involved in the building,” he said.
Such will be the case, literally, at the new home of the Giants and Jets, where less will mean more.
The teams are seeking only five corporations who will pay to see their names on the stadium: One for the building itself, and four others in each corner of the structure, rather than the hodgepodge of billboards seen in other stadiums. Jeff Knapple, who is marketing the naming rights deal, declined to discuss an asking price.
“We feel the marketplace is always challenged by clutter,” he said.
Uncluttering the field could make it more likely for the sponsors to be seen on TV broadcasts, therefore making it more valuable.
If the stadium brings in at least $25 million to $30 million annually as predicted, and with the four additional sponsorships, the teams could get more than double or even triple what the highest deal has brought in so far.
That belongs to the New York Mets, which will receive $20 million annually from Citigroup to name its new baseball stadium, or about $400 million over a 20-year contract. The New Jersey Nets got a similar deal from Barclays Bank PLC for their proposed new arena in Brooklyn, N.Y.
The Mets wanted a sponsor to extend the reach of its brand globally, and New York-based Citigroup was a perfect fit, said Dave Howard, the team’s executive vice president of business operations. More than many teams, the Mets have drawn players from around the world.
“New York is the most international city, quite frankly in the world,” he said. “It made a lot of sense to have a substantial New York presence as well as a global perspective.”
For the sponsors, the reasons to enter into a long, expensive naming rights deal are varied, whether it’s global expansion or hometown pride. Timing is also important.
Barclays wanted to expand its brand to the U.S., said Nets CEO and President Brett Yormark. The arena, part of a $4 billion project, has also earned cachet with star architect Frank Gehry and Brooklyn’s reputation as an up-and-coming borough, he said.
“It’s not about the team,” he said. “It’s about the building. This will be landmark building, a destination area.”
For Prudential Financial Inc., the decision to buy the naming rights to a new hockey arena meant improving its hometown of Newark, N.J., said Arthur Ryan, Prudential’s chairman who retired as CEO last month.
Since its October opening, the Prudential Center name is heard daily on radio, the Internet and in print as the new home of the New Jersey Devils. Prudential paid $105.3 million over 20 years.
And before the Nets and Mets deals, the Houston Texans had negotiated an annual $10 million from Reliant Energy for its stadium that opened in 2002. Team president Jamey Rootes said Reliant wanted to take advantage of a once-in-a-lifetime opportunity to bring a football franchise back to Houston.
Some teams hold out, however.
The Washington Nationals are still talking with potential candidates for a naming rights partner for their $631 million, publicly financed stadium, which opens this spring, said team president Stan Kasten.
“I don’t know if anything will be done by opening day,” he said. “There’s not a particular deadline. We want partner to be correct and deal to be correct.”
The New York Yankees balked at selling naming rights for a new stadium opening in 2009, potentially leaving hundreds of millions on the table.
Randy Levine, the team’s president, said a naming rights deal would diminish the team’s value.
“The Yankee Stadium name is sacred,” he said. “Yankee Stadium is the cathedral of baseball and would be unseemly for a naming rights deal.”